Elliott v Water Wheel Holdings Ltd (Subject to a Deed of Company Arrangement) [2004] FCAFC 253 (10 September 2004)

Last Updated: 10 September 2004

FEDERAL COURT OF AUSTRALIA

Elliott v Water Wheel Holdings Ltd (Subject to a Deed of Company Arrangement) [2004] FCAFC 253

BANKRUPTCY – Whether judgment debts arising out of orders under s 588J(1) of the Corporations Law were available to found bankruptcy notices issued against the appellant – Whether the debts are assets covered by two deeds of company arrangement – Whether administrators acting under those deeds are competent to take bankruptcy proceedings on behalf of the companies.


Corporations Law ss 437A, 442A, 444A, 588G, 588J, 588L
Corporations Regulations (Cth) Sch 8A cll 1, 2
Supreme Court (General Civil Procedure) Rules 1996 (Vic) r 66.12

















JOHN DORMAN ELLIOTT v WATER WHEEL HOLDINGS LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT)

JOHN DORMAN ELLIOTT v WATER WHEEL MILLS PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT)

V 122 of 2004
V 196 of 2004


WILCOX, HEEREY and RD NICHOLSON JJ
10 SEPTEMBER 2004
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 122 of 2004

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	JOHN DORMAN ELLIOTT APPELLANT
AND:	WATER WHEEL HOLDINGS LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) FIRST RESPONDENT WATER WHEEL MILLS PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) SECOND RESPONDENT
JUDGES:	WILCOX, HEEREY and RD NICHOLSON JJ
DATE OF ORDER:	10 SEPTEMBER 2004
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The appeal be dismissed.
2. The appellant pay to the respondents their costs of the appeal.













Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 196 of 2004

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	JOHN DORMAN ELLIOTT APPELLANT
AND:	WATER WHEEL HOLDINGS LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) FIRST RESPONDENT WATER WHEEL MILLS PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) SECOND RESPONDENT
JUDGES:	WILCOX, HEEREY and RD NICHOLSON JJ
DATE OF ORDER:	10 SEPTEMBER 2004
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The appeal be dismissed.
2. The appellant pay to the respondents their costs of the appeal.













Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA	V 122 of 2004
VICTORIA REGISTRY	V 196 of 2004

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	JOHN DORMAN ELLIOTT APPELLANT
AND:	WATER WHEEL HOLDINGS LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) FIRST RESPONDENT WATER WHEEL MILLS PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) SECOND RESPONDENT

JUDGES:	WILCOX, HEEREY and RD NICHOLSON JJ
DATE:	10 SEPTEMBER 2004
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

THE COURT:

1 The appellant, John Dorman Elliott, filed two appeals to this Court from orders made by a Federal Magistrate (McInnis FM) in relation to bankruptcy proceedings taken against him. Because the Chief Justice did not determine, pursuant to s 25(1A) of the Federal Court of Australia Act 1976 (Cth), that the Court’s jurisdiction in relation to either appeal be exercised by a single judge, the appeals were listed before this Full Court.

2 The respondents to each of the appeals are two companies of which the appellant was formerly a director, Water Wheel Holdings Ltd (‘Holdings’) and Water Wheel Mills Pty Ltd (‘Mills’). Each of these companies is now subject to a deed of company arrangement (‘DOCA’), a circumstance which gives rise to the principal issue we have to determine.

The two appeals

3 On 30 January 2004, the magistrate made an order in which he dismissed with costs applications filed on 18 December 2003, whereby the appellant sought an extension of time for compliance with bankruptcy notices issued against him by each of Holdings and Mills. In each case, the desired extension of time was ‘until the expiry of 14 days after final judgment in the Victorian Court of Appeal proceeding 7748 of 2000 or other order’.

4 Although McInnis FM held that this extension of time should not be granted, he was conscious of the fact that, on 23 January 2004, the appellant had filed applications in the Federal Magistrates Court seeking orders setting aside each of the bankruptcy notices. Accordingly, his Honour granted a short extension of time, until 13 February 2004, for compliance with the two bankruptcy notices.

5 The first appeal in this Court (V 122 of 2004) challenges the decision of the magistrate not to extend time for compliance with the bankruptcy notices until delivery of final judgment in the Court of Appeal proceeding. However, on 7 April 2004, after the notice of appeal was filed, the Court of Appeal dismissed the appeal mentioned in the applications for extension of time: see Elliott v Australian Securities and Investments Commission; Plymin v Australian Securities and Investments Commission [2004] VSCA 54. Accordingly, at the commencement of the hearing before us, counsel for the appellant abandoned the first appeal, on the basis that it no longer had any utility. By consent, we ordered that this appeal be dismissed with costs.

6 The second appeal in this Court (V 196 of 2004) challenges an order made by McInnis FM on 19 February 2004, whereby he dismissed the applications to set aside the bankruptcy notices. That appeal has been pressed, it being argued by counsel for the appellant that the magistrate ‘erred in finding that each judgment debt ... was available to each respondent for the purposes of meeting the claims of the creditors’.

Background

7 It appears that, on or about 27 November 2000, the Australian Securities and Investments Commission (‘ASIC’) commenced a proceeding in the Supreme Court of Victoria against the appellant and two other persons. The three defendants to that proceeding were all directors of both Holdings and Mills. ASIC’s allegation was that each of the defendants had contravened s 588G of the Corporations Law (‘the Law’) in respect of each of the companies, the companies having been insolvent as from 14 September 1999 or, alternatively, 3 October 1999. After a lengthy hearing in 2002, Mandie J delivered a judgment on 5 May 2003, in which he found the allegation to have been established: see Australian Securities and Investments Commission v Plymin, Elliott & Harrison [2003] VSC 123. However, his Honour did not make orders on that day. Rather, he invited the parties to make submissions about relief at a hearing in early June 2003.

8 On 30 June 2003, Mandie J delivered a further judgment ([2003] VSC 230) and made formal orders. Those orders included an order, pursuant to s 588J(1) of the Law, that the appellant pay compensation to Holdings and Mills in the sums of $97,513.89 and $1,330,486.11 respectively.

9 On 14 July 2003, the appellant’s solicitors filed a notice of appeal against those orders to the Victorian Court of Appeal. On the following day, they filed a summons seeking an order that the orders made by Mandie J be stayed pending determination of the appeal. That application came before the Court of Appeal on 25 July 2003. It was granted in relation to Mandie J’s order that the appellant be prohibited from managing a corporation for a period of four years from 28 July 2003. It was otherwise unsuccessful.

10 On 2 December 2003, two bankruptcy notices were issued against the appellant, one claiming that a debt of $97,513.89 was owed to Holdings and the other that a debt of $1,330,486.11 was owed to Mills. The notices were served on the appellant on 5 December 2003. Each notice was in the usual form, whereby the appellant was required, within 21 days, to pay the stipulated sum to the relevant company or to make an arrangement to the company’s satisfaction for settlement of the debt. Each bankruptcy notice annexed a copy of the orders made by Mandie J on 30 June 2003.

Compliance with the bankruptcy notices

11 As indicated above, the appellant filed applications for extension of time for compliance with each of the bankruptcy notices. These applications were rejected by McInnis FM. The appeal against this decision has now been dismissed by consent. Consequently, we say nothing about extension of time.

12 The time for compliance with the bankruptcy notices has now expired. We have been informed that the administrators of Mills have presented a bankruptcy petition against the appellant, based on his failure to comply with the bankruptcy notice issued on behalf of Mills, and that the hearing of this petition has been adjourned to 13 September 2004.

13 The appellant apparently assumes that:

(i)	if he is successful in demonstrating that the magistrate erred in failing to set aside the bankruptcy notices, on the ground that they were inappropriately issued, this Court retains power to set aside the notices notwithstanding that time for compliance has expired; and
(ii)	an order setting aside the bankruptcy notices, even an order made after expiry of the time for compliance, would have the effect that the appellant has not committed an act of bankruptcy in relation to those notices.

14 Counsel for the respondent did not challenge the validity of these apparent assumptions, but argued the appeal on the merits, contending that the bankruptcy notices were validly issued. In the circumstances, we make no comment about the assumptions.

The appellant’s case

15 Counsel for the appellant summarised their attack on the magistrate’s decision to dismiss the applications to set aside the bankruptcy notices in this way:

‘• The judgment debt did not exist when the deeds of company arrangement were executed.

• The judgment debt arose from ASIC’s subsequent proceedings against the appellant.

• By the creditors approving by special resolution, and the subsequent execution of the DOCAs, the creditors accepted their entitlements pursuant to the DOCAs in full satisfaction and complete discharge of all debts or claims which they had against the company as at the date of administration. They also gave up their rights to pursue the directors for insolvent trading pursuant to sections 588M or 588R of the Law.

• At the date on which the deeds were executed, the bringing of ASIC’s statutory cause of action under s.588J of the Law was a theoretical possibility. That the companies would, as a result of a possible future proceeding by ASIC, become the beneficiaries of a compensation order was no more than a chance, and there is no suggestion in the evidence that such a chance was in the contemplation of the parties to each DOCA. That chance was incapable of being assigned and, accordingly, there was no existing chose in action on 30 June 2000. To be made available to creditors, that chance would have to have been described as possible future property – use in each DOCA of the simple term "property" could not have extended to it.

• By virtue of section 588J of the Law, the judgment debt is payable to each of the companies rather than to the deed administrators.’ (footnotes omitted)

The deeds of company arrangement

16 The Holdings DOCA was dated 30 June 2000. It was executed by the company itself, under common seal; by the four directors of Holdings (including the appellant); by Christopher Thomas Daly and Nicholas Brooke, two accountants who had been appointed as administrators of Holdings (and Mills) on 17 February 2000 (‘the Administrators’); and by Australian Rice Holdings Pty Ltd, a company which, with its related entities, was described in the Holdings DOCA as ‘Directors’ Associates’.

17 The Holdings DOCA recited the appointment of the Administrators as administrators of Holdings under Part 5.3A of the Law. It also recited a resolution of creditors, at a meeting held on 9 June 2000, that Holdings execute a deed on the terms of a draft tabled at that meeting. Clause 5 of the Holdings DOCA dealt with the Administrators’ appointment and powers. It read:

‘5.1 The Administrators agree to act as the administrators of this deed.

5.2 For the purposes of administering this deed, the Administrators have the powers set out in section 437A and section 442A of the Law and Prescribed Provision 2.
5.3 In addition to the powers referred to in clause 5.2, the Administrators may employ the Administrators’ firm, any member of the Administrators’ firm and any of the Administrators’ staff and may employ any person or firm as their solicitors.’

18 Clause 8 incorporated into the Holdings DOCA the ‘Prescribed Provisions’, defined in cl 1 as the prescribed provisions set out in Schedule 8A of the Corporations Regulations (Cth) (‘the Regulations’) at the Commencement Date of the Holdings DOCA (30 June 2000).

19 Clause 9.1 of the Holdings DOCA provided that the DOCA ‘binds all Creditors [other than secured creditors] so far as it concerns Claims arising on or before the Appointment Date [17 February 2000] and also binds the Company [Holdings], its officers and members and the Administrators’.

20 Clause 11 of the Holdings DOCA read as follows:

‘11.1 The assets of the Company available to pay the Claims of Creditors after Administration Liabilities comprise all the assets and undertaking of the Company, including without limiting the generality of the foregoing:

(a) the Company’s debtors;
(b) cash if any held by the Administrators at the Commencement Date;
(c) any other property of the Company whatsoever of whatever description and wherever located and whether or not under the control of the Administrators at the Commencement Date.’

21 Clause 12 provided for the opening and maintenance of a bank account (‘the Fund’) into which the Administrators would pay the proceeds of realisation of Holdings’ debtors and other assets.

22 Clause 13 dealt with payments to creditors out of the Fund. Clause 14 set out a procedure for determining creditors and proof of creditors’ claims and cl 15 provided for moratorium and release of those claims. By cl 15.3, the claim of a creditor was not to be wholly released and extinguished until it was paid in full.

23 The Mills DOCA was in substantially similar terms. Relevant points of difference were:

(i) the directors were not made parties to the Mills DOCA;
(ii) the operation of many clauses of the Mills DOCA was made dependent upon certain events, including sale of Mills’ three businesses (flour milling, stock feed and rice milling);
(iii) 30 June 2000 was called the ‘Signing Date’, rather than the ‘Commencement Date’; and
(iv) cl 11 of the Mills DOCA included reference to each of the three businesses and the company’s stock and real estate.

Relevant statutory provisions

24 Chapter 5 of the Law dealt with external administration of companies. It included Part 5.3A, titled ‘Administration of a company’s affairs with a view to executing a deed of company arrangement’. That Part comprised ss 435A to 451D inclusive. Sections 437A and 442A were referred to in cl 5 of both the Holdings DOCA and the Mills DOCA. The sections read:

‘437A(1) While a company is under administration, the administrator:

(a) has control of the company’s business, property and affairs; and
(b) may carry on that business and manage that property and those affairs; and
(c) may terminate or dispose of all or part of that business, and may dispose of any of that property; and
(d) may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration.

(2) Nothing in subsection (1) limits the generality of anything else in it.’

‘442A Without limiting section 437A, the administrator of a company under administration has power to do any of the following:

(a) remove from office a director of the company;
(b) appoint a person as such a director, whether to fill a vacancy or not;
(c) execute a document, bring or defend proceedings, or do anything else, in the company’s name and on its behalf;
(d) whatever else is necessary for the purposes of this Part.’

25 Chapter 5 of the Law also included Part 5.7B, titled ‘Recovering property or compensation for the benefit of creditors of insolvent company’. That Part included s 588G, the provision relied on by ASIC in its Supreme Court action against the appellant and two other directors of Holdings and Mills. The section provided for the imposition of a civil penalty upon a director who failed, under certain circumstances, to prevent an insolvent company incurring a debt.

26 Section 588J(1) stated:

‘Where, on an application for a civil penalty order against a person in relation to a contravention of subsection 588G(2), the Court is satisfied that:

(a) the person committed the contravention in relation to the incurring of a debt by a company; and
(b) the debt is wholly or partly unsecured; and
(c) the person to whom the debt is owed has suffered loss or damage in relation to the debt because of the company’s insolvency;

the Court may (whether or not it makes a pecuniary penalty order under section 1317G or an order under section 206C disqualifying a person from managing corporations) order the first-mentioned person to pay to the company compensation equal to the amount of that loss or damage.’

27 Section 588L provided that an order to pay compensation under s 588J ‘may be enforced as if it were a judgment of the court’.

28 Rule 66.12 of the Supreme Court (General Civil Procedure) Rules 1996 (Vic) states as follows:

‘Enforcement by or against non-party

(1) A person not being a party who obtains a judgment or in whose favour a judgment is made may enforce the judgment by the same means as if he were a party.’

29 The Corporations Act 2001 (Cth) (‘the Act’) came into force on 15 July 2001, supplanting the Law: see ss 2 and 3 of the Corporations (Repeals, Consequentials and Transitionals) Act 2001 (Cth). However, this did not affect ASIC’s then pending Supreme Court action against the appellant and others: see ss 1383 and 1401 of the Act. As it seems to us, and this is common ground, the substitution of the Act for the Law may be disregarded for present purposes.

The magistrate’s decision

30 It seems there were two issues before the magistrate in relation to the question whether the bankruptcy notices should be set aside. One issue was whether the notices were in a form prescribed by the Regulations. The magistrate resolved this issue in favour of the respondents and his decision on that matter has not been challenged.

31 The other issue was that pressed before us. After setting out much of the material outlined above and summarising counsel’s submissions about the issue, the magistrate said:

‘The Administrators of both Respondents are entitled to enforce the judgment pursuant to Order 66 of the Supreme Court (General Civil Procedure) Rules 1966 and in particular Rule 66.12(1) referred to earlier in this judgment.

In my view clause 8 of each of the deeds clearly provides a provision whereby each deed includes "prescribed provisions". They are defined in clause 1 as provisions which are set out in schedule 8A of the Corporations Regulations. Significantly I accept that the prescribed provisions provide a power to the administrators to take possession and call in property of the company (see paragraphs (a) and (f)). There is no doubt that by application of s.110 of the Law an expression in the regulations has the same meaning as it has in the Law. It is therefore appropriate to apply the definition of "property" as it appears in s.9 of the Law set out earlier in this judgment. By applying the definition of "property" as it appears in s.9 of the Law, I am satisfied that the judgment debts created by the orders of Mandie J in the Supreme Court of Victoria may be regarded as legal choses in action assignable pursuant to s.134 of the Property Law Act 1958. I accept the respondents submission that accordingly the incorporated provisions provide express power to the administrators to deal with "future property" of the companies. Section 9 of the Law which I take to be given the same meaning in regulations [sic] clearly refers to ‘property’ meaning any legal or equitable estate or interest whether present or future and whether vested or contingent and includes a thing in action. The submission by the Applicant that property in the present case would not include the judgment debt which is the basis of the bankruptcy notices should therefore be rejected. To exclude the benefit of the judgment of Mandie J from the power of the administrators administering the deeds would constitute an inappropriate restriction contrary to law and indeed contrary to any sensible commercial practice. I accept that it would lead to what has been described as an absurd outcome.

In my view the chronology of events whereby the deeds had been executed well before the orders or indeed even the commencement of proceedings which led to the orders in the Supreme Court does not in any way detract from the rights of the administrators to rely upon the judgment and to apply for bankruptcy notices to be issued. Whether there has been some delay in the administration of the companies is not a relevant matter for this Court to take into account. The fact remains that the deeds continue to be in full force and effect until terminated either by the administrators or otherwise by Court order. There is no application to terminate the deeds and in any event I am satisfied that during the currency of the deeds property of a kind has come into existence and is appropriately the subject of the bankruptcy notices.

I reject the Applicant's submissions in relation to the analysis of s.444A(4)(b) to the extent that it is suggested that it supports a proposition that only property in existence at the time when the deeds are executed is contemplated. As found earlier in this judgment I am satisfied that property includes the meaning found in s.9 of the Law and that otherwise the judgment of the Supreme Court in the present case is capable of falling within that meaning and becomes property which is appropriately dealt with by the administrators under the respective deeds.

...

It is clear that at all times the administrator is deemed an agent of each company which is the subject of the deed and has power amongst other things to take proceedings under the Bankruptcy Act.’

The appellant’s written submissions

32 In their outline of submissions, counsel for the appellant drew attention to s 444A(3)-(5) of the Law. These subsections related to DOCAs. They read:

‘(3) The administrator of the deed must prepare an instrument setting out the terms of the deed.

(4) The instrument must also specify the following:

(a)	the administrator of the deed;
(b)	the property of the company (whether or not already owned by the company when it executes the deed) that is to be available to pay creditors’ claims;
(c)	the nature and duration of any moratorium period for which the deed provides;
(d)	to what extent the company is to be released from its debts;
(e)	the conditions (if any) for the deed to come into operation;
(f)	the conditions (if any) for the deed to continue in operation;
(g)	the circumstances in which the deed terminates;
(h)	the order in which proceeds of realising the property referred to in paragraph (b) are to be distributed among creditors bound by the deed;
(i)	the day (not later than the day when the administration began) on or before which claims must have arisen if they are to be admissible under the deed.

(5) The instrument is taken to include the prescribed provisions, except so far as it provides otherwise.’

33 Counsel also noted cl 2 of the Prescribed Provisions:

‘Powers of administrator

For the purpose only of administering this deed, the administrator has the following powers:

(a) to enter upon or take possession of the property of the company;

...

(f) to call in, collect or convert into money the property of the company;

...

(j) to bring, prosecute and defend in the name and on behalf of the company or in the name of the administrator any actions, suits or proceedings.’

34 The word ‘property’ was defined, by s 9 of the Law, as meaning ‘any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action’.

35 Counsel for the appellant made the uncontroversial point that there was no relevant judgment debt at 30 June 2000, the date of commencement of the two DOCAs. At that date, ASIC had not commenced the proceeding that gave rise to the orders made by Mandie J under s 588J(1) of the Law.

36 In their outline of submissions, counsel argued:

‘The statutory cause of action stemmed from section 588G of the Law. Neither Mills nor Holdings had the statutory right of action against the appellant. Section 588J provides expressly for a limited intervention by a liquidator. It is plain that the legislative scheme did not authorise expressly the assignment of the Commission’s cause of action to an administrator. It follows that the right was not something over which the respondents could exercise any control (whether prior to or following the date on which it arose).’

37 Counsel accepted that s 444A(4)(b) envisaged the possibility of specification of property not owned by the company at the date of a DOCA. However, they said that the word ‘available’ ‘confines the specified property to property immediately capable of assignment ... anything that is incapable of answering the description of "property" at the date of the DOCA cannot have been made "available"’. They argued:

‘Had the parties to the DOCA wished the benefit of any possible future s.588J compensation order to be available, it would have been necessary to describe the chance of such an order adequately; but no attempt was made to include such a description in clause 11 of the DOCA – the chance was certainly not covered by the simple word "property" as used in that clause.’

38 Counsel’s outline of submissions went on:

‘This analysis is consistent with the use of the present tense in the opening words of clause 11.1 of each DOCA. For example, and as matter [sic] of construction, the use of the word "available" in the opening words of the clause 11.1 of the Mills DOCA governs the phrase "any other property of the Company" in subclause 11.1(h). In light of purpose [sic] of subsection 444A(4)(b) of the Law, the reference in subclause 11.1(h) to "any other property ... whether or not under the control of the Administrators at the Signing Date" is a reference to future property [that is immediately capable of assignment].’

39 Counsel argued that ASIC’s cause of action against the appellant was not ‘property’ for the purpose of the DOCAs. The cause of action did not exist until 27 November 2000, when ASIC instituted its Supreme Court proceeding. Any cause of action, whenever arising, belonged to ASIC, not the relevant company or the Administrators. Being a statutory cause of action, it was incapable of assignment.

The respondents’ written submissions

40 Counsel for the respondents argued it is immaterial, for present purposes, whether the deemed judgment debts, available to the companies by virtue of s 588L of the Law, is ‘property’ within the meaning of the DOCAs. They referred to cl 1 of the Prescribed Provisions, which read:

‘Administrator deemed agent of company

In exercising the powers conferred by this deed and carrying out the duties arising under this deed, the administrator is taken to act as agent for and on behalf of the company.’

41 In their outline of submissions, counsel contended:

‘(a) The purposes of the Deeds include the purpose of placing the entire control of the companies’ affairs in the hands of the administrators for the whole of the period while the Deeds remain in force.

(b) The collection of the judgment debts created by the Compensation Orders are affairs of the companies that are under the control of the administrators, whether or not the proceeds of collection are available for distribution to creditors pursuant to the Deeds.

(c) Even if the purposes of the Deeds are limited to collecting property of the companies that is available for distribution to creditors pursuant to the Deeds, the judgment debts are property that is so available.’

42 Counsel went on:

‘The Appellant’s contentions proceed from the fundamental misconception that the Deed Administrators can exercise their powers only in relation to property that has been assigned to them under the Deeds, or is available under the Deeds to pay creditors.

Certainly it is clear beyond argument that the Deed Administrators have power to take action in the name of the companies to realise assets whose proceeds are to be distributed pursuant to the Deeds. However the powers of the Deed Administrators are not limited to taking action only for that purpose, and extend to permitting them to recover, in the names of the companies, any debt payable to the companies, whether or not the proceeds of that debt are available to pay creditors.

The provisions of section 437A ... make it clear that one of the purposes of the Deeds is to put the entire control of the companies in the hands of the administrators throughout the period of administration.

During the deed period, no person other than the Deed Administrators can exercise or purport to exercise any power or function as an officer of the company, deal with any of the companies’ assets or business or be involved in the affairs of the companies except with the Deed Administrators’ prior written consent. So if the Deed Administrators cannot cause the companies to take action to recover the compensation, no-one can. This would be an absurd consequence of the construction that the appellant would put on the Deeds.

In carrying out their duties under the Deeds and in exercising the powers conferred by them, the Deed Administrators are taken to act as agents for and on behalf of the companies. The Deed Administrators’ powers include the power to do any other act necessary for obtaining payment of any money due from a debtor and to prove in [sic] the bankruptcy of a debtor.’ (footnotes omitted)

43 Counsel for the respondents argued that the Administrators acted as agents of Mills and Holdings when they applied for the issue of the bankruptcy notices addressed to the appellant. They, and only they, were entitled to do this.

44 Counsel responded to the appellant’s reference to the preamble to cl 2 of the Prescribed Provisions, which stated ‘For the purpose only of administering this deed’. Counsel for the respondents contended there is no warrant for limiting that purpose to dealing with property made available under the DOCAs for distribution to creditors; the purpose extended to the general administration of the companies’ affairs. Any question between the companies and the Administrators as to whether funds received from the appellant will be available for distribution to creditors is a matter for those parties, said counsel, not the appellant. The appellant was simply a debtor of the companies, bound to comply with the compensation orders made by Mandie J.

45 Against the possibility that their above arguments are not accepted, counsel for the respondent went on to put an argument concerning the proper construction of the DOCAs. Essentially, they argued the word ‘property’ is wide enough to include the right to enforce the compensation orders, this being a species of future property.

The oral argument

46 During the course of oral argument, considerable attention was directed to the terms of cl 11 of the DOCAs. Although cl 11 of the Mills DOCA particularised some assets not mentioned in the Holdings DOCA, in both cases cl 11 stated that the assets of the relevant company ‘available to pay the Claims of Creditors after Administration Liabilities’ comprised ‘all the assets and undertaking of the Company’. In each case, the clause went on to refer to particular items (including ‘any other property of the Company whatsoever’) but the inclusions were said to be made ‘without limiting the generality of the foregoing’.

47 Mr G Bigmore QC, senior counsel for the appellant, conceded in argument that the judgment debts are now ‘assets’ and ‘property’ of each company. Accordingly, he agreed, it is critical to his argument that cl 11 must be read as referring to the situation at 30 June 2000, the ‘Commencement Date’ or ‘Signing Date’, as the case might be; if cl 11 is to be read as referring to the situation immediately before distribution to creditors, his argument collapses. However, Mr Bigmore argued that, for reasons of both principle and context, cl 11 should be read as referring to the situation at the Commencement Date or Signing Date, rather than at the date of distribution to creditors.

48 In relation to principle, Mr Bigmore pointed to the terms of s 444A(4)(b) of the Law: see para 32 above. The effect of that paragraph was to require a DOCA to ‘specify’ ‘the property of the company (whether or not already owned by the company when it executes the deed) that is to be available to pay creditors’ claims’. The purpose of this requirement, according to Mr Bigmore, was to force the parties, prior to executing the DOCA, to consider what assets of the company should be made available for distribution, and what assets should not. Mr Bigmore agreed that the division of assets into these two categories extended to specified future assets. That concession is inevitable, given the words in parenthesis in s 444A(4)(b), and also the reference to future property in the statutory definition of ‘property’. However, Mr Bigmore argued there must be specification of future assets. This may be done in a general way; for example, by specifying that all the property of the company, present or future, is to be made available to pay creditors’ claims, or all property except some particular specified property. But, Mr Bigmore insisted, there must be specification at the date of the DOCA; this being specification of already-existing company property or identified future property.

49 Mr Bigmore contended that the drafters of the subject DOCAs correctly understood this to be the position; that is why they made reference to some assets that were held in specie at the Commencement Date or Signing Date but were envisaged to be converted to cash prior to final distribution to creditors. He said these references would have been unnecessary and inappropriate if cl 11 was intended to speak as at the date of distribution to creditors.

50 Mr R Brett QC, senior counsel for the respondents, agreed that the purpose of a clause such as cl 11 of the DOCAs was to define in advance what property of the company should be made available to pay the claims of creditors and what should not; but, he said, it was possible to do this by making available all the company’s assets, as they then might be. That was the evident intention in the present case, he argued, nothing having been excluded from availability to creditors.

51 Mr Brett contended that the critical words in cl 11 were that the available assets ‘comprise all the assets and undertaking of the Company’. In other words, the assets to be made available to creditors comprised everything the company may have at the time of the distribution. It is not to the point, he said, that particular items were mentioned in cl 11; the itemisation was ‘without limiting the generality’ of the previous general statement.

52 Mr Brett disputed that his construction of cl 11 enlarged the meaning of the word ‘assets’. Rather, he claimed, Mr Bigmore sought to read that word too narrowly. Mr Brett pointed out that the relevant assets were those available ‘after Administration Liabilities’. This term was defined by cl 1 of each DOCA to mean ‘the debts and other obligations incurred by the Company during the period from the Appointment Date to the Termination Date’; that is, including the period of administration under each DOCA. According to Mr Brett, this meant that the pool of available assets is to be assessed at the date of distribution; it is sufficient if a particular asset exists at that time, it does not matter that the asset may have come into existence after the Commencement Date or Signing Date.

Conclusion

53 We do not think it necessary for us to express conclusions about all the matters discussed in counsel’s outlines of submissions. We think it is possible to resolve the appeal by reference only to cl 11 of the two DOCAs, considering the clause, in each case, in its context within the DOCA and against the background of the relevant provisions of the Law.

54 As Mr Bigmore conceded, if clause 11 is construed in a manner inconsistent with his submissions, the appeal must fail.

55 Since it is conceded that the rights of Holdings and Mills under the orders of Mandie J are now ‘assets’ and ‘property’ of these companies within the meaning of cl 11 of the DOCAs, the critical question is whether, as the appellant contended, they must have existed as the property (or assets) of the companies as at the Commencement Date or Signing Date of the DOCAs.

56 The answer to this question must be in the negative. Clause 11 was concerned with an event, the payment of claims of creditors, which must of necessity have occurred some considerable time after the date of commencement of the DOCAs. Between that date and the payment of claims, it was inevitable (and therefore within the presumed contemplation of the parties) that the company would divest itself of some property and acquire other property; as, for example, when stock or debts were realised and replaced by cash. The fact that those drafting the DOCAs did not specify every conceivable form of property is not to the point. No doubt appreciating the difficulty of doing this, they resolved the problem by adopting the familiar drafting technique of using all-embracing language: in this case, the phrase ‘all the assets and undertaking of the Company’. For the reasons given by Mr Brett, we think they had in mind the assets as at the date of distribution.

57 We accept Mr Bigmore’s point that the deemed judgment debts are not particular assets referred to in cl 11. So far as we are aware, the listed items comprised all the assets held by the relevant company at the date of commencement of the relevant DOCA. The purpose of the reference to them seems to have been to emphasise that all the assets of the company were to be available for distribution to creditors, obviously after conversion into cash of non-cash assets and defrayment of Administration Liabilities. However, even if there was some other purpose, the listing of some particular assets cannot cut down the generality of the term ‘all the assets and undertaking of the Company’.

58 Section 444A(4)(b) of the Law mandated the specification of property which ‘is to be available’ (not ‘is available’) for payment of creditors’ claims. In that context, a DOCA might ‘specify’ some particular property which is to be excluded or, as in the present case, seek to include every possible form of property which might be available in the future. Reading the subject DOCAs as a whole, we are satisfied that the latter is the proper construction of them.

59 The appeal will be dismissed with costs.

I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Wilcox, Heerey and R D Nicholson.

Associate:

Dated: 10 September 2004

Counsel for the Appellant:	Mr G Bigmore QC, Mr R Heath
Solicitor for the Appellant:	TressCox Lawyers
Counsel for the Respondent:	Mr R Brett QC, Mr P Fary
Solicitor for the Respondent:	Minter Ellison Lawyers
Date of Hearing:	23 August 2004
Date of Judgment:	10 September 2004