FC of T v B&G PLANT HIRE PTY LTD & ORS

Judges:
Gummow J

Court:
Federal Court of Australia

Judgment date: Judgment handed down 12 August 1994

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Gummow J

The applicant (``the Commissioner''), who is a substantial creditor of the first respondent (``the Company''), seeks an order under s. 445D of the Corporations Law terminating a deed of company arrangement dated 6 December 1993 (``the Deed''). The second and third respondents are administrators of the Deed. As a creditor, the Commissioner has standing to make this application (para. 445D(2)(a)).

Section 446 is included in Part 5.3A (ss. 435A-451D) which was substituted for the previous Part 5.3 of the Corporations Law by the Corporate Law Reform Act 1992 (``the Corporate Law Reform Act''). The relevant provisions came into force on 23 June 1993.

Section 435A of the Corporations Law describes as follows the object of Part 5.3A:

``435A The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:

• (a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or
• (b) if it is not possible for the company or its business to continue in existence - results in a better return for the

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  ATC 4694

  company's creditors and members than would result from an immediate winding up of the company.''

As will become apparent there was, at all relevant times, no real prospect of the Company, or any of its business, continuing in existence. Hence, the objective of the administrators in the present case has been to administer the affairs of the Company, being admittedly insolvent, so as to result in a better return for creditors than would result from an immediate winding-up.

However, despite that goal, in the events that have happened there arises an important question as to the priorities between creditors. It concerns the interrelation between the system of priorities established by the Deed and the obligations created in favour of the Commissioner by s. 221P of the Income Tax Assessment Act 1936 (``the Tax Act'').

Section 221P itself was amended (with effect 1 June 1993) by s. 7 of the Insolvency (Tax Priorities) Legislation Amendment Act 1993 (``the Tax Amendment Act''). This statute, to put it broadly, introduced a new regime for the collection of unremitted deductions from salary or wages.

Section 7 of the Tax Amendment Act amended s. 221P by inserting the following before sub-s. (1):

``221P(1A) Subsection (1) does not apply to a deduction made by a group employer after:

• (a) if the employer is an early remitter in relation to June 1993 - 14 June 1993; or
• (b) otherwise - 31 May 1993.

(1B) Subsection (1) does not apply to a deduction made by an employer (other than a group employer) after 30 June 1993.''

The Company was controlled by the Dalby family and carried on business excavating and selling land fill. As at 29 April 1994, the Company was indebted to the applicant in the sum of $135,102.62 in respect of unpaid group tax. A very substantial element of that sum is in respect of unpaid group tax to which, subject to the success of the submissions for the respondents, s. 221P still applies.

Put shortly, the Commissioner submits that the Deed establishes a system for the payment of creditors which does not recognise the priority still given the applicant by s. 221P of the Tax Act. In particular, the applicant submits that the respondents, as administrators of the Deed, are obliged by s. 221P to pay the amount in question to the Commissioner so that they are not free to administer the property of the Company to which the Deed applies, first by payment of certain entitlements of employees and then to all other creditors (with an exception not immediately material). The consequence is said to be that the Deed should be terminated by order under s. 445D of the Corporations Law.

Sub-section 221P(1) of the Tax Act is as follows:

``221P(1) Where an employer makes a deduction for the purposes of this Division, or purporting to be for those purposes, from the salary or wages paid to an employee and refuses or fails to deal with the amount so deducted in the manner required by this Division, or to affix tax stamps of a face value equal to the amount of the deduction as required by this Division, as the case may be, he shall be liable, and where his property has become vested in, or where the control of his property has passed to, a trustee, the trustee shall be liable, to pay that amount to the Commissioner.''

[Emphasis supplied]

Sub-section 221P(2) confers priority in respect of an amount payable to the Commissioner by a trustee in pursuance of s. 221P. Subject to immaterial qualifications, an amount payable to the Commissioner by a trustee in pursuance of s. 221P has priority over all other debts, whether preferential, secured or unsecured. Further, that priority exists notwithstanding ``anything contained in any other law of the Commonwealth, or in any law of a State or of the Northern Territory...''.

The term ``trustee'' is defined in sub-s. 6(1) of the Tax Act as follows:

```trustee' in addition to every person appointed or constituted trustee by act of parties, by order, or declaration of a court, or by operation of law, includes-

• (a) an executor or administrator, guardian, committee, receiver, or liquidator;
• and
• (b) every person having or taking upon himself the administration or control of income affected by any express or implied trust, or acting in any fiduciary capacity, or having the possession,

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  ATC 4695

  control or management of the income of a person under any legal or other disability;''

The term ``liquidator'' is defined in the same sub-section as meaning a person who ``whether or not appointed as liquidator, is the person required by law to carry out the winding-up of a company''.

Before turning to the issues of law which arise, it is necessary to set out some facts. They are not relevantly in dispute.

Sub-section 436A(1) of the Corporations Law provides as follows:

``436A(1) A company may, by writing under its common seal, appoint an administrator of the company if the board has resolved to the effect that:

• (a) in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some future time; and
• (b) an administrator of the company should be appointed.''

On 1 November 1993, the Board of Directors of the Company passed a resolution as a consequence of which the administrators were appointed pursuant to s. 436A. The administration of the Company then began (para. 435C(1)(a)). It ended on 6 December 1993 with the execution of the instrument comprising the Deed by the Company and the administrators (para. 435C(2)(a)). During that period, the Company is to be taken, for the purposes of the legislation, as having been ``under administration'' (sub-s. 435C(4)).

While the Company was under administration, the administrators had control of the business, property and affairs of the Company (para. 437A(1)(a)).

The administrators were obliged to convene a meeting of the creditors of the Company within five business days after the administration began (s. 436E). After the weekend of 6 and 7 November, the necessary meeting of creditors was held on 8 November 1993. This decided on the second meeting to be called for 29 November 1993 to consider a report by the administrators on their investigations, and proposed courses of action. A report dated 19 November 1993 was prepared by the administrators and distributed before the second meeting.

The Report as to Affairs submitted to the administrators by the directors of the Company had disclosed $218,578.76 in assets, and $317,371.59 in liabilities, with a deficiency of $98,793.05. To the date of their report on 19 November, the administrators had realised assets totalling $4,860.89

Under the headings ``Trading Realisations'' and ``Future Realisations'' the following appeared in the report of the administrators:

``Due to the fact that the company ceased trading on 31 October 1993 there are no trading realisations to report since my appointment. I am advised the company had no material unencumbered assets and the majority of equipment was leased. The company's accounts confirm the asset position and likewise my inspection of cheque butts and cashbooks. The major asset is a truck which is valued at $2,000.00 but needs registration. The directors have elected not to include plant and equipment in their offer noted in paragraph 4(a) below, and will retain same in the new company noted in paragraph 4(a) below.

...

I anticipate that further realisations of company's property will be derived from the collection of debtors. In this regard I have written demand letters to the majority of debtors, and will shortly engage the services of debt collection agencies and solicitors for the balance. Whilst it is too early to estimate the eventual recoveries, directors are confident that over $100,000.00 will be collected within the next six months. I will give creditors a full report on same at the meeting highlighting recoveries made.''

Later in the report, the administrators showed under the heading ``Realisation of Assets'' $100,000 in respect of debtors, $3,965 for cash at bank, and beside the heading ``Plant and Equipment'' $2,000.

Sub-paragraphs 4(a) and (b) were as follows:

``4(a) Offer

Creditors should refer to the annexed document for details of the offer being made by the company. In summary, the company has offered a sum of 30 cents in the dollar to unsecured creditors. This is to be contributed from the realisation of certain assets, being debtors, and cash at bank, and

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ATC 4696

the guarantee of same by way of a third party guarantee from the new trading company `St Ives Transport Pty Limited' and `St Ives Landscaping Pty Limited'. Also, related party claims of directors and relatives are to be waived, be they as employees, or as unsecured creditors.

Other employee claims for wages and holiday pay are to be paid 100 cents in the dollar. The company will make these payments within six months of acceptance of the offer.

Creditors' Claims

The directors have disclosed unsecured creditors of $137,471.69, priority creditors - Group Tax $137,860.79, and employees $42,039.11. I had not become aware of any material additional creditors apart from contingent claims of various leasing companies. As noted, the final claim by the Australian Taxation Office may vary upon reconciliation and calculation of their claim post 31 January 1993.''

In the event, St Ives Transport Pty Limited (``St Ives'') executed the instrument constituting the Deed, doing so to guarantee the payment of what are defined therein as the Priority Amounts. However, it has since become apparent that this company lacks assets to back the guarantee. At a meeting of creditors on 16 June 1994 it was decided that at that stage they did not wish to pursue the guarantee. St Ives is associated with the Dalby family.

The Corporations Law requires the terms of the deed to be set out in an instrument (sub-s. 444A(3)). It does not limit the contents of the instrument to the terms of the deed. Thus the instrument dated 6 December 1993 has two relevant operations.

At the meeting of creditors on 29 November 1993, against the vote of the Commissioner, the following resolution was passed:

``That the company execute a Deed of Company Arrangement, a draft copy of which was annexed to the report dated 19 November 1993, with the alteration that creditors were to receive 40 cents in the dollar.''

The Commissioner voted in respect of a debt of $116,465.61, whilst the total of debts of all creditors voting was $248,294. The Deed was, as I have indicated, executed on 6 December 1993. On 16 June 1994, a further resolution was passed approving ``the extension of the Deed's operation for a further 6 months''. Nothing for present purposes turns upon the passage of this further resolution.

Section 444A of the Corporations Law applies where, at a meeting convened under s. 439A, the creditors of the company resolve that it execute a deed of company arrangement. The section further provides that the administrator of the company is to be the administrator of the Deed, unless the creditors by resolution passed at the meeting appoint someone else to that office (sub-ss. 444A(1) and (2)). The Deed expressly provided for the appointment of the second and third respondents as administrators. Two or more persons may be appointed administrators of a company or of a deed of company arrangement (ss. 451A, 451B).

Sub-sections 444A(4) and (5) provide for the contents of the instrument setting out the terms of company management. They state:

``444A(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.''

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ATC 4697

The prescribed provisions referred to in sub- s. 444A(5) are those set out in Schedule 8A to the Corporations Regulations (``the Regulations''). Paragraph 1 thereof provides that in exercising the powers conferred by the deed and in carrying out the duties arising thereunder, the administrator is taken to act as agent for and on behalf of the Company. Paragraph (2) confers wide powers, including those of entry upon and taking of possession of the property of the company.

Subject to special provision as to secured creditors, not here relevant, the Deed binds all creditors of the Company so far as concerns claims arising on or before the day specified therein pursuant to 444A(4)(i). Section 444D so provides. In the present case, the relevant date is 1 November 1993. On the other hand, the Deed releases the Company from a debt only insofar as it provides for the release and ``the creditor concerned is bound by the deed'' (s. 444H). One issue that arises is whether, if the Commissioner otherwise has in respect of the administration under the Deed the privileged position given by s. 221P of the Tax Act, that nevertheless is subjected to the general operation of ss. 444D and 444H of the Corporations Law.

Whilst the Deed is in force, a person bound by it cannot, except with the leave of the Court, apply for the winding-up of the Company or commence or continue with any proceeding against it or in relation to any of its property (s. 444E). The Deed also binds the Company and its officers and members (s. 444G).

Provision for a release of the above description is contained in para. 7 of the Deed. Paragraph 12 confers upon the administrators wide powers including the following:

``(a) To deal with, carry out, or cease any business activity of the Company for such purposes and times and in such manner as the Administrator may think fit, subject only to the limitations imposed by this Deed and the Corporations Law, including sale of the Company's whole business, if any.

(b) To deal with and realise any of the Available Property of the Company at any time that the Administrator shall think fit either by public auction or by private contract and either for a lump sum or a sum payable by instalments or for a sum on account or in return for mortgage charge or encumbrance for the benefit of creditors.''

The term ``Available Property'' is significant. It is the property available to pay the claims of creditors and is defined as the book debts of the Company as at 1 November 1993, as set out in an attached list, and the ``Cash at Bank'', which includes any book debts recovered after 1 November 1993.

The Available Property is to be realised in an orderly manner at the discretion of the administrators. The proceeds are to be distributed in accordance with the terms of the Deed within a period of six calendar months from 29 November 1993. Hence the need for the extension referred to above. The distributions are to be made to creditors ranked in three degrees. Payment is to be made first in satisfaction of accrued entitlement of certain employees to wages and holiday pay and secondly, with exceptions not here relevant, to all other creditors. The moneys so payable are defined as ``the Priority Amounts''. Upon payment of the Priority Amounts, the creditors bound by the Deed release the Company. The third ranking creditors are those excluded from the first and second rank and are defined as Excluded Persons (members of the Dalby family) and the Excluded Company (St Ives).

Accordingly, the scheme of the Deed is for the administrators to get in the Available Property and reduce it to a fund from which the Priority Amounts are to be paid. The position is quite different from what one might call the ``interim'' control which existed whilst the Company was under administration between 1 November and 6 December 1993.

The first question of law which arises is whether, within the meaning of s. 221P of the Tax Act, control of the property of the Company has passed to the second and third respondents, as administrators of the Deed and as trustees, so that they are liable to pay to the applicant the amount of group tax to which s. 221P applies.

In argument, there was some discussion as to whether during the earlier administration of the Company, that is to say between 1 November 1993 and 6 December 1993, control of the property of the Company had passed to them as trustees within the meaning of s. 221P. In view of the conclusion I have reached on the other point, that concerned with the present position of the second and third respondents as

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ATC 4698

administrators of the Deed, it will be unnecessary to resolve that issue. I therefore say nothing as to the view expressed by Professor O'Donovan in his comprehensive article ``Voluntary Administration and Deeds of Company Arrangement Under Part 5.3A of the Corporations Law'', (1994) 12 Company and Securities Law Journal 71 at 93-94. The learned author there says:

``Despite the broad statutory powers vested in the administrator by s 437D of the Corporations Law, there can be little doubt that the administrator does not acquire the requisite degree of control to attract section 221P. During the administration, the administrator is merely expected to maintain a form of interim control. The administrator is not required to reduce all the company's property to a single fund from which all the debts and liabilities of the Company can be paid or discharged. It is, therefore, unlikely that the administrator of a company under administration has the necessary degree of control to attract s 221P.''

Earlier in these reasons, I have set out the definition of ``trustee'' as it appears in sub-s. 6(1) of the Tax Act. This brings in every person ``acting in any fiduciary capacity''. Their Lordships of the Judicial Committee, when allowing an appeal from the New Zealand Court of Appeal, recently have reminded us of the basic proposition that to describe someone as a fiduciary, without more, is meaningless without further analysis:
Re Goldcorp Exchange Ltd (in receivership) [1994] 2 All E.R. 806 at 819. In the present case, the specific issue is whether the administrators in the exercise of their powers and functions under the Deed act in the capacity which is to be described as ``fiduciary'' within the meaning of the statutory definition.

In my opinion, it cannot seriously be disputed but that the administrators in their office under the Deed do act in such a capacity. A corresponding conclusion was reached, as regards the scheme manager of a scheme of arrangement under earlier corporations legislation, in
James v DFC of T 88 ATC 4812 at 4819. Mahoney J.A. there said:

``In my opinion, Mr James did what he did in a fiduciary capacity. His powers were to be exercised, not for his benefit, but for the benefit of others and he was under obligations to them in relation to the exercise of the powers. Those obligations were, in my opinion, fiduciary.''

However, the administrators then point to the definition in the Deed of ``Available Property'' which is to be dealt with by the administrators. It does not extend to the whole of the property of the Company. In particular they refer to the circumstances in which the unregistered motor truck was left outside the operation of the Deed. They cite a number of authorities in which it has been said, to put it broadly, that what is required for the operation of s. 221P is for control of the whole of the property of the party in question to pass to the trustee. These authorities are most recently collected and discussed in this Court by Drummond J. in
Australian Securities Commission v Macleod & Ors 94 ATC 4061.

However, it is important to appreciate the rationale which underlies the construction given s. 221P in these authorities. It was explained as follows by McPherson J., giving the judgment of the Queensland Full Court in
Re Obie Pty Ltd (in liq) (No. 5) 84 ATC 4776 at 4780; (1984) 9 A.C.L.R. 151 at 157. There, after discussing numerous decisions, his Honour said:

``The exclusion from the operation of sec. 221P recognised in F.C. of T. v. Barnes (supra), in favour of distinct property the subject of such a mortgage or charge does not mean that a receiver or liquidator, who otherwise controls all the other assets, fails to attain control of all the property of the company simply because the particular assets so mortgaged or charged are not within his control. If that were so the existence of a mortgage over a single asset would preclude the operation of the section. The opposite conclusion seems clearly enough to be required by what was said in the joint judgment in F.C. of T. v. Barnes at ATC p. 4265; CLR p. 491. What it does mean, however, is that in such a case sec. 221P does not extend to authorise the trustee to apply the particular assets specifically mortgaged or charged in satisfaction of the liability under that section unless those assets also pass to the control of a receiver or liquidator who controls all the other assets: F.C. of T. v. Barnes (supra), at ATC p. 4265; CLR p. 491.

The result is that the section does not operate to impose a liability upon a receiver

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ATC 4699

or liquidator unless he acquires control of all the property of the company. The explanation for that requirement must, I think, be to ensure that all creditors bear a rateable proportion of the liability imposed by the section. That object can be accomplished only if all the property of the employer is brought under a single process of administration or `control'.''

[Emphasis supplied]

One of the decisions referred to by McPherson J. was that of Nettlefold J., in the Supreme Court of Tasmania, in
Re L.G. Holloway Transport Pty Ltd (1983) 7 A.C.L.R. 690. That case contains the following passage which, whilst probably obiter, is of significance for the present dispute. His Honour said (at 694-695):

``When one comes to apply the section to a given set of facts, one should take a practical approach as a jury of businessmen would. One should look at the commercial realities and sternly subordinate legal technicalities to that. Thus one should ignore the fact that a worthless equity of redemption is not part of the `pool' or `fund'. One should ignore the fact that some particular asset of the employer, even a large asset, is subject to a mortgage or charge as security for a debt which exceeds the value of the asset so that only a worthless equity of redemption in the asset is part of the `pool' or `fund'. One may ignore minor items which, for some reason, have failed to get into the `pool'. That is so because the tribunal, in its capacity as a tribunal of fact, should content itself with asking whether in substance or to all intents and purposes the employer's property has passed, as far as the law allows, into the control of the trustee and hence out of the control of the employer. For that is the essential situation, and the only situation which will create a liability in the trustee to pay the Commissioner.''

Whilst I would, for myself, not accept all of the reasoning involved in this passage, it does serve to emphasise the essential point made by McPherson J., namely that the concern is to ascertain whether all creditors bear a rateable proportion of the liability imposed by s. 221P by reason of the bringing of the property under a single process of administration or ``control''. An apparently worthless equity of redemption or an asset of minor value in proportion to the assets of the company as a whole, may, in my view, be disregarded if, as to the balance, control has passed so that as a matter of practical reality there is but one process of administration over the assets of the company.

In the present case, the unregistered motor truck appears to have had a value of $2,000, whilst the estimated debtors and cash in bank had a value of $103,965. In that setting, and given also the magnitude of the insolvency of the Company, the truck was de minimis.

Accordingly, I conclude that within the meaning of s. 221P, control of the property of the Company passed to the administrators of the Deed.

The administrators are bound by the Deed. Paragraph 444G(c) so provides. Furthermore, the Deed provides, in the circumstances outlined above, for the release of the Company from indebtedness including that to the applicant, and this will be effective insofar as the Commissioner ``is bound by the deed'' (s. 444H).

It is clear that the Available Property will produce a fund in an amount less than that for which the Commissioner asserts absolute priority under s. 221P. Further, if the fund is administered solely in accordance with the Deed, the result will be that the Commissioner, along with trade creditors, will receive 40 cents in the dollar. On the other hand, some of the claims of employees will be paid in full.

The question then arises of accommodation of the apparently conflicting requirements of the Deed, Part 5.3A of the Corporations Law, and s. 221P of the Tax Act.

The administrators pointed to s. 444A(4)(h) of the Corporations Law. This states that the instrument setting out the terms of the Deed which is to be prepared by the administrators must specify the order in which the proceeds of realisation of the property, which are available to pay the claims of creditors, are to be distributed among creditors bound by the Deed. They then submitted that (a) the order laid down in the Deed for the distribution of the fund from utilisation of the Available Property, had the statutory authority of the Corporations Law; (b) if s. 221P of the Tax Act imposed an obligation to pay the funds in question to the Commissioner, this was repugnant to the operation of the order of distribution established pursuant to para. 444A(4)(h) of the

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ATC 4700

Corporations Law; (c) that provision came into force after the last amendments to s. 221P.

It followed, so it was submitted, that the earlier legislation yielded to the later, to the extent to which the utilisation of the later legislation gave rise to any repugnancy in the administration of the funds the subject of a deed of company arrangement. Further, as creditor of the Company, the Commissioner was bound by the Deed as the direct effect of s. 444D.

So far as is possible, the two statutes are to be read together, and in this context ``repugnancy'' is a matter of construction. The relevant authorities are discussed in Chapter 14 of Gifford ``Statutory Interpretation'', 1990, p. 105, and by Professor J.F. Burrows in his article ``Inconsistent Statutes'' (1973-6) 3 Otago L. Rev. 600 at 603-4. In my view, s. 221P in its terms (``Notwithstanding anything contained in any other law of the Commonwealth...'') contemplates an ambulatory operation to retain the specific priority with which it is concerned. The general provisions of the Corporations Law (which for this purpose may be treated as a ``law of the Commonwealth'' within the meaning of sub-s. 221P(2)) should not be held impliedly to operate upon the subject matter of s. 221P so as to constitute, merely by implication, a departure from that specific subject matter; cf
Goodwin v Phillips (1908) 7 C.L.R. 1 at 14,
Refrigerated Express Lines (A'asia) Pty Limited v Australian Meat and Livestock Corporation & Ors (1980) ATPR ¶ 40-156 at 42,228-42,229; (1980) 44 F.L.R. 455 at 468-469.

The administrators sought to obtain some support for their submissions to the contrary by reference to s. 109 of the Bankruptcy Act 1966. This sets out the order of priority of payments by the trustee. Sub-section 109(1) was previously expressed to be subject, inter alia, to s. 221P of the Tax Act. Section 109 was amended by s. 29 and Schedule 1 of the Tax Amendment Act. Sub-section 109(1) thereafter simply stated ``Subject to this Act, the trustee must...''. That is to say the express reference to s. 221P was removed. However, there was added sub-s. 109(1A) which provided that sub- s. 109(1) has effect subject, inter alia, to s. 221P. Further, the very statute which effected this amendment to the bankruptcy legislation, the Tax Amendment Act, itself introduced the changes which resulted in s. 221P not applying, to put it broadly, to liabilities arising after 30 June 1993.

In my view, there is no repugnancy between Part 5.3A, inserted in the Corporations Law by the Corporate Law Reform Act, and s. 221P as it now operates after the Tax Amendment Act. The general provision in para. 444A(4)(h) of the Corporations Law to the effect that the instrument prepared by the administrators must specify the order of distribution among creditors bound by the Deed is subject to the qualification that this order must not derogate from that mandated by s. 221P of the Tax Act. Further, the liability to the Commissioner which arises under s. 221P is not, against his will, to be overridden by a provision inserted pursuant to para. 444A(4)(h). To the extent that such a contrary provision is inserted, then despite the general terms of s. 444D, the deed of arrangement does not bind the Commissioner as a creditor, nor may steps taken under the Deed operate to release the liability to the Commissioner. This is because the Commissioner will not, relevantly, be bound by the Deed, within the meaning of s. 444H.

The administrators also relied upon a related, but distinct, argument. To do so they challenged the correctness of the decision of the Supreme Court of New South Wales in
DFC of T v Dollymore Pty Ltd 93 ATC 5212. Brownie J. held that the effect of the Tax Amendment Act was not to remove retrospectively the priority previously accorded under s. 221P to certain debts. His Honour held that the terms of the statute which introduced the new regime for collection of unremitted tax instalment deductions spoke of the future, as at the date of the commencement of the statute, and not so as to affect past events. There was nothing to affect the priority which s. 221P previously had provided to the deductions in question before the Supreme Court. I respectfully agree.

The remaining issues concern the relief which should be given upon the application.

Counsel for the Commissioner submitted that this was a case in which an order should be made terminating the Deed. That order should be made, it was said, because acts proposed to be done under the Deed, namely the administration of the Available Property and distribution between creditors in the manner provided therein, would be ``oppressive or unfairly prejudicial to'' or ``unfairly discriminatory against'' a creditor, being the

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ATC 4701

Commissioner. Counsel relied upon para. 445D(1)(f) which speaks in these terms. It is true that the administrators are bound by the Deed (s. 444G). However, consistently with what I have indicated above, that obligation is subjected to the paramount requirements of s. 221P. Having been apprised of the position, it is unlikely that the administrators thereafter would act inconsistently with the law as now understood.

On the other hand, if the Deed stands, it is an instrument which does not mean what it says. There is a general interest in protecting the creditors of the Company, and those third parties dealing with them or with the administrators, from deception or confusion by the continued circulation of such an instrument. The situation is, to an extent, analogous to that in which there would, at general law, be an equity for delivery up and cancellation; cf
Money v Money (No. 2) [1966] 1 N.S.W.R. 348.

Accordingly, in my view, the case is one in which there is, within the meaning of para. 445D(1)(g), ``some other reason'' for the Court to make an order terminating the Deed.

The termination of the Deed will not affect its previous operation (s. 445H). However, it is necessary, before making the order, to consider the impact thereof upon the further conduct of the affairs of the Company, and the position of the administrators.

The effect of s. 446B of the Corporations Law is to authorise the making of regulations which prescribe cases where the company is taken to have passed a special resolution that the company be wound up voluntarily, in circumstances where the company has executed a deed of company arrangement and that deed has been terminated. The effect of reg. 5.3A.07 of the Regulations is that if the Court makes an order under s. 445D terminating the Deed, the Company will be taken at the particular time the Court makes that order to have passed a special resolution under s. 491 that the Company be wound up voluntarily. Furthermore, for the purposes of sub-s. 499(1), the Company will be taken to have nominated the administrators of the Deed to be liquidators for the purposes of the winding up.

It was accepted by the Commissioner and the administrators that if these steps were taken, the consequence would be that s. 221P of the Tax Act would operate upon the administration instituted with the start of the liquidation.

There are two final points. The first is that St Ives, although it executed the instrument in which the Deed is contained, is not a party to the present application. However, that is not a fatal difficulty. As I have indicated, St Ives did so only as guarantor. The effect of the order terminating the Deed would not be to interfere with so much of the instrument as contains the guarantee. It will be for St Ives and the administrators, now as liquidators, to determine whether any further steps need be taken in respect of the guarantee. As I have indicated, it would appear that the guarantee is, from a practical point of view, a dead letter.

The other point concerns costs. This was in the nature of a test case. Important questions arose concerning both the Corporate Law Reform Act and the Tax Amendment Act. As I indicated in the course of argument, in my view there should be no order as to the costs of any party.

The Court orders, pursuant to sub-s. 445D(1), that the deed of company arrangement dated 6 December 1993, in respect of the first respondent, be terminated.

THE COURT ORDERS THAT:

The deed of company arrangement dated 6 December 1993, in respect of the first respondent, is terminated.