This view of the matter does not avoid the apparent problem arising under s 532(2) already referred to. It could hardly have been the intention of the legislature that every administrator who would otherwise automatically become liquidator by virtue of the operation of s 446A should, before so acting, make an application to the Court for leave under s 532(2). One might readily suspect that by oversight the legislature failed to add the words 'or administrator' after the word 'liquidator' in s 532(2)(b) and (c)(i), when enacting Pt 5.3A: cf s 448C(1)(b) and (c). Be this as it may, I consider that the enactment of Pt 5.3A had the effect of excluding by necessary implication from the operation of s 532(2)(b) and (c)(i) an administrator who becomes a liquidator by virtue of the operation of s 446A. "
22 Mr Russell referred to other provisions pursuant to which an administrator or deed administrator may automatically be appointed as liquidator. If creditors resolve that the company execute a deed of company arrangement but the company fails to do so, the company is taken to have passed a special resolution that it be wound up voluntarily without a declaration of solvency and the creditors are taken to have appointed the administrator to be the liquidator (ss 444B(2), 446A(1)(b), (2), and 499(2B)). If, at a meeting convened under s 445F, a company's creditors pass a resolution terminating a deed of company arrangement executed by the company and also resolve that the company be wound up, the company is taken to have passed a special resolution that it be wound up voluntarily without a declaration of solvency. Unless the creditors appoint another person to be liquidator, they are taken to have appointed the deed administrator to be liquidator (ss 445E, 445F, 446A(1)(c), (2) and 499(2C)). Sections 445D, 446B and reg 5.3A.07 provide another instance of a company's being taken to be subject to a creditors' voluntary winding-up where a deed of company arrangement is terminated. However, after the amendment of reg 5.3A.07 on 31 December 2007, it is not clear that the deed administrator is to be taken to have been appointed as liquidator in such a case.
23 Mr Russell submitted that the same reasoning as led McLelland CJ in Eq to conclude that by necessary implication s 532(2)(b) and (c)(i) did not apply in a case of an administrator who becomes a liquidator by virtue of s 446A, shows that those provisions do not apply in the case of an administrator who becomes a liquidator by virtue of s 446A and 499(2B), nor where a deed administrator is taken to have been appointed as liquidator pursuant to ss 446A(1)(c) and (2) and 499(2C). He submitted that these were examples of unexpressed "carve-outs" from the prohibitions in s 532(2)(b) and (c)(i) and that to avoid anomalies, the same "carve-out" should be implied not only in the specific circumstances provided for in those provisions, but in circumstances such as the present where the creditors vote at a meeting convened pursuant to s 497 to appoint a deed administrator as liquidator.
24 Some of the steps in the argument can be accepted. I agree that consistently with the reasoning in Energy & Resource Conservation Co Ltd (in liq) v Abigroup Contractors Pty Ltd, it is to be implied that s 532(2)(b) and (c)(i) do not apply where an administrator is automatically appointed as liquidator upon the creditors resolving that the company execute a deed of company arrangement and its failing to do so. I also agree that it is to be implied that s 532(2)(b) does not apply where a deed administrator is taken to be appointed as liquidator following a resolution under s 446A(1)(c). But that is because of a necessary implication to be drawn from the fact that the legislature could not have intended those parts of s 532(2) to apply where the administrator or deed administrator is to be taken to be appointed as liquidator and (in the case of an administrator) he or she is likely to be a creditor of the company and (in the case of both an administrator and a deed administrator) he or she would be precluded from taking the appointment by virtue of being an officer of the company and the Act not contemplating that there would be a meeting of creditors to pass a resolution under s 532(5).
25 However, no such necessary implication arises in the present case. Subsection 497(11) is a general provision relating to the replacement of a liquidator. No qualification to s 532(2)(b) and (c)(i) can be implied from the terms of s 497. It does not follow from the fact that some exceptions to s 532(2)(b) and (c)(i) are necessarily implied, nor from the fact that the legislature could reasonably have excluded both administrators and deed administrators from s 532(2)(b) and (c)(i) in all of the circumstances to which the section might apply, that the section should be construed as if those persons were added to the exceptions in the case of liquidators, so as to exempt them from those provisions. Such a construction would amount to a rewriting of the provisions. There is no necessary implication that s 532(2)(b) and (c)(i) do not apply to an administrator or deed administrator where creditors propose to replace a liquidator at a meeting convened pursuant to s 497(11). In my view s 532 applied to the appointment of Mr Pleash as liquidator.
26 Accordingly Mr Pleash required leave of the court to accept the appointment. That leave can be given retrospectively (Deputy Commissioner of Taxation v ACN 080 122 587 Pty Ltd [2005] NSWSC 1247). This is an appropriate case for the grant of leave. Mr Pleash has acted in accordance with the wishes of the creditors. He did not overlook the requirements of s 532. He took legal advice as to whether he could accept the appointment and received advice as to the reasoning in Energy & Resource Conservation Co Ltd (in liq) v Abigroup Contractors Pty Ltd. I have not accepted the submission of Mr Pleash's solicitor as to the extent of the implied exceptions to s 532(2)(b) and (c)(i), and Mr Pleash should have appreciated, and probably did appreciate that it was at least doubtful whether he could accept the appointment without leave of the court. However, the time for seeking that leave was short. There were other pressing issues. There is no question that Mr Pleash acted in good faith. He has acted properly in making this application. It is in the interests of creditors that leave be given.
27 For these reasons I will make an order pursuant to s 532(2) that Mr Pleash have leave nunc pro tunc to be appointed and act as liquidator of the company.
28 Before leaving these provisions I should note that there appears to have been a slip in the amendments made by the Corporations Amendment (Insolvency) Act 2007 (Cth) in a case where, under reg 5.3A.07, the company is to be taken to have passed a special resolution under s 491 for its being wound up voluntarily without a declaration of solvency. Prior to the amendments on 31 December 2007 the regulation provided that the company was taken to have nominated the deed administrator to be the liquidator for the purposes of the winding-up and the creditors were taken not to have nominated anyone (reg 5.3A.07(04)). That regulation was repealed with effect from 31 December 2007 when amendments were made to ss 497 and 499. Whilst s 499 deals with who is taken to be appointed as liquidator in cases to which s 446A applies, it does not deal with who is taken to be appointed as liquidator in cases to which regulations made under s 446B apply. This would seem to be an oversight. By reg 5.3A.07(3), s 497 is taken to have been complied with in relation to the winding-up. A possible construction of the legislation is that the company is required to convene a general meeting to appoint a liquidator pursuant to s 499(1). It is not clear what the position would be if the company failed to do so, or what opportunity the creditors would have to replace a liquidator appointed by the members in general meeting. The explanatory memorandum to the Corporations Amendment (Insolvency) Bill 2007 states that the Bill would allow creditors to appoint a different person as liquidator when a company proceeds from a deed of company arrangement into liquidation (clause 4.205). It is not clear how that objective is achieved in a case to which reg 5.3A.07 applies. This is a matter which deserves attention when the next amendments are made to the Act.
Directions that Application is Justified
29 Mr Pleash is acting properly in seeking orders for the termination of the deed of company arrangement and directions as to how he should deal with the deed fund. Because he holds positions where he is required to consider the interests of creditors whose claims conflict he is entitled to protection against any disgruntled creditor who might contend that he has not acted properly in making this application.
30 He seeks such a direction both in his capacity as deed administrator and liquidator. Mr Pleash is not entitled to seek directions under s 447D(2) of the Corporations Act as deed administrator. That section provides that the administrator of a deed of company arrangement may apply to the court for directions about a matter arising in connection with the operation of, or giving effect to, the deed. As the company is being wound up, by reason of s 471A(2), Mr Pleash cannot perform or exercise, or purport to perform or exercise, any function or power as an officer of the company. "Officer" includes an administrator of a deed of company arrangement. A deed administrator is not within the exemption in s 471A(1A). Accordingly the direction sought will be given pursuant to s 479(3) to Mr Pleash in his capacity as liquidator.
Beneficial Ownership of the Deed Fund
31 Now that the company is in liquidation there is a question whether the creditors who are entitled to the moneys constituting the deed fund (after allowance for the remuneration and expenses of Mr Pleash as deed administration) are all of the creditors of the company or only those creditors who are entitled to participate under the deed. If the deed fund is property beneficially owned by the company it is to be dealt with by the liquidator by paying debts and claims in accordance with ss 555 and 556 of the Corporations Act, that is to say, for the benefit of all creditors who are entitled to prove in the winding-up. On the other hand, if the effect of the deed of company arrangement is that the deed fund is held by the company on trust for the creditors entitled to participate under the deed, whilst Mr Pleash would no longer be entitled to deal with the fund in his capacity as deed administrator by virtue of s 471A (which prohibits a person exercising any function or power as an "officer" of the company), Mr Pleash, as liquidator of the trustee, would be obliged to distribute the deed fund to the beneficiaries of the trust (himself as deed administrator for his proper remuneration and the participating creditors under the deed) after recovering remuneration from such trust assets for work done by him as liquidator in administration of the trust.
32 A number of cases has considered the question whether property contributed by a company or by third parties to be subject to a deed of company arrangement is held on trust for participating deed creditors or remains beneficially owned by the company prior to distribution to participating creditors. The principal authorities are Federal Commissioner of Taxation v All Suburbs Car Repairs Pty Ltd (1994) 14 ACSR 753; Dean-Willcocks v ACG Engineering Pty Ltd (in liq) [2003] NSWSC 353; (2003) 45 ACSR 290; Shepard v Sports Mondial of Australia Pty Ltd (in liq) [2005] NSWSC 432; (2005) 53 ACSR 746; Commonwealth of Australia v Rocklea Spinning Mills Pty Ltd [2005] FCA 902; (2005) 145 FCR 220; Lombe v Wagga Leagues Club Ltd [2006] NSWSC 3; (2006) 56 ACSR 387; Purchas, Re; Estore Pty Ltd (in liq) [2006] FCA 1222; (2006) 154 FCR 246 and Parker, Re; Strongest Link Pty Ltd (in liq) [2008] FCA 1007; (2008) 250 ALR 118.
33 The leading decision is that of Barrett J in Lombe v Wagga Leagues Club Ltd. Contrary to what has been suggested, I do not understand his Honour to have concluded that it is not possible, consistently with the scheme of Pt 5.3A, for a deed of company arrangement to provide that property of the company (including property contributed by third parties which becomes property of the company in accordance with s 444A(4)(b)) be settled on trust for the benefit of creditors entitled to prove under the deed, either by transferring the legal title of the property to the deed administrators, or by the company declaring itself to be trustee of the property. (See at paras [74]-[76]).
34 In Parker, Re; Strongest Link Pty Ltd, Lander J of the Federal Court appears to have been of the view that a deed of company arrangement could not create a trust in favour of creditors (at [47]-[50]). With respect, I do not think that conclusion follows either from the scheme of the Act, nor the earlier authorities. In particular, it is not inconsistent with a trust being created by a deed of company arrangement that, s 444A(4)(b) describes the property to be the subject of the deed as "the property of the company". "Property" is defined in s 9 as meaning any legal or equitable estate or interest in property. A beneficiary's interest in trust property is engrafted onto, not carved out of, the legal estate (DKLR Holding Co (No. 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510 at 518-520; Re Transphere Pty Ltd (1986) 5 NSWLR 309 at 311). A deed fund would not cease to be property of the company within the meaning of s 444A(4)(b) because it might be held on trust. It does not seem to me to be conceptually impossible for the company to be trustee of a deed fund for the benefit of creditors, and for the trust to be administered by the deed administrator as the company's agent as is usually the case when clause 1 of sch 8A is incorporated.
35 With respect, I do not see any inconsistency between the reasoning of Davies J in Federal Commissioner of Taxation v All Suburbs Car Repairs Pty Ltd and the reasoning of Austin J in Dean-Willcocks v ACG Engineering Pty Ltd. In All Suburbs Car Repairs, no question arose of the deed creating a trust in favour of participating creditors.
36 However, as Barrett J convincingly demonstrates in Lombe v Wagga Leagues Club Ltd, it does not follow that merely because the deed administrator is required to hold the deed fund and apply the balance after certain deductions pro rata to participating creditors, that the company (let alone the deed administrator who is usually the agent of the company) holds the property on trust for those persons. (Compare Dean-Willcocks v ACG Engineering Pty Ltd at [15]). A deed administrator performs a function analogous to that of a liquidator required to distribute property of the company to the creditors entitled. But it is inaccurate to speak of the company as having lost its beneficial ownership in its property which is to be dealt with by the liquidator for the creditors' benefit (Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) [2005] HCA 20; (2005) 220 CLR 592 at [48]-[49], [54]-[55]). In Lombe v Wagga Leagues Club Ltd, Barrett J held that even specific references in the deed in question in that case to the deed fund being held on trust, did not indicate that a trust was created, but rather was a use of the term "trust" other than in a strict sense. In that case, it was contended that the deed administrators were themselves trustees, rather than being agents for the company as a trustee, but there was no language or mechanism by which the legal title to the company property was transferred to the deed administrators to be held by them on trust.
37 In the present case the deed does not use the language of trust. It provided for the company to provide funds for the payment of the claims of participating creditors. There is no need to imply from the language of the deed that a trust was intended to be created.
38 If the deed had created a trust, this would have been a clear case to make an order terminating the deed. The trust would thereupon be extinguished. There is no reason that the trade creditors who allowed the company to continue to trade, or the Commissioner of Taxation, should be postponed to the deed creditors (Re Spargold Enterprises Pty Ltd; Ex parte McDonald [1999] NSWSC 623; (1999) 32 ACSR 363; Commonwealth of Australia v Rocklea Spinning Mills Pty Ltd at [23]-[27]).
39 As the deed property is beneficially owned by the company, it is to be dealt with for the benefit of all creditors in accordance with ss 555 and 556. The deed has no further work to do and should be terminated pursuant to s 445D(1)(g) (Parker, Re; Strongest Link Pty Ltd at [54]).