Proctor : October 2016
34 PROCTOR | October 2016 Setting aside a deed of company arrangement Part 2: How to bring the application Standing The following can make an application terminating or otherwise in relation to the validity of a deed of company arrangement (DOCA) under the Corporations Act 2001 (Cth) (the Act): • under s445D – a creditor, the company, the Australian Securities and Investments Commission (ASIC), or any other interested person1 • under s445G – the administrator of the DOCA, a member or creditor of the company, or ASIC 2 • under s447A – the company, a creditor of the company, the administrator or deed administrator, ASIC, any other interested person3 • under s600A – a creditor of the company.4 The applicant for an order under ss445D, 445G or 600A must be a creditor when the application is filed.5 It has been held that the same position applies for applications under s447A.6 Who is the respondent to proceedings? The DOCA may contain particular provisions about who is to conduct any defence. The company in administration is usually the first respondent. Any sponsor or other party to the deed should also be named as a respondent and served with the application. The administrator should also be a respondent to the application; however, it is good practice to write to the administrator and invite them to consent to the order of the court, leaving it to the directors and sponsors to conduct the defence to the application. Any other interested persons should also be served or notified so that they have the opportunity of appearing on the application to protect their interests. Do you seek to impugn the administrator personally? This will depend on the facts, bearing in mind the possibility of an adverse costs order and also that an administrator is not expected to pursue a wide-ranging inquiry into the public interest or commercial morality of the company’s behaviour. 7 At the second meeting of creditors, the administrator needs to express their opinion as to whether they consider a proposed DOCA is in the interests of creditors. While your client may disagree with the administrator’s opinion, if given in favour of the DOCA, more will usually be required before attacking the administrator personally. Which court? The Federal Court and the Supreme Court have jurisdiction to make the orders sought.8 In practice, unless the applicant is a Commonwealth body such as ASIC, applications are usually brought in the Supreme Court. Like all applications, the applicant will need to consider the appropriate forum, taking into account the location of the parties, including the company and the administrator. Timing An application to set aside the DOCA should be brought promptly – within days or weeks, not months. If there is significant delay in bringing an application, the court may decline to exercise its discretion to set the deed aside.9 The termination or avoidance, in whole or in part, of a deed of company arrangement does not affect the previous operation of the deed. 10 Similarly, an act done under a resolution as in force before an order is made under ss600A is valid and binding on and after the making of the order as if the order had not been made. 11 Therefore, if your client is considering making a challenge to the DOCA, you should write to the administrator immediately and ask them to undertake not to carry out the DOCA until your client decides their position and their application is determined by the court. If agreement is not forthcoming, the court has power to make interim orders.12 Material required Have regard to the Corporations Proceedings Rules13 if you intend to file in the Supreme Court, or otherwise the Federal Court (Corporations) Rules 2000 (Cth). Use Corporations Act Form 2 for the originating process (Form 3 if you need to commence an interlocutory process). A supporting affidavit is required (unless the court directs otherwise).14 As well as setting out the facts relied on for relief, the affidavit must annex a copy of an ASIC search of the subject company. You should also ask for a written signed consent from the administrator (in Form 8) to their appointment as liquidator in the event your client succeeds. If they do not provide this, obtain consent from another registered liquidator.