Sino Group International Limited v Toddler Kindy Gymbaroo Pty Ltd

order made by: Anderson J DATE OF ORDER: 2 June 2022

1. The application is dismissed.
2. Costs be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

INTRODUCTION 1 On 22 November 2021, Gideon Rathner and Matthew Sweeny (Administrators, or Deed Administrators, from after the execution of the deed of company arrangement) were appointed as the administrators of Toddler Kindy Gymbaroo Pty Ltd (Company) pursuant to a resolution of directors under s 436A of the Corporations Act 2001 (Cth) (Act). 2 In proceeding VID732/2021, the Administrators, by originating process dated 8 December 2021, sought (amongst other things) an order pursuant to s 447A of the Act and/or s 90-15 of Schedule 2 of the Act; that the Administrators are justified and acting reasonably in proceeding on the basis that the preservation order made against the Company in the arbitration proceeding between the Company and Sino Group International Limited and Beijing Yingquidi Education and Technology Corporation Ltd (Sino Creditors) in the Resolution Institute Arbitration, Case No. ARB20/2018 (Arbitration Proceeding) will not be recognised or enforced against the Administrators, or will not otherwise prevent them from offering for sale and, if possible, entering into an agreement for the sale of all or part of the assets and property of the Company. 3 In proceeding VID732/2021, the Sino Creditors, by interlocutory process dated 14 January 2021, sought an order pursuant to s 447A and/or s 447B(2) of the Act, alternatively, s 90-15 of Schedule 2 of the Act, that the Administrators be removed as administrators of the Company and that a suitably qualified and independent registered liquidator be appointed in their place as administrator of the Company. 4 On 28 January 2022, Justice Middleton ordered that none of the parties to the Arbitration Proceeding shall take any further steps in the Arbitration Proceeding without leave of the Court. 5 On 11 March 2022, Justice Middleton made orders for a timetable of procedural steps to enable the Administrators' originating process dated 8 December 2021 and the Sino Creditors' interlocutory process dated 14 January 2022 to be heard before me on 29 March 2022. 6 On 28 March 2022, the Company and the Administrators executed a deed of company arrangement (DOCA). 7 On 29 March 2022, the Sino Creditors commenced proceeding VID153/2022. In VID153/2022 , the Sino Creditors apply for relief pursuant to s 75-41 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR) and alternatively, s 445D and/or s 445G of the Act, seeking that: (1) the DOCA be terminated; and (2) the remuneration of the Administrators be reviewed by the Court. 8 On 29 March 2022, proceeding VID153/2022 and the related proceeding VID732/2021 came on for hearing before me. Mr Gronow QC appeared with Mr Segal of counsel on behalf of the Sino Creditors. Mr Freire of counsel appeared on behalf of the Administrators. Ms Plain of counsel appeared on behalf of the Deed Proponent, Dr Janet Williams (Deed Proponent). I was informed by counsel that on the previous day, being 28 March 2022, the DOCA had been executed and that pursuant to s 435(1)(b) of the Act the administration had come to an end. In those circumstances, Mr Gronow QC informed me that the Sino Creditors no longer pressed their interlocutory process seeking to have the Administrators removed. I ordered that the Sino Creditors' interlocutory process in proceeding VID732/2021 issued on 14 January 2022 be dismissed and reserved the costs of and incidental to that interlocutory process. 9 I also ordered that proceeding VID732/2021 be heard with proceeding VID153/2022 and that the evidence in one proceeding shall be evidence in the other. I made various other confidentiality orders and listed the matters to be heard before me on 11 April 2022. 10 At the commencement of the hearing on 11 April 2022, I was informed by Mr Freire, counsel for the Administrators, that as a consequence of the DOCA being executed on 28 March 2022, it was accepted by the Administrators that the relief which they sought in VID732/2021 was no longer of any utility. As a consequence, I will dismiss that proceeding and I will reserve the question of costs. 11 The parties accepted that the principal issue for determination by the Court in proceeding VID153/2022 is whether the DOCA executed on 28 March 2021 ought be set aside or terminated. The secondary issue is whether the remuneration of the Deed Administrators be reviewed by the Court. I will now consider these issues below.

EVIDENCE 12 The Sino Creditors tendered the following affidavits in evidence: (a) Affidavit of Dr DanDan Yang affirmed on 11 January 2022 (Yang Affidavit); (b) Affidavit of Demian Walton affirmed on 9 March 2022; (c) Confidential affidavit of Demian Walton affirmed on 9 March 2022 (Confidential Walton Affidavit); (d) Affidavit of Mr Graeme Douglas Tyshing affirmed on 9 March 2022 (First Tyshing Affidavit); (e) Affidavit of Mr Graeme Douglas Tyshing affirmed on 18 March 2022 (Second Tyshing Affidavit); (f) Affidavit of Demian Walton affirmed on 28 March 2022; (g) Affidavit of Dr DanDan Yang affirmed on 6 April 2022 (Second Yang Affidavit); (h) Affidavit of Mr Graeme Douglas Tyshing affirmed on 6 April 2022 (Third Tyshing Affidavit); and (i) Affidavit of Mr Seamus Ryan affirmed on 6 April 2022. 13 The Deed Administrators tendered the following affidavits in evidence: (j) Affidavit of Gideon Isaac Rathner affirmed 8 December 2021 (Rathner 1); (k) Affidavit of Gideon Isaac Rathner affirmed 20 January 2022 (Rathner 2); (l) Affidavit of Gideon Isaac Rathner affirmed 9 March 2022 (Rathner 3); (m) Confidential Affidavit of Gideon Isaac Rathner affirmed 9 March 2022 (Rathner 4); (n) Affidavit of Gideon Isaac Rathner affirmed 10 March 2022 (Rathner 5); (o) Affidavit of Gideon Isaac Rathner affirmed 25 March 2022 (Rathner 6); (p) Affidavit of Gideon Isaac Rathner affirmed 28 March 2022 (Rathner 7); and (q) Affidavit of Gideon Isaac Rathner affirmed 8 April 2022 (Rathner 8). 14 The Deed Proponent tendered the following affidavits in evidence: (r) Affidavit of Dr Janet Williams dated 10 April 2022 (First Williams Affidavit); and (s) Affidavit of Dr Janet Williams dated 10 April 2022 (Second Williams Affidavit).

BACKGROUND 15 The parties were not in dispute as to much of the background facts following the appointment of the Administrators to the Company. The background facts, can therefore be conveniently summarised as follows. 16 The Company carries on a business that provides neuro-developmental and sensorimotor movement programs for children from birth to five years old. 17 The Company's assets include intellectual property assets in Australia and overseas. It is the registered owner of 31 different trade marks in Australia. Those registered trademarks include "Toddler Kindy Gymbaroo", "BabyRoo", "KindyRoo", "GymbaRoo" and "Active Babie Smart Kids". It also holds trademarks or pending trade mark applications in a number of overseas jurisdictions. 18 The Company either franchises or licences (as applicable) the use of the programs and the brands in Australia and overseas. 19 The Company's financial statements for the 2018 to 2021 financial years record that the Company had annual revenue during those years in the range of $1.3 million to $1.7 million. 20 As at December 2021, the Company had 69 centres across Australia. Two of the centres were owned and operated by the Company and the balance of the centres were operated by the Company's franchisees. The Company employed 10 staff members, including three employees in each of the two Company-operated centres, and also engaged six contractors who assisted the Company in administration, education, IT, research and development and marketing. 21 Since 2018, the Company and the Sino Creditors had been involved in the Arbitration Proceeding. 22 On 26 October 2020, the arbitrator decided that the Company should be liable for the Sino Creditors' costs after a series of failed applications by the Company to terminate the Arbitration Proceeding. The arbitrator fixed costs in the amount of $215,274.96. 23 On 11 January 2021, the arbitrator issued a partial final award (PFA), by which he determined, as a preliminary question, that the Company's purported termination of a master licencing agreement between the Company and the Sino Creditors on 6 January 2017, was not lawful and effective. 24 On 22 September 2021, the Sino Creditors filed a Further Amended Statement of Claim in the Arbitration Proceeding setting out, amongst other things, the Company's alleged various breaches of the master licencing agreement for which damages were sought. 25 On 11 November 2021, the Sino Creditors filed submissions on the question of costs in relation to the determination of the preliminary question in the Arbitration Proceeding. The Sino Creditors claimed costs totalling $748,922.19 and also sought an order that the Company immediately pay the amount of $215,274.78 which had been fixed by the arbitrator on 26 October 2020. 26 The Deed Administrators were initially appointed as joint and several administrators of the Company on 22 November 2021. As at that time, the Sino Creditors' claim and the Company's counterclaim in the Arbitration Proceeding had not been heard and determined. No timetable had been set, nor were orders made in the Arbitration Proceeding for the filing of evidence or submissions for an assessment of damages.

DOCA 27 The proponent of the DOCA is Dr Janet Williams, who is one of the directors of the Company. The DOCA relevantly includes the following provisions: (a) A Deed Fund of $600,000 is to be established by the Deed Administrators [cl 1.1, cl 4.1]. (b) The Deed Fund shall comprise the Company Funds and the Deed Contribution [cl 1.1]. (c) The term 'Company Funds' is defined as follows [cl 1.1]: Company Funds the amount of money held in the Administration Bank Account as at the Effective Date (including but not limited to monies received from trade debtors of the Company prior to the Effective Date) after allowing for all unpaid liabilities and obligations of the Company during the Administration Period (d) Effective Date means the date of execution of the Deed [cl 1.1]. (e) Deed Contribution is defined as follows [cl 1.1]: Deed Contribution the amount calculated in accordance with the following formula: Deed Contribution = Deed Fund - Company Funds (f) The Proponent must procure payment of the Deed Contribution to the Deed Administrators as follows [cl 3.1]: (a) 50% of the Deed Contribution within 7 days of the Effective Date; and (b) 50% of the Deed Contribution on or before 30 May 2022. (g) Payments out of the Deed Fund are in the following order [cl 4.1]: (a) firstly, to the Administrators in respect of the Administrators' Remuneration and Expenses; (b) secondly, to the Deed Administrators in respect of the Deed Administrators' Remuneration and Expenses; (c) thirdly, in the order specified in Section 556 of the Act as though the Company were being wound up and there were no Claims by any Secured Creditor; and (d) fourthly, in full and final settlement of the proved Claims of all Participating Creditors and if more than one on a pari passu basis. (h) Participating Creditors will be entitled to payment of that portion of the Creditor's Claim as the Deed Administrators determine that they are able to pay [cl 4.3]. (i) Participating Creditors means all Creditors other than the Excluded Creditors [cl 1.1]. (j) The Excluded Creditors are William (Bill) Sasse, Peter Sasse, Janet Williams and Harry Sasse [cl 1.1], who are all related parties of the Company. (k) The Deed Administrators will determine and make payments of Claims to Participating Creditors on the same basis as in a winding-up [cl 4.5]. (l) Claim is defined as follows [cl 1.1]: Claim a debt payable by, and all claims against, the Company (present or future, certain or contingent, ascertained or sounding only in damages) and being a debt or claim the circumstances giving rise to which occurred on or before the Appointment Date and which would be admissible to prove against the Company in accordance with Division 6 of Part 5.6 of the Act if the Company were to be wound up (m) All Participating Creditors [but not Excluded Creditors] must accept their entitlements (if any) under this Deed in full satisfaction and complete discharge of all Claims and will, if called upon to do so, execute and deliver to the Company such forms of release as the Deed Administrators may require [cl 2.3]. (n) Upon termination of the Deed pursuant to cl 7: (i) the Company will be forever released from all Claims of Participating Creditors [but not Excluded Creditors]; and (ii) all Claims of Participating Creditors [but not Excluded Creditors] will be discharged and extinguished forever [cl 2.4]. (o) Termination under cl 7 of the Deed includes if there is an unremedied breach by the Proponent [cl 7.1(c)] whose obligation is to procure the Deed Contribution [cl 3.1]. (p) Subject to s 444D of the Act, the Deed may be pleaded by the Company against any Participating Creditor as a bar to any Claim that is released, discharged and extinguished under this Deed.

RELATED PARTY CREDITORS (THE 'EXCLUDED CREDITORS') 28 Mr Bill Sasse, Mr Peter Sasse and Dr Janet Williams are siblings. Mr Harry Sasse is their father. Mr Bill Sasse, Mr Peter Sasse and Dr Williams are each directors and shareholders of the Company. Mr Harry Sasse is a shareholder of the Company. The Administrators' Report to Creditors at Annexure GIR-33 to Rathner 4 (Report) discloses that related party creditors (or the "Excluded Creditors") are owed a total of $1,937,904 comprising loans and deferred wages as set out at page 19 of the Report.

ADMINISTRATORS RECOMMEND THE DOCA 29 The Administrators, in their Report, recommended the DOCA proposal to creditors on the basis that it provided an estimated dividend to Participating Creditors of 100 cents in the dollar as a result of the Excluded Creditors agreeing not to participate: Report at p 29. The Administrators contrasted this outcome with a winding up scenario where they estimated a dividend to creditors of 33 to 42 cents in the dollar: Report at pp 28-29. 30 It was not in dispute between the parties that the purpose of the Report was to permit creditors to make an informed choice as to what should happen to the Company: DSG Holdings Australia Pty Ltd v Helenic Pty Ltd (2014) 86 NSWLR 293 (DSG), [90] Meagher, Leeming JJA and Bergin CJ in Eq agreeing.

SINO CREDITORS' CLAIM 31 On 30 November 2021, the Sino Creditors lodged a proof of debt with the Administrators for $5,964,197.15 comprising: (a) the fixed legal costs of $215,274.96; (b) the additional costs (not yet fixed) of $748,922.19; and (c) an estimate of $5,000,000 for their alleged losses as a result of the Company's breaches of the master licencing agreement.

FIRST MEETING OF CREDITORS 32 At the first meeting of creditors of the Company on 1 December 2021, Mr Rathner admitted the Sino Creditors to vote for $964,198.15 and the four related parties for $863,456. In admitting the Sino Creditors' claims for voting purposes, Mr Rathner allowed, in full, the fixed costs of $215,274.96 and the additional costs (not yet fixed) of $748,922.19. With respect to the damages claim, Mr Rathner allowed the claim for $1 "as there is no calculation provided to determine its reasonableness". 33 On 9 March 2022, the Administrators (by their solicitors) invited the Sino Creditors to notify the Administrators of the issues that the Sino Creditors wished the Administrators to investigate, and to provide the details and documentation necessary for those investigations to be carried out. 34 On 16 February 2022, the Administrators (by their solicitors) repeated the invitation for the Sino Creditors to contact the Administrators in writing if there were any further matters the Sino Creditors believed should be investigated with all supporting documentation. 35 On 11 March 2022, the Sino Creditors were served with an affidavit of Mr Rathner affirmed 9 March 2022, in which the Sino Creditors were told that the Administrators now assessed the related party claims at $1,961,062 and that the Sino Creditors would have their claims admitted for $161,647. The rationale for the Administrators' assessment was disclosed to the Sino Creditors in the Report which was issued to creditors on 18 March 2022. 36 The Administrators in the Report at pp 16-17, allow the Sino Creditors' fixed costs of $215,274 in full. The Administrators then assessed the additional costs (not yet fixed) in the amount of $539,922 by applying the same discount percentages to professional fees, counsel's fees and arbitrator's fees that the arbitrator applied to arrive at the fixed costs of $215,274. In respect to the damages claim, the Administrators say: In addition, Sino also claim damages of "approximately $5,000,000 (further details to be advised"). No evidence has been supplied to quantify or prove that claim. In our view the damages claim is an unliquidated contingent claim and as such cannot be quantified by a just estimate. Accordingly, we assess the damages claim for a nominal value of $1. 37 The Administrators in the Report at pp 14-15, provided a further basis for the reduction of the Sino Creditors' claim down to $161,647 by setting off unpaid licence fees plus interest due under the master licencing agreement in the amount of $593,621. The Administrators in their Report assessed the value of the Sino Creditors' claims as follows: (1) Costs amount fixed in the arbitration $215,274 (2) Additional costs claimed of $748,274 (but not yet fixed) $539,992 (3) Damages claim of $5million $1 (4) Set off unpaid licence fees plus interest under the master licencing agreement ($593,621) $161,647 38 On the afternoon of 24 March 2022, the day before the second meeting of creditors, the Sino Creditors (by their solicitors) wrote to the Administrators' solicitors in relation to the Sino Creditors' claim against the Company attaching further information in the form of spreadsheets and management accounts during the period 2016-2019 to substantiate the Sino Creditors' damages claim.

SECOND MEETING OF CREDITORS 39 On 25 March 2022, the second meeting of creditors was convened by the Administrators under s 439A of the Act. Mr Rathner presided as the chairperson of the meeting. The minutes of the second meeting held on 25 March 2022 are found at Annexure GIR-44 to Rathner 8. 40 The Sino Creditors attended the meeting by their appointed proxy, a solicitor, Mr Walton. The chairperson, Mr Rathner, declared that he held special proxies from 18 creditors: Rathner 8 at Annexure GIR-42. 41 Mr Rathner, admitted the claims of creditors attending the meeting for voting purposes as follows: Creditor Unrelated Related Sino Creditors Blue Rock Law $5,993 Helen Woodman $4,257 MST Lawyers $7,729 Ortamate $6,558 Rothsay Audit and Assurance Pty Ltd $4,400 Tessa Maude Grigg $3,055 Tessarose Productions $2,638 Booking Autopilot $7,682 Bowen Island Bakery $1,413 Roslyn Littlejohn $600 Melissa Mills $2,041 Tamara Schroder $125 Sherylee Posner $192 TKGK Unit Trust $3,300 William Sasse $142,916 Harry Sasse $684,947 Janet Williams $573,007 Peter Sasse $537,034 Sino/BY $161,647 $49,984.25 $1,937,904 $161,647

42 Mr Rathner acknowledged receipt of the Sino Creditors' solicitors' letter dated 24 March 2022 as well as its attachments. Mr Rathner said that he could not make a "just estimate" of the Sino Creditors' damages claim, but would admit it for $1. The minutes of the meeting at Annexure GIR-44 to Rathner 8 records Mr Rathner's reasons for his assessment as follows: (a) First, the Proof of Debt itself describes this component as "Approximately $5,000,000". (b) Second, paragraph 21 of the Sino Creditors' Further Amended Statement of Claim attached as Annexure D to the Proof of Debt, states that the particulars of loss and damage "will be given at the appropriate time". (c) Third, paragraph 163 of the Witness Statement of Dr Yang dated 14 May 2020, attached as Annexure E to the Proof of Debt, states: "Without the ability to sublicence the KindyROO business, I would lose the sum of approximately USD$2.5m paid to Lau and Reader China Group, plus approximately USD$3m that I invested in the growth of the business in China." (d) Fourth, in a letter given on the previous day (24 March 2022) by the Sino Creditors' solicitors, a breakdown of the $5 million amount was given as follows: (i) Lost profit in 2018: RMB ¥ 7,844,561 (ii) Actual trading loss sustained in 2018: RMB ¥ 3,527,904 (iii) Lost profit in 2019: RMB ¥ 7,844,561 (iv) Actual trading loss sustained in 2019: RMB ¥ 1,302,194 (v) Total loss in 2018 and 2019: RMB ¥ 20,519,220 (vi) Convert to AUD: $4,301,681 (vii) Gross up for interest (loss of use of moneys) $5,000,000 (e) The following spreadsheets were provided: (i) a spreadsheet listing the newly-opened Kindyroo centres in China and associated revenues derived in each year from 2014 to 2019; (ii) a spreadsheet listing the sub-licensees who stopped paying their fees to BY in 2018 and 2019; (iii) a spreadsheet containing BY's management accounts during 2016-2019. (f) None of the figures provided appear in the first two spreadsheets. The figures appeared to be based on the spreadsheet said to contain BY's management accounts for 2016-2019. (g) There was no evidence supporting the assertion that net profit from 2017 was lost in 2018 and 2019 by reason of the Company's actions. (h) There was no evidence that trading losses in 2018 or 2019 were attributable to the Company's actions. (i) There was no evidence supporting the conversion of RMB to Australian dollars, or the "gross up" for the "loss of use of moneys" from $4.3M to $5M. (j) No forensic accounting or expert reports have been provided in support of any of these amounts. 43 The minutes of the second meeting of creditors at Annexure GIR-44 to Rathner 8 records that Mr Rathner stated that he could make a "just estimate" of the unpaid licence fees and interest under the master licencing agreement and this amount of $593,621 would be set off against the Sino Creditors' claim resulting in a balance of $161,647. 44 A resolution was passed at the second creditors' meeting to execute the DOCA. All 18 special proxies held by the Mr Rathner voted in favour. The Sino Creditors voted against the execution of the DOCA. 45 Resolutions were also passed to fix the remuneration of the Administrators. Special proxies (17) totalling $1,980,411.47 held by Mr Rathner as chairperson voted in favour; one special proxy held by Mr Rathner abstained with the Sino Creditors voting against the resolutions. 46 Resolutions were passed in relation to future remuneration of the Administrators (to the date of the execution of the DOCA) and the Deed Administrators. Special proxies (17) totalling $1,980,411.47 held by the chairperson, Mr Rathner, voted in favour. One special proxy held by Mr Rathner abstained with the Sino Creditors voting against the resolutions. 47 The DOCA was executed by the Company and the Administrators on 28 March 2022 and, thereupon, pursuant to s 435C(1)(b) of the Act, the administration came to an end.

SINO CREDITORS' APPLICATION 48 The Sino Creditors by their originating process dated 28 March 2022 seek, pursuant to s 75-41 of the IPR, or alternatively, s 455D and/or s 455G of the Act, that the DOCA be terminated and that the remuneration of the Deed Administrators be reviewed by the Court on the basis that the DOCA and the Deed Administrators' remuneration is contrary to, prejudicial against and/or likely to prejudice the interests of the Sino Creditors such that the Court should exercise its discretion to terminate the DOCA. The grounds relied upon by the Sino Creditors may be conveniently summarised as follows: (1) Materially misleading information provided to creditors: s 445D(1)(a) of the Act. (2) Material omissions from reports to creditors: s 445D(1)(c) of the Act. (3) The DOCA is oppressive or unfairly prejudicial to, or unfairly discriminatory against, the Sino Creditors: s 445D(1)(f)(i) of the Act. (4) The DOCA should be terminated as it is to the detriment of commercial morality in the interests of the public at large: s 445D(1)(g) of the Act. (5) The DOCA should be set aside by operation of the Court's discretion under s 75-41 of the IPR.

SINO CREDITORS' EVIDENCE AND CROSS EXAMINATION 49 Graeme Douglas Tyshing gave short oral evidence affirming the truth of the matters that he deposed to in his affidavits and the expert opinion he expressed. Mr Tyshing was cross-examined and gave the following evidence. 50 Mr Tyshing was taken to the First Tyshing Affidavit. It was put to Mr Tyshing that he made an attempt to arrive at an approximate value for the Company. Mr Tyshing stated that he did not attempt to do so. 51 Mr Tyshing was then taken to [4.1] of the First Tyshing Affidavit, where Mr Tyshing stated: The website does offer other franchise businesses for sale but at significantly lower sale prices than that which I would assume would apply to [the Company]. 52 When asked on what basis he made the assumption that the franchise businesses were offered for sale were at "significantly lower sale prices" than what he would assume would apply to the Company, Mr Tyshing stated that he was assuming a higher value based on information that he was provided in the information memorandum (IM), such as the Company's intellectual property portfolio and other financial information that was made available to him. Mr Tyshing stated that he did not know the Company's actual value. 53 It was put to Mr Tyshing that he made no endeavour to approximate the value of the Company, despite being an expert valuer, in circumstances where he, in the First Tyshing Affidavit provided a critique of the expression of interest (EOI) campaign for the sale of the Company. Mr Tyshing stated that it was not in the remit of his instructions to ascribe a value to the Company, rather he was asked to provide an opinion on the IM. 54 It was put to Mr Tyshing, and Mr Tyshing accepted that the value of the Company would necessarily inform the scale and expense of the marketing and sale campaign, and that there is commercial sense to have at least some idea of the value of the Company being sold when preparing for the sale campaign. 55 Mr Tyshing was taken to the Company's preliminary report into financial statements dated 16 December 2021. During cross-examination, Mr Tyshing accepted that the Company's financial records indicated that the Company might have been in distress with limited cash reserves. Mr Tyshing also accepted that there would be no reason why he could not arrive at an indicative value for the Company on the basis of the financial information and sales revenue of the Company over the course of 2018 to 2021, if that were part of his instructions. 56 Mr Tyshing accepted that he has no experience in advising insolvency practitioners in the context of a sale of a business. 57 Mr Tyshing was taken to the Expert Evidence Practice Note (GPN-EXPT). It was put to Mr Tyshing that it was in accordance with his duties as an expert witness that if the value of the Company was a matter that was relevant, he was required to make inquiries to ascertain the Company's value, and by not doing so he withheld a relevant matter from the Court. Mr Tyshing did not agree. 58 Mr Tyshing was taken to the First Tyshing Affidavit. It was put to Mr Tyshing and he agreed that insolvency practitioners are time constrained and are also constrained in the representations they can make to potential buyers of distressed assets, and that it is commonplace for distressed businesses to be sold on an "as-is where-is basis". 59 It was put to Mr Tyshing that if an insolvency practitioner has made representations about a business beyond the material that is available to them, this would expose them to potential claims by a purchaser. It was also put to Mr Tyshing that his criticism of the Administrators, that they ought to have made an assessment about future profitability, was not on solid ground, as once an insolvency practitioner starts to make commentary about future forecast trading, they are making representations. 60 It was then put to Mr Tyshing that his criticism of the quality of information in the IM was not fair in circumstances where there is urgency to sell the Company, limited funds available to it, and information relating to employees, organisation structure, intellectual property and financials are matters that would be taken up by prospective purchasers during their due diligence. Mr Tyshing gave evidence that it would still be possible to put together an IM that provides basic data that a prospective purchaser would look at, form a view on, and that view would colour further due diligence requirements. 61 It was put to Mr Tyshing that, in his view, the IM was a selling document and in those circumstances, it would be suitable for the vendor to disclose to interested parties that the sale of the Company would be weighed down by a risk of litigation, and that disclosure of the presence of this preservation order to potentially interested parties would create uncertainty in the minds of those parties. Mr Tyshing stated that he was not sure that such information would need to be disclosed in the IM and would not criticise insolvency practitioners for taking steps to remove the preservation order. 62 Mr Tyshing was then taken to the Third Tyshing Affidavit. It was put to Mr Tyshing that he criticised the findings of Mr Dalla at item "D" of the Third Tyshing Affidavit, where he stated that Mr Dalla made no allowance for the impact of the COVID-19 pandemic on the Company's trading profile. It was put to Mr Tyshing that this was not accurate. Mr Tyshing was taken to Annexure GIR-20 to Rathner 4 at [3], where it states: Discussions with management consider the government subsidies have adequately compensated for losses as a result of these extended lockdowns. 63 Mr Tyshing was taken to a table set out at [2.1] to the Third Tyshing Affidavit which provided the Company's sales revenue for the financial years 2018-2021. It was put to Mr Tyshing, and it was accepted by him, that deductions were made from the total revenue of the Company to reflect sales revenue and that government related subsidies were reflected within those deductions. It was also agreed that once revenue is taken into account and added to the sales revenue, this would compensate for any loss of sales revenue attributable to the COVID-19 pandemic. 64 Mr Tyshing was taken to a table set out at [6] to the Third Tyshing Affidavit which dealt with Mr Tyshing's opinion of what he believed to be a suitable multiplier to be appropriate to the Company. Mr Tyshing, in the Third Tyshing affidavit, stated that a 3.5 to 4 multiplier was the most suitable to the Company. It was put to Mr Tyshing that he provided no appropriate justification for arriving at this multiple. Mr Tyshing agreed with that assertion. 65 Mr Tyshing was asked whether, when arriving at the multiplier, he took into account that the Company was a distressed asset and whether he discounted it based on this factor. Mr Tyshing stated that he did not. 66 Mr Tyshing was then asked if he was to take that factor into account, by how much he would discount the multiple. Mr Tyshing stated that it would be a value judgment, and if he settled on a 3.5 to 4 multiple and if he took the view that the Company was a distressed business, then it may have dropped to a 3 to 3.5 multiple. 67 When asked if he also took into account the fact that there was ongoing litigation, Mr Tyshing stated that he was aware of the litigation in the context of the information that had been provided, but he was not able to answer how this would affect the valuation of the Company. 68 Mr Tyshing's experience in selling businesses did not include experience in selling financially distressed businesses. Mr Tyshing accepted that he did not have experience in advising insolvency practitioners in respect to the sale of financially distressed businesses. Mr Tyshing was asked to review the EOI campaign and the quality of the information contained in the IM. Mr Tyshing's evidence ignored the fact that the Administrators were required to conduct the EOI campaign and prepare the IM in a three week period. I do not find Mr Tyshing's evidence to be of assistance in considering the manner in which the Administrators conducted themselves in the events leading up to the execution of the DOCA on 28 March 2022.

DEED ADMINISTRATORS' EVIDENCE AND CROSS EXAMINATION 69 Mr Rathner gave oral evidence to the following effect. 70 During evidence in chief, Mr Rathner confirmed that he is a partner of Lowe Lippmann Chartered Accountants and that the evidence he gave in his eight affidavits is true and correct. 71 Mr Rathner was then cross-examined and gave the following evidence. 72 In mid-November 2021, Mr Rathner attended a conference call with the directors of the Company. Mr Rathner was asked what occurred during that call. Mr Rathner, in cross examination, stated that he discussed the financial position of the Company, including what insolvency options were available to it. Mr Rathner was then asked about the circumstances leading to the Administrators' appointment including the work undertaken by the Administrators. Mr Rathner stated that the Administrators undertook investigations, including discussions with the directors to get a better understanding of the Company and these matters were set out in the first creditors report. 73 Mr Rathner was asked about the franchise fees, and whether these fees were discussed with the Company after the Administrators were appointed. Mr Rathner stated that this matter was raised after the Administrators' appointment and that one of the issues the Administrators addressed with the franchisees was the arrears of payment of the franchise fees and the need for an arrangement to be made for the fees to be paid. 74 Mr Rathner was asked about the purpose of the EOI campaign. Mr Rathner stated that the EOI campaign was used to assess what would happen in a winding-up scenario, in the event that the Administrators could not attain a DOCA proposal and the Company had to be sold. Mr Rathner stated that obtaining a DOCA gave the Administrators a basis upon which they could advise creditors of the alternatives between liquidation and the deed proposal. 75 Mr Rathner was asked about the DOCA and the Company's related party debts of $1.9 million that it owed. Mr Rathner stated that the $1.9 million of debt is not extinguished under the DOCA and is still outstanding and payable by the Company. This was because these were related party loans and it would be counterintuitive for the directors to go through the process, put up money for a deed fund and then call up their loans knowing they could not be paid. The $1.9 million of debt would be outstanding but not immediately payable. 76 Mr Rathner stated that, in the course of his investigations, he reviewed the Company's books and records, including its bank accounts and any related party transactions. In the course of this review, Mr Rathner found that only one transaction required further investigation, which was resolved and ultimately all of the related party transactions were bona fide and were found to have actually occurred. 77 Mr Rathner was asked about the Sino Creditors' damages claim which the Administrators valued at $1. Mr Rathner stated that the $1 "value" was for the purposes of allowing the Sino Creditors to vote at the meeting because he could not estimate the value of the Sino Creditors' claim. 78 Mr Rathner stated that this claim was unquantified, so he took advice on how the Sino Creditors claim should be assessed. Mr Rathner gave evidence that he admitted the Sino Creditors' claim following a review of the advice that he received. 79 Mr Rathner was taken to the Report. Mr Rathner was asked if the Report identified related party transactions of the Company. Mr Rathner identified that this was dealt with on page 19 of the Report. In terms of the methodology that Mr Rathner took to determine the loan positions for each of the related party creditors identified at page 19 of the Report, Mr Rathner stated that he reviewed the Company's bank statements as well as the interest calculations, loan agreements, discussions with the directors, Xero transactions relating to each related party's loan account and the employment contracts for wage entitlements and wages paid to verify the figures. Mr Rathner stated that he was satisfied that the funds had been provided to the Company. 80 Mr Rathner was also taken to page 20 of the Report, which outlined the investigation into financial transactions conducted by the Company. Mr Rathner stated that he investigated each of the potential voidable transactions (outlined at 10.2 of the Report) and he was satisfied that there were no transactions which would be voidable by a liquidator. Further, Mr Rathner stated that a solvency analysis was conducted (outlined at 10.3 of the Report). Mr Rathner gave evidence that he was satisfied that there was no insolvent trading. 81 Mr Rathner also noted that at 8.1.5 of the Report, he dealt with the Company's counterclaim against the Sino Creditors in the Arbitration Proceeding. Mr Rathner stated that the Company made a counterclaim of $1,096,823 and he assessed it at $593,621. 82 Mr Rathner was then taken to the minutes of the second meeting held on 25 March 2022 at Annexure GIR-44 to Rathner 8. Mr Rathner was taken to page 2 of the minutes, where it states: 2. Sino claims to be a creditor of the Company for the total sum of $5,964,197.15. The particulars of this amount are set out in Sino's Proof of Debt as comprising: … an amount claimed for loss and damage in the Arbitration Proceeding stated to be "Approximately $5,000,000 (Further details to be advised.)" ["Damages Claim"] by reference to Annexures D and E.] 83 Mr Rathner was asked about the damages claim of "Approximately $5,000,000" and what information was made available to him, prior to allowing the Sino Creditors to vote for $1. Mr Rathner stated that he received a letter from the Sino Creditors' solicitors the day before the second creditors meeting, which assessed the quantification of their damages claim as being $5 million. Mr Rathner stated that he forwarded this letter along with its attachments to his solicitor in order to obtain advice on it. Mr Rathner stated that he reviewed that advice and that the minutes reflect his assessment of the advice he was provided. 84 Mr Rathner was asked to explain his analysis of the Sino Creditors' damages claim as recorded in the minutes of the second meeting. Mr Rathner stated that the damages claim for approximately $5 million is an unliquidated "claim", and that the "claim" is not established under the rules, which required him to make a just estimate of its value. Mr Rathner stated that he had determined that the "claim" could not be quantified by a just estimate, but that it appeared to him that the Sino Creditors may be a creditor for an amount. This was because the Sino Creditors were making a claim of $5 million in relation to the Arbitration Proceeding and Mr Rathner was aware there was an interim award that may have led to them having a claim, he just did not know how much that claim was worth. 85 Mr Rathner stated that he undertook various steps to quantify the value of the Sino Creditors' claim to see if a reasonable estimate could be made. However, after reading the interim award in the Arbitration Proceeding, the Sino Creditors' proof of debt and various other documents, including a spreadsheet which was substantially in Chinese, without any clear provenance and without any clear way to discern whether the figures contained within the spreadsheet related to the Company or its related entities, Mr Rathner stated that he could not quantify the claim. Mr Rathner was only able to discern approximate numbers without context and without evidence as to its causation or any of the expenditures that the Sino Creditors claimed. 86 Accordingly, Mr Rathner determined that the amount of $5 million was not a just estimate as the information that he was provided with did not give him a level of confidence to determine this figure to be accurate. As Mr Rathner determined that the Sino Creditors were likely to be a creditor for at least some amount, he allowed them to vote for $1. 87 Mr Rathner was taken to item 7 of the minutes, where Dr Yang's concession, that she will comply with all obligations under the master licencing agreement, including the payment of any outstanding licence fees, was noted. Mr Rathner stated that this concession gave him the confidence that Dr Yang admitted that she did owe the fees. 88 Mr Rathner stated that he applied the set-off of the Company's counterclaim against the Sino Creditors' claim because he took the view that the Sino Creditors were not going to pay the credit and in these circumstances, determined that that a set-off was commercially appropriate. 89 I accept the evidence of Mr Rathner who impressed me as a frank and forthright witness. Mr Rathner was challenged in cross-examination on the matters deposed to in his affidavits but was unwavering in the evidence that he gave and remained of the same opinions that he expressed in his affidavits, which I find to be truthful and accurate. I accept Mr Rathner's evidence in its entirety.

DEED PROPONENT'S EVIDENCE AND CROSS EXAMINATION Dr Janet Williams (Dr Williams) was the Deed Proponent and a director and creditor of the Company. 90 Dr Williams was cross-examined and gave the following evidence. 91 Dr Williams was asked whether the Company made attempts to subvert the Sino Creditors' rights to exclusively operate their licence in the whole of greater China. Dr Williams did not agree with that proposition. 92 Dr Williams agreed that the Company terminated the Sino Creditors' master licencing agreement due to its failure to pay the licence fees and that this termination was found not to be lawful and effective by the arbitrator, Mr Santamaria QC in the PFA dated 25 August 2021. Dr Williams agreed that the termination of the master licencing agreement was, on a technical basis, unlawful and therefore remained in full force and effect. 93 It was put to Dr Williams that the Company sought to rebrand itself within mainland China and that action was stopped by the interim award by the previous arbitrator, Mr Heaton QC in an interim measures application, which was ordered on 12 September 2019. Dr Williams stated that they followed the arbitrator's ruling and did not do anything further in China. 94 Dr Williams stated that the COVID-19 pandemic had had an enormous negative impact on the Company's bottom line and that she discussed the risk of insolvency with her lawyer and asked for advice on this as she understood that it is unlawful to continue operating as a company while insolvent. 95 Dr Williams was asked whether she wanted to continue fighting the arbitration. Dr Williams stated that she had concerns about legal costs, which were onerous to her and her family, and that ongoing litigation was not tenable. 96 Dr Williams was asked whether she was aware that there was a DOCA proposal for the Company. Dr Williams gave evidence that she was aware of it, but that she was happy for a buyer to take over the Company, provided reasonable offers could be received, as she and her family had no more money to put into the Company. 97 Dr Williams was asked about the related party loans and specifically the loan to Mr Harry Sasse that was entered into on 26 April 2018, and whether the loans had been called up. Dr Williams stated that as at 11 November 2021, the loan to Mr Harry Sasse, her father, had not been called up and this was part of Dr Williams' concern about the Company's solvency, this loan was part of the application to the Administrators. 98 Dr Williams was asked why the Company later decided to call in the loan from Mr Harry Sasse. Dr Williams stated that her father's health had deteriorated, and it was necessary to assist with his care. Dr Williams was also greatly concerned about the Company being solvent moving forward due to the decreased income in conjunction with the legal costs. 99 Dr Williams was taken to an email sent by Mr Peter Sasse on 17 November 2021, on behalf of Mr Harry Sasse (as his power of attorney) to request that Mr Harry Sasse's loan be repaid. Dr Williams was also taken to a minute of the meeting of the Company dated 17 November 2021, where it states "the Company is unable to meet this demand" to repay the loan of $687,947 to Mr Harry Sasse and that the Company was insolvent or is likely to be insolvent. 100 It was put to Dr Williams that Mr Harry Sasse's demand to be repaid was used as the trigger point to place the Company into administration. Dr Williams stated that the administration was triggered by a combination of issues that the Company had such as its bottom line and its costs moving forward. The Company's financial position made it clear to Dr Williams that it could not meet any of its demands and was likely to become insolvent. 101 It was suggested to Dr Williams that part of the Company's motivation to enter into administration was to end the arbitration. Dr Williams stated that she would have liked to have continued the arbitration, but the Company simply could not afford to do so. 102 Dr Williams was then asked about the EOI campaign. Dr Williams stated that she wanted to make sure her creditors were paid, and if there was a reasonable sum offered to purchase the Company, she would have sold it, despite the Company being a family business since 1982. 103 It was suggested to Dr Williams that she was not prepared to let the Company be sold, and that she always had intended to put on a proposal where she either purchased the assets or put up a proposal to take the Company out of administration. Dr Williams denied this. 104 Dr Williams impressed me as a truthful witness who gave a detailed account of the events which led up to the Company appointing the Administrators. I accept Dr Williams' evidence in its entirety.

STATUTORY FRAMEWORK AND RELEVANT PRINCIPLES 105 The parties were not in dispute as to the statutory framework and relevant principles to be applied in this case. The Deed Administrators' submissions conveniently summarise the relevant statutory framework and relevant principles as follows. 106 The Sino Creditors apply for relief pursuant to s 75-41 of the IPR that resolutions passed at the second creditors' meeting in relation to the execution of the DOCA and the past and future remuneration of the Deed Administrators be set aside.

Section 75-41 107 Section 75-41 of the IPR (which replaced s 600A of the Act) provides, relevantly: 75-41 Outcome of voting at creditors' meeting determined by related entity - Court powers Application of this section (1) This section applies if, on the application of a creditor of a company under external administration, the external administrator of the company or ASIC, the Court is satisfied of the following matters: (a) a proposal has been voted on by creditors (either at a meeting of the creditors or under section 75-40 without a meeting); (b) if the vote or votes that a particular related creditor, or particular related creditors, of the company cast on the proposal had been disregarded for the purposes of determining whether or not the proposal was passed, the proposal: (i) if it was in fact passed - would not have been passed; or (ii) if in fact it was not passed - would have been passed; or the question would have had to be decided on a casting vote; (c) the passing of the proposal, or the failure to pass it, as the case requires: (i) is contrary to the interests of the creditors as a group or of that class of creditors as a group, as the case may be; or (ii) has prejudiced, or is reasonably likely to prejudice, the interests of the creditors who voted against the proposal, or for it, as the case may be, to an extent that is unreasonable having regard to the matters in subsection (2) Unreasonable prejudice to interests of creditors - matters to be taken into account (2) For the purposes of subparagraph (1)(c)(ii), the matters are: (a) the benefits resulting to the related creditor, or to some or all of the related creditors, from the proposal if passed, or from the failure to pass the proposal, as the case may be; and (b) the nature of the relationship between the related creditor and the company, or of the respective relationships between the related creditors and the company; and (c) any other relevant matter. Court may make orders (3) The Court may make one or more of the following: (a) an order that the proposal be considered and voted on at a meeting of the creditors convened and held as specified in the order; (b) an order directing that the related creditor is not, or such of the related creditors as the order specifies are not, entitled to vote on: (i) the proposal; or (ii) a resolution to amend or vary the proposal; (c) if the proposal was passed - an order setting aside the resolution passing the proposal; (d) such other orders as the Court thinks fit. … 108 The conditions for the application of s 75-41 are set out in ss 75-41(1)(a) and 75-41(1)(b). 109 It is accepted that those conditions are satisfied in this case. Due to the split in outcomes voted for by a majority of creditors by number on the one hand, and majority of creditors by value on the other, but for the votes of related creditors, the resolutions would have had to be decided by a casting vote (by reason of the operation of s 75-115 of the IPR). 110 That being so, the relevant enquiry is whether either of the conditions prescribed by s 75-41(1)(c) are satisfied in this case. This first step involves an evaluative exercise of broadly worded language: "contrary to the interests of the creditors as a whole" and "unreasonable" prejudice to the "interests of the creditors": DSG at [84]. The next step involves the exercise of a discretion: whether to make orders under s 75-41(3) setting aside the resolutions. 111 The principles governing the former s 600A of the Act (the predecessor to s 75-41) apply with equal force to s 75-41 of the IPR. Those principles can be summarised as follows: (a) First, there are two possibilities by which the passing of a resolution can engage s 75-41(1)(c): (i) that it is contrary to the interests of creditors as a group; or (ii) that the prejudice or likely prejudice to the interests of creditor dissentients is unreasonable having regard to certain factors. It follows that there may be prejudice to the interests of creditors who voted against the resolution but which falls short of unreasonable prejudice. In that event the curial power to override the decision of the meeting will not be enlivened. (b) Second, the onus lies upon the applicant to make out the elements of s 75-41. (c) Third, the provision applies to creditors who were creditors when the resolution was passed. (d) Fourth, the provision focuses on the "interests of creditors": those words are to be construed as identical in substance to the "creditors' interests" required to be addressed in the opinions required by s 438A of the Act to be formed by an administrator, and the statement by an administrator to creditors pursuant to r 75-225(3)(a) of the IPR about whether it would be in the creditors' interests for the administration to end, for the Company to execute a DOCA or for the Company to be wound up. (e) Fifth, "the interests of creditors" falls to be construed in such a way as would best promote the express object of Pt 5.3A of the Act, as contained in s 435A: that is, to maximise the chances of the Company, or as much as possible of its business, continuing in existence; or if that is not possible, results in a better return for the Company's creditors and members than would result from an immediate winding up of the Company; and (f) Sixth, it is the interests of creditors as creditors to which regard must be had.

Section 445D - termination of a DOCA 112 The Sino Creditors apply for an order pursuant to s 445D of the Act that the DOCA be terminated. 113 Section 445D of the Act provides as follows: When Court may terminate deed (1) The Court may make an order terminating a deed of company arrangement if satisfied that: (a) information about the company's business, property, affairs or financial circumstances that: (i) was false or misleading; or (ii) can reasonably be expected to have been material to creditors of the company in deciding whether to vote in favour of the resolution that the company execute the deed, was given to the administrator of the company or to such creditors; or (b) such information was contained in a document that accompanied a notice of the meeting at which the resolution was passed; or (c) there was an omission from such a document and the omission can reasonably be expected to have been material to such creditors in so deciding; or (d) there has been a material contravention of the deed by a person bound by the deed; or (e) effect cannot be given to the deed without injustice or undue delay; or (f) the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be so done or made would be: (i) oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more such creditors; or (ii) contrary to the interests of the creditors of the company as a whole; or (g) the deed should be terminated for some other reason. 114 Section 445D is contained in Pt 5.3A of the Act which was introduced to improve the speed and efficiency of external administrations. In Britax Childcare Pty Ltd v Infa Products Pty Ltd [2016] FCA 848; 115 ACSR 332 (Britax), Burley J observed at [87] and [88]: When the Corporate Law Reform Bill 1992 (Cth) was introduced, the Explanatory Memorandum (Explanatory Memorandum, Corporate Law Reform Bill (Cth) 1992) stated (at [449]) that the new Part was intended to provide for speed and ease of commencement of administration, minimisation of expensive and time-consuming court involvement and formal meeting procedures, flexibility of action and ease of transition to other insolvency solutions where an administration does not by itself offer all of the answers. It is with these objectives in mind that section 435A was introduced. The administration process operates in circumstances where those controlling the relevant company have accepted that it is insolvent. It has been accepted that the investigation conducted in the administration process is intended by Parliament to be a swift and practical' one; In the matter of Mustang Marine Australia Services Pty Ltd (admin apptd) - Perpetual Trustee Company Ltd v Mustang Marine Australia Services Pty Ltd [2010] NSWSC 1429 (Mustang Marine) at [109]. Consistent with this, the administrator's investigation is necessarily a preliminary investigation which involves the administrator carrying out his or her investigations in a manner which is modified in light of the tight timeframe and associated constraints provided for by Part 5.3A. An administrator, so constrained, cannot carry out a detailed investigation of at [sic] company in the same way as can a liquidator, and accordingly the administrator's actions must be looked at in the light of that more restricted range of activities which are available to him or her; Mediterranean Olives Financial Pty Ltd v Loaders Traders Pty Ltd (Subject to Deed of Company Arrangement) (No 2) [2011] FCA 178; (2011) 82 ACSR 300 (Mediterranean Olives) at [61] - [62]. 115 The Sino Creditors in their originating process rely upon s 445D(1)(f) of the Act. In deciding whether a DOCA is oppressive, unfairly prejudicial and/or unfairly discriminatory, and/or contrary to the interests of the creditors as a whole, the Court has regard to factors including: (a) the object of Pt 5.3A of the Act; (b) the interests of other creditors, the Company and the public; (c) the comparable position of the creditors on a winding-up, compared with their position under the deed; and (d) other relevant facts such as the relative position of all creditors under the deed (ie whether they are better off), the existence of a collateral benefit to the shareholders and the whole of the effect of the deed: TiVo, Inc v Vivo International Corporation Pty Ltd (subject to deed of company arrangement) [2014] FCA 789 (TiVo) at [54] per Gordon J, citing Sydney Land Corp Pty Ltd v Kalon Pty Ltd (No 2) (1997) 26 ACSR 427; appeal dismissed: Kalon Pty Ltd v Sydney Land Corporation Pty Ltd (1998) 26 ACSR 593. 116 In TiVo, Gordon J said at [55]: Section 435A is important. It describes the object of Pt 5.3A. Here, the relevant object is to ensure that the business, property and affairs of Vivo, as an insolvent company, are administered in a way that results in a better return for Vivo's creditors and members than would result from an immediate winding up of the company. As it has sometimes been said, s 435A effectively places the onus on those who support the DOCA to show positively that it "results in a better return for the company's creditors and members than would result from an immediate winding up of the company" (emphasis added): JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691 at [90]. 117 As noted by Brereton J in respect of the former s 600A in Re Connections Total Fitness for the Family Pty Ltd [2014] NSWSC 75 (at [42]-[43]), there is significant overlap and parity of consideration between the provisions: ... However, the similarity between s 445D(1)(f) and s 600A(1)(c) means that what is prejudicial to an unreasonable extent under the latter is likely also to be unfairly prejudicial or unfairly discriminatory under the former. Moreover, if one were to conclude that the deed, if executed, would be liable to be terminated under s 445D, that could be very relevant to what consequential orders should be made under s 600(2). Whether a deed of company arrangement is oppressive or unfairly prejudicial or discriminatory is determined primarily by reference to the general principles underlying Part 5.3A, including, first, the creditor's right to be paid or to have the company wound up or to have the company administered by an administrator in a way that will see creditors paid from the company's property, In Sydney Land Corporation v Kalon, Young J put it in these terms (at 430): Accordingly when one is looking at what is oppressive or unfairly prejudicial under section 445D, one looks at it in the background of the general right of a creditor to be paid or to wind the company up or to have the company administered by the administrator under the deed in a way which keeps the company's business going and will see the creditor paid something out of the property of the company. If a scheme and a deed deviates from that, then a creditor is more easily able to say that it's operating oppressively than otherwise. 118 Part 5.3A of the Act does not proceed on the basis that the will of the majority creditor necessarily prevails. The authorities support the proposition that the scheme of Pt 5.3A does not permit the individual will of one creditor, even a creditor entitled to claim the most significant sum in the administration, to set aside the DOCA without first establishing that the conditions of one or other of the sub-paragraphs of s 445D(1) have been satisfied: Decon Australia Pty Ltd v TFM Epping Land Pty Ltd (No 2) [2021] FCA 32 (Decon) at [152]. 119 As Burley J observed in Britax at [104] and [105]: In Mediterranean Olives, Dodds-Streeton J noted (at [192]) that the plaintiffs could not establish viable causes of action or negative the administrators' estimates of the probable nil return to the unsecured creditors on winding up. The plaintiffs submitted, however, that as the administrators' investigations were inadequate and the Deed of Company Arrangement depended on the support of related creditors, the Court should, if outstanding issues reasonably called for further investigation, "readily uphold their bona fide preference, as the major independent creditors, for liquidation", at [192]. Her Honour, at [193], said: As Network and Portinex make clear, however, unless the outcome of the relevant resolution is contrary to the interests of the creditors as a whole, the defeat of a major creditor's preference by the votes of related creditors is irrelevant. In DCT v Portinex/Silindale/Dalvale … ACSR 391 Austin J at [137] summarised the position as follows: This is a case where by far the most substantial unrelated creditor has been outvoted by related creditors and now finds himself bound to arrangements to which he objects. He objects broadly on the grounds that the arrangement unduly benefit the director of the companies and that the administrator has made inadequate investigations. If there were nothing more to the case than this, the creditor may have at least a sound moral case for assistance. But Pt 5.3A clearly contemplates that the wishes of an individual creditor may be overridden, and permits related creditors to take part in the decision to do so, subject to s 600A: Decon [104]-[105]. 120 The essence of the Sino Creditors' claims is an assessment of whether the Deed Administrators adequately performed their statutory duty to investigate the Company's financial circumstances and whether the Deed Administrators had a sufficient basis to recommend to creditors a DOCA instead of liquidating the Company. 121 The authorities recognise that the standards required of an administrator's investigation are necessarily modified by the tight timeframe and associated constraints: Mediterranean Olives Financial Pty Ltd v Loaders Traders Pty Ltd (Subject to Deed of Company Arrangement) (No 2) (2011) 82 ACSR 300 (Mediterranean Olives); [2011] FCA 178 at [61]; Decon at [99]-[114]. 122 In Hagenvale Pty Ltd v Depela Pty Ltd (1995) 17 ACSR 139, Cohen J at [145] and [146] stated: As a preliminary matter, it should be noted that Pt 5.3A has its objects as set out in s 435A, namely the provision for the business, property and affairs of an insolvent company to be administered in a way that maximises the chances of the company, or as much as possible of its business, continuing in existence, or, if that is not possible, results in a better return for the company's creditors and members than would result from an immediate winding up of the company. The intention was, as has been indicated in several cases, to provide a more expeditious and less expensive way of assisting those creditors and members than under the greater formality of a winding up or of the entry into a scheme of arrangement. One result, however, is that an administrator, constrained as he or she is by the time limits imposed under the Part, cannot carry out a detailed investigation of a company in the same way as can a liquidator, and accordingly the administrator's actions must be looked at in the light of that more restricted range of activities which are available to him. A further result, when dealing with a deed of company arrangement under Pt 5.3A, is that the amount of detailed information which would be given to creditors in a scheme of arrangement under s 411 of the Corporations Law is not available, again because of time restrictions and the need to have material sent to the creditors quickly. [emphasis added] 123 In Bovis Lend Lease Pty Ltd v Wily (2003) 45 ACSR 612, Austin J at [339] described the administrator's duty to investigate as follows: An administrator has a statutory duty under s 438A to investigate the company's business, property, affairs and financial circumstances. It is possible that he or she may fall under an obligation to obtain legal advice in order to discharge that duty properly in the facts of the case. But in assessing whether any such duty has arisen, the court is bound to take into account the limited time available to an administrator to carry out his or her investigations, the extent and complexity of the tasks to be carried out during that time, and the availability of funds for these purposes: see the Pddam [Deputy Cmr of Taxation (Cth) v Pddam Pty Ltd (1996) 19 ACSR 498] and Portinex [Deputy Cmr of Taxation v Portinex Pty Ltd [2000] NSWSC 99; (2000) 34 ACST 391] cases, cited above. In some cases it will be open to the court, bearing in mind such considerations, to conclude that something less than an independent legal assessment will be sufficient: [2003] NSWSC 467; 45 ACSR 612, [339]. 124 Relevant authorities were reviewed by Dodds-Streeton J in Mediterranean Olives. In the course of that review, her Honour observed at [66] and [69]-[70] as follows: In Spiteri v Georges [2002] VSC 473, Hansen J reiterated that the administrator must act quickly in relation to both the first and second meeting of creditors, and in investigating and forming an opinion. His Honour dismissed an application by the director of the company to remove the administrator and set aside his decisions allowing a party to vote as a creditor in a particular amount, on grounds including alleged partiality and lack of independence. … In Deputy Cmr of Taxation v Wellnora Pty Ltd (2007) 163 FCR 232, Lindgren J concluded (at [198]) that, on the basis of a number of provisions of Pt 5.3A, an administrator was required to act with expedition within a tight timeframe, which should be extended or adjourned only exceptionally. His Honour referred to the consistent distinction in relevant authority between the extent and quality of information available and investigations performed in, on the one hand, a voluntary administration and, on the other hand, a liquidation. In the former, the investigation was to be "swift and practical", as stated in Pddam at [226]. 125 Dodds-Streeton J also examined a number of authorities which had considered the relevance of an inadequate investigation by an administrator to the termination of a DOCA pursuant to various potentially overlapping provisions of the Act: Mediterranean Olives at [79]-[145]. Those authorities indicate that the Court's discretion is wide but should be exercised having regard to the interests of creditors and also the public interest. 126 In Decon, McKerracher J, after surveying relevant authorities, summarised the position at [112]-[114] and [121] as follows: As the authorities make a clear, there is a wide range of evaluative, discretionary decisions that administrators are required to make with the benefit of appropriate expertise about what information should be verified and what can be followed up in the constraints of the limited time and resources available. The authorities note that what has to be done is to be carried out within a three week period as determined by statute. Although it may be open to administrators to apply to the Court for an extension of time in an exceptional case, this also is very much a matter of their judgement as to the likely utility in doing so. … The statute does not contemplate that an administrator will be able to conduct a speedier, but just as effective, version of a liquidator's investigation. The statute of course is not prescriptive about what particular inquiries or investigations an administrator must make. It is clear that this also is to be a question of judgement for the qualified professional. … This is intended to be a practical insolvency regime. It is often of course disappointing to creditors as is the case in the present circumstances. That is more to do with an absence of available funds for creditors, rather than who should get them. But the statutory object is to achieve the formation of a relatively prompt independent expert view as to what course to recommend to the creditors in all the circumstances. Sometimes this is more of a rough and ready process as the authorities acknowledge and not an exact science, but of course qualified administrators are suitably trained to perform that task. The availability of an administration as an insolvency tool is to provide a trade-off for what would otherwise be a far more time-consuming and usually expensive process in liquidation. 127 The Sino Creditors' application also needs to be evaluated by reference to its claim and the assessment of its claim at the second creditors' meeting. 128 Meetings in external administrations are governed by Division 75 of the IPR. The following provisions are relevant to ruling on the entitlement of creditors to vote at a meeting of creditors: (a) First, s 75-50 of the IPR provides that, if a meeting is convened by an external administrator under s 439A of the Act, the external administrator must preside at the meeting. (b) Second, s 75-85(2) of the IPR provides that, subject to subsections (3) to (5), each creditor is entitled to one vote and has one vote. Section 75-85(3) of the IPR (which is the equivalent of previous reg 5.6.23(1)) provides: A person is not entitled to vote as a creditor at a meeting of creditors unless: (a) his or her debt or claim has been admitted wholly or in part by the external administrator; or (b) he or she has lodged, with the person presiding at the meeting or the person named in the notice convening the meeting as the person who may receive particulars of the debt or claim: (i) those particulars; or (ii) if required, a formal proof of debt or claim. (c) Third, s 75-85(4) of the IPR (which is the equivalent of previous reg 5.6.23(2)) provides: A creditor must not vote in respect of: (a) an unliquidated debt; (b) a contingent debt; (c) an unliquidated or contingent claim; (d) a debt that the value of which is not established - unless a just estimate of its value has been made. (d) Fourth, s 75-95 of the IPR, which is headed "Evidence of liability for debt", provides: (1) If necessary, an external administrator must ask a creditor to give evidence in writing in relation to a debt claimed by the creditor to establish the liability of the company for the debt. (2) If the external administrator considers that the evidence is insufficient for the purpose of subsection (1), the administrator, before asking for further information, must have regard to the expected dividend rate and the materiality of the issue requiring clarification. (3) An external administrator must keep a copy of any evidence or information relied upon in deciding, for the purpose of voting or distributing dividends, whether to accept or reject a creditor's claim. (e) Fifth, s 75-100 of the IPR is headed "Decisions in relation to entitlement to vote at creditors' meeting". Section 75-100(1) (which is equivalent of previous reg 5.6.26(1)) provides that the person presiding at a meeting may determine any question that arises as to the entitlement of a person to vote. (f) Sixth, s 75-100(2) of the IPR provides that, in deciding whether a person is entitled to vote at a meeting of creditors, the person presiding must have regard to "…the merits of the person's claim" and act "impartially and independently". (g) Seventh, s 75-100(3) of the IPR (which is the equivalent of previous reg 5.6.26(2)) provides that, if the person presiding is in doubt whether a proof of debt or claim should be admitted or rejected, he or she must mark the proof as objected to and allow the creditor to vote, subject to the vote being declared invalid if the objection is sustained. 129 The Administrators' submissions conveniently summarise the relevant principles as follows: (a) First, authorities such as Selim v McGrath (2003) 47 ACSR 537; 177 FLR 85; [2003] NSWSC 927 (Selim) and El-Saafin & Anor v Franek & Ors (No 3) (2019) 143 ACSR 452 (El-Saafin) make a distinction between ruling on the entitlement to vote at meetings and ruling on proofs of debt for dividend purposes. The obligation to seek further information from a creditor "if necessary" is imposed on the "external administrator" and not on "the person presiding at the meeting". (b) Second, the decision-making of the person presiding over the meeting is by reference to documents persons claiming to be creditors choose to present. It is also undertaken against the background of all relevant contextual matters of which the decision-maker is aware. (c) Third, it is "no part of the function of an administrator or the chairperson of a s 439A meeting to promote or advance the claims of certain persons to be creditors". (d) Fourth, if the debt or claim is for an unliquidated amount, or it is contingent, or it is a debt the value of which is not established, a just estimate of the value of the debt or claim must be made by the chairman of the meeting acting reasonably before the creditor is permitted to vote. (e) Fifth, if the claim cannot be quantified by a just estimate, but it appears that the creditor is a creditor for at least some amount (for example, where a debt is subject to an uncertain contingency), it is appropriate to admit the creditor for voting purposes at a nominal value of $1. (f) Sixth, the decision of whether to admit or reject the debt and the decision to estimate the just value of a debt or claim to be taken at the meeting will "of necessity, be of somewhat summary nature". The process of evaluation will take place shortly before the meeting without much time for consideration and it is not contemplated that the person evaluating will undertake any detailed inquiry. He or she will be expected do the best they can in the light of their pre-existing knowledge and the particulars supplied by the claimant. Accordingly, the situation is not one in which extensive debate or deliberation or detailed consideration will be possible. As Austin J observed in Selim at [103]: He or she will do the best that can be done by reference to the factual material the claimant furnishes, viewed in the total context with which the decision-maker is dealing. If that material provides reasonable grounds, within that context, for ascribing a particular figure to the particular claim, the chairperson or administrator is no doubt expected to accept that position. If, on the other hand, there is little or no material from which a conclusion as to value can be drawn, a just estimate may be zero or perhaps the nominal amount of $1 assuming that admission is warranted.

CONSIDERATION 130 I now turn to consider the Sino Creditors' complaints about: (1) the manner in which the Administrators undertook their investigation for the purposes of preparing a Report for Creditors (s 438A); (2) whether the Report contained misleading information (s 445D(1)(a)) and/or material omissions (s 445D(1)(c)); (3) whether the DOCA is oppressive or unfairly prejudicial to, or unfairly discriminatory against, the Sino Creditors (s 445D(1)(f)(i)); and (4) whether the DOCA ought be terminated because of considerations of corporate morality and the interests of the public at large (s 445D(1)(g)).

Administrators' statutory duty to investigate - s 438A of the Act 131 The Sino Creditors submit that the Administrators failed to adequately perform their statutory duty under s 438A to investigate the Company's business, property, affairs and financial circumstances. In particular, and as set out in the originating process, the Sino Creditors submit that: (1) the Administrators failed to establish the value of the Company and its assets for the purpose of giving a true estimate of the return to creditors in a winding up; (2) the EOI conducted by the Administrators, on an "as is where is" basis, gave insufficient information to interested parties to ascertain the profitability of the business and formulate meaningful indicative offers; (3) the EOI was also unnecessary in circumstances where it was always intended that the DOCA would be proposed; (4) the Administrators exacerbated the costs of the administration, including by protracting the Administrators' trade-on period from an original estimate of 4 weeks to 17 weeks; (5) the Administrators exacerbated the costs of the administration by bringing premature proceedings in VID732/2021 to lift the preservation orders in the Arbitration Proceeding on the premise this was necessary to avoid a "chilling effect" on the EOI campaign; (6) as a result of points 2-5, any distribution to Participating Creditors, including the Sino Creditors, under the Deed Fund had already been substantially eroded by the costs of the administration; (7) the Deed Fund stands to be further (if not fully) eroded by the Administrators' remuneration and legal costs, with minimal or no return to Participating Creditors, in the event that the Sino Creditors dispute the Administrators' incorrect and inequitable assessment of the Sino Creditors' claim in the amount of $161,647; (8) in respect to the value of the Sino Creditors' claim, the Administrators have predetermined that they would assess the damages component of the Sino Creditors' claim at $1, doing nothing to investigate or engage with the Sino Creditors concerning the quantum of its damages claim. Further, the setting off of unpaid licence fees and interest under the master licencing agreement is inequitable where the Sino Creditors have suffered far greater losses as a result of the Company's breaches of the master licencing agreement. The Sino Creditors were first informed of the intended set-off in the Administrators' Circular to Creditors on 18 March 2022; and (9) in contrast to the position of Participating Creditors under the DOCA, including the Sino Creditors, the claims of the related party creditors remain unaffected by the DOCA. 132 The Administrators submit that there is nothing (in the manner in which they conducted their investigation under s 438A of the Act) which would provide any basis to conclude that the Administrators had not made adequate investigations so as to be able to form an opinion based on the available information as to whether to recommend a DOCA or liquidation to the Company's creditors. 133 I reject the Sino Creditors' claim that the Administrators failed to adequately perform their statutory duty under s 438A of the Act to investigate the Company and its property, affairs and financial circumstances. Mr Rathner gave detailed evidence of the steps which the Administrators undertook to investigate the financial affairs of the Company so as to be in the best position to make a recommendation to creditors to proceed with the DOCA instead of liquidating the Company. I accept that evidence. 134 Mr Rathner's reasoning for admitting the Sino Creditors' damages claim for the nominal amount of $1 value is recorded in the minutes of the second creditors' meeting at Annexure GIR-44 to Rathner 8. Those minutes record that Mr Rathner was not satisfied that he had sufficient cogent or probative information to make a just assessment of the Sino Creditors' damages claim. That was principally because the information provided to Mr Rathner by the Sino Creditors lacked particularity and did not provide any causal basis between the breaches of the master licencing agreement found by the arbitrator and the alleged damage. Mr Rathner, in his evidence, pointed to the following matters which highlights the lack of probative information available to him, as well as the difficulty that he experienced in reaching a just estimate of the Sino Creditors' claim: (1) the proof of debt itself describes the damages claim as "approximately $5,000,000"; (2) the Sino Creditors' further amended statement of claim in the Arbitration Proceeding attached as Annexure D to the proof of debt states that the particulars of loss and damage "will be given at an appropriate time"; (3) the particulars provided in the Sino Creditors' solicitors' letter dated 24 March 2022 did not provide sufficient particularity to enable Mr Rathner to form a view as to a just estimate of the Sino Creditors' damages claim; (4) the spreadsheets provided with the Sino Creditors' solicitors' letter dated 24 March 2022 did not contain any figures which could be reconciled to the Sino Creditors' solicitors' breakdown of how the approximate $5 million claim was calculated or arrived at; (5) there was no financial information to support the assertion by the Sino Creditors that the net profit from 2017 was lost in 2018 and 2019 by reason of the Company's breaches of the master licencing agreement; (6) there was no information which would substantiate trading losses in 2018 or 2019 being attributable to any breach of the master licencing agreement by the Company; and (7) the Sino Creditors did not provide any objective evidence of the damages claimed by way of forensic accounting or expert report. 135 In these circumstances, I find that Mr Rathner was justified in rejecting the Sino Creditors' unparticularised damages claim on the basis that he could not make a just estimate on the information that had been provided to him by the Sino Creditors. In my opinion, the information provided by the Sino Creditors to Mr Rathner concerning the quantum of the alleged damages claim arises no higher than mere assertion. As a consequence, I find that Mr Rathner was justified in admitting the claim for $1 at the second creditors' meeting and that he, as an experienced administrator formed the opinion (which I find was reasonably based) that he did not have sufficient probative information to be able to make a just assessment of the Sino Creditors' damages claim.

Materially misleading information provided to creditors - s 445D(1)(a) of the Act 136 The Sino Creditors submit that the Report was materially misleading in three ways. 137 First, the Sino Creditors submit that "the substantial understatement" of the Sino Creditors' debt owed by the Company led to the contention that, under the DOCA, creditors would be paid in full, when, in fact, they would only receive "a small proportion of their claims". I reject this submission as it is premised on the assumption that for the purposes of any distribution under the DOCA, the Sino Creditors will be able to substantiate that they have a substantial damages claim against the Company. I do not accept that the Sino Creditors have established that they had a substantial damages claim against the Company for breaches of the master licencing agreement. 138 Second, the Sino Creditors submit that the Report is misleading in the sense that, once the costs of administration or winding up are taken into account, the estimated return to creditors, both under the DOCA and in a winding up, are misleading. I reject this submission as the Report stated the assumptions which underpinned the Administrators' estimate of returns under the DOCA or in liquidation. Those assumptions included fees not exceeding $500,000 in a best-case scenario; no ongoing or other litigation; and noted that if the Sino Creditors disputed the assessment of their claim, legal fees and disbursements were likely to be higher: Report p 28. I do not accept that the Report was misleading with respect to the estimated return to creditors both under the DOCA and in a winding up once the costs of administration of winding up are taken into account. 139 Third, the Sino Creditors submit that the Report is misleading in the sense that the potential realisation on a sale of the Company has been understated. The Sino Creditors did not tender any evidence to substantiate the claim that the Report is misleading in that it understates the value on realisation of the Company's business. Mr Tyshing did not value the Company. Mr Tyshing's criticisms of the manner in which the Administrators conducted themselves were unrealistic in that Mr Tyshing failed to take into account the fact that the Company was in financial distress and that the Administrators were working on a confined timeline in preparing the Report for creditors.

Material omissions from Report to creditors - s 445D(1)(c) of the Act 140 The Sino Creditors submit that the Report contains little or no discussion of a number of the financial agreements and security arrangements entered into with the related parties, and whether they might be set aside in a liquidation or give rise to claims against directors. This wholly unparticularised claim disregards the evidence. The Report, under the heading "Related Entity Loans", makes plain that there were no such security arrangements with the related parties. The Report makes clear, each of the related party creditor loans were unsecured: Report, p 19-20. 141 The Report noted that the Administrators had reviewed the related party loans as recorded in the Company's Xero accounting system and the Company's financial statements: Report, p 9; reviewed bank statements to verify the advance of funds to the Company by related parties: Report, pp 9, 19-20; verified interest calculations: Report, pp 19-20; and reviewed loan agreements: Report, pp 19-20. The Report did not identify any potential claims against directors: Report, pp 20 and 25. 142 I also reject the Sino Creditors' submission that "had creditors been aware of the potential claims, then there is a real likelihood that some or all of them would have voted to wind up the companies …". I accept the Administrators' submission that under the DOCA, unrelated creditors stood to receive an estimated 100 cents in the dollar and that, in these circumstances, it is inconceivable that unrelated creditors, acting rationally, would have voted to wind up the Company so that a liquidator could pursue unidentified "potential claims".

Unfairly prejudicial or discriminatory against the Sino Creditors - s 445D(1)(f)(i) of the Act 143 The Sino Creditors accept in their submissions that in respect of s 445D(1)(f)(i) of the Act, and whether the DOCA is oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more creditors, the mere fact that a creditor is prejudiced by the operation of the deed is not a sufficient reason to terminate a deed. The mere existence of the deed procedure usually means that some creditors will gain something and some creditors will lose something out of the arrangement: Decon at [203]. 144 The test under s 445D(1)(f)(i) is not merely discrimination or prejudice, but unfair discrimination or unfair prejudice. Some degree of discrimination is not necessarily unfair. 145 The Sino Creditors' principal complaint is that the DOCA extinguishes the Sino Creditors' damages claim whilst preserving the related party debts. This, the Sino Creditors contend, is unfairly discriminatory against them. I reject this submission for the following reasons. 146 The submission ignores the evidence that the related parties had entered into a deed of subordination and forbearance on 11 April 2022, which provided for the related party debts to be subordinated to the debts of the unsubordinated creditors for a period of three years, to 11 April 2025. As a consequence, the Company and Dr Williams agree not to prove or claim its debts in competition with any unsubordinated creditor in the event of the Company's insolvency or liquidation. 147 For the reasons already given, I do not accept that the Sino Creditors have established that they have a "very substantial damages claim against the Company". 148 I also reject this claim that the DOCA is unfairly discriminatory or unfairly prejudicial to the interests of the Sino Creditors. Under the terms of the DOCA, the related party creditors agree not to participate in the distribution so that the dividend available to Participating Creditors is increased. Further, as a consequence of the operation of the deed of subordination, the related party creditors agree, as outlined above, to subordinate their debt to the debts of the unsubordinated for a period of three years. I am satisfied on the evidence that the non-participation of the related party creditors increases the pool of funds available to Participating Creditors. The evidence is that under the terms of the DOCA, on the basis of the proofs as assessed by the Administrators, unsecured creditors stand to receive an estimated 100 cents in the dollar. I have found the Sino Creditors have not established that they have a substantial damages claim against the Company and that Mr Rathner was justified in admitting the Sino Creditors' damages claim for $1. I have also found that the quantum of the Sino Creditors' alleged damages claim rises no higher than mere assertion. The Sino Creditors did not establish on the evidence that they will be worse off under a DOCA than in an immediate liquidation of the Company. Accordingly, I find that the DOCA is not unfairly discriminatory or unfairly prejudicial to the Sino Creditors.

Detriment to commercial morality - s 445D(1)(g) of the Act 149 Section 445D(1)(g) of the Act provides that the Court may make an order terminating a DOCA if satisfied that "the deed should be terminated for some other reason". That includes the Court taking into account considerations of commercial morality and the interests of the public at large: Vero Insurance Ltd v Kassem [2011] NSWCA 381 per Campbell JA (with Meagher JA agreeing) at [82]; cited in Decon at [70]. 150 The Sino Creditors point to the following matters, which they say can be taken into account in deciding whether to terminate the DOCA: (a) The Administrators have failed to properly establish the value of the Company's business and assets for the purpose of giving a true estimate of the return to creditors in a winding-up. (b) The EOI campaign conducted by the Administrators, on an 'as is where is' basis, gave insufficient information to interested parties to ascertain the profitability of the Company and formulate meaningful indicative offers. (c) In respect of the value of the Sino Creditors' claim, it is also contended that the Administrators predetermined that they would assess the damages component of that claim at $1, and did not investigate or engage with the Sino Creditors concerning the quantum of its damages claim. (d) The Administrators permitted an unsubstantiated claim by the Company against the Sino Creditors for licence fees under the master licencing agreement to be set off against the Sino Creditors' claims in circumstances where it had already been found in the arbitration that the Company had been in breach of the master licencing agreement for the period to which those fees related. (e) The claims of the related party creditors remain unaffected by the DOCA. (f) If the DOCA is permitted to stand, the Company will be insolvent as it has insufficient assets to meet the claims of the Excluded Creditors. 151 Each of the above claims by the Sino Creditors must be rejected for the reasons previously given. 152 I reject the claim that the Administrators have failed to properly establish the value of the Company and its assets for the purpose of giving a true assessment of the return to creditors in a winding up. In this regard, I accept the evidence of Mr Rathner and the process that he undertook to establish the value of the Company and its assets. I find that the Report provides a sound basis of the methodology adopted by Mr Rathner for the purpose of reporting to creditors and the estimated return to creditors under the DOCA as opposed to the Company being placed into liquidation. 153 I do not accept that the EOI campaign gave insufficient information to interested parties. The EOI campaign was successful in the limited timeframe. This is clear from the $1.15 million arms-length offer that the Administrators had elicited for the Company in this short timeframe. 154 On the findings that I have made with respect to the conduct of the Administrators, the manner in which they undertook their investigation and the Administrators' assessment of the Sino Creditors' damages claim, I am satisfied that the DOCA should not be terminated for some other reason as it does not offend against commercial morality nor the interests of the public at large.

Setting aside the DOCA - s 75-41 of the Insolvency Practice Schedule 155 The Sino Creditors contend that the DOCA should also be set aside by operation of the Court's discretion under s 75-41 of the Insolvency Practice Schedule, which replaced s 600A of the Act. 156 The Sino Creditors accept that the conditions for the application of s 75-41 in respect of the DOCA, as prescribed by s 75-41(1)(a) and s 75-41(1)(b), are satisfied. 157 The Sino Creditors accept that there is a significant overlap and parity of consideration between s 75-41 of the Insolvency Practice Schedule and the question of whether a DOCA is oppressive or unfairly prejudicial or discriminatory for the purpose of s 445D(1)(f)(i) of the Act. The Sino Creditors rely upon the same matters that they relied upon under s 445D to submit that the Court ought exercise its discretion to set aside the DOCA resolution. 158 For the same reasons that I rejected terminating the DOCA under s 445D as variously stated in my Reasons above, I will not exercise my discretion under s 75-41 of the IPR to set aside the DOCA resolution.

Review of Administrators' Remuneration 159 The Sino Creditors apply under IPS Rules 60-5, 60-10 and 60-12 for the Administrators' remuneration to be referred to a Judicial Registrar of the Court for assessment. 160 The Sino Creditors at [75] of their written submissions dated 6 April 2022, identify the matters which they rely upon to have the Court exercise its discretion to review the remuneration of the Administrators. I am not satisfied that those matters warrant exercising the discretion in favour of having the Administrators' remuneration reviewed by a Registrar of this Court for the following reasons: (1) I am not satisfied on the evidence that the EOI campaign conducted by the Administrators was unnecessary and a waste of costs. (2) I am not satisfied that the criticisms made by Mr Tyshing of the EOI campaign and the content of the IM are warranted for the reasons previously given. (3) I am not satisfied on the evidence that the Administrators have exacerbated the costs of the administration by the manner in which they have conducted themselves. 161 The Sino Creditors have not tendered any evidence to establish that the Administrators' costs were unreasonable in the circumstances and that the work they undertook was not work that was needed to be undertaken.

CONCLUSION 162 For the reasons given, proceeding VID153 of 2022 will be dismissed. I certify that the preceding one hundred and sixty-two (162) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anderson.

SCHEDULE OF PARTIES VID 153 of 2022

Second Plaintiff BEIJING YINGQUIDI EDUCATION AND TECHNOLOGY LTD

Second Defendant GIDEON ISAAC RATHNER (IN HIS CAPACITY AS JOINT AND SEVERAL ADMINISTRATOR OR DEED ADMINISTRATOR OF TODDLER KINDY GYMBAROO PTY LTD (ADMINISTRATORS APPOINTED) (ACN 006 166 141)

Third Defendant MATTHEW BRIAN SWEENY (IN HIS CAPACITY AS JOINT AND SEVERAL ADMINISTRATOR OR DEED ADMINISTRATOR OF TODDLER KINDY GYMBAROO PTY LTD (ADMINISTRATORS APPOINTED) (ACN 006 166 141)

Second Plaintiff MATTHEW BRIAN SWEENY (IN HIS CAPACITY AS JOINT AND SEVERAL ADMINISTRATOR OF TODDLER KINDY GYMBAROO PTY LTD (ADMINISTRATORS APPOINTED) (ACN 006 166 141)

Third Plaintiff TODDLER KINDY GYMBAROO PTY LTD (ADMINISTRATORS APPOINTED) (ACN 006 166 141)

First Intervenor SINO GROUP INTERNATIONAL LIMITED

Second Intervenor BEIJING YINGQUIDI EDUCATION AND TECHNOLOGY LTD