We can help you buy or sell a residential or commercial property anywhere in Australia. Leasing contract services included.
ForumLaw provides legal services and contract work for any type of business transaction from business registration to succession matters.
We'll help make your project a success, from setting up & revising contracts and agreements to tracking sales & leases in multiple-strata unit projects online!
Choose a package that suits your needs. We then maintain constant legal watch of your business.
Take control of your assets today. Contact ForumLaw to arrange a new Will or review any existing arragements in place.
Stay in touch with how the law affects you! Subscribe to our
Deeds of Company Arrangement [DOCA] after a company has been placed into administration may cause some confusion for secured creditors. A recent case has ventilated some issues raised by secured creditors in this situation.
In the recent decision in Bluenergy Group Ltd (Subject to a Deed of Company Arrangement) (Administrator Appointed)  NSWSC 977, the Supreme Court held that the construction of the terms of a Deed of Company Arrangement [“DOCA”] acted to extinguish a secured creditor’s debt. However, the secured creditor’s right to realise and deal with its security was preserved as a proprietary right irrespective of the debt under s444D of the Corporations Act 2001.
This decision highlights a departure from the previous approach that a secured creditor, who abstained from voting on a proposed DOCA, stood outside of the DOCA process and was able to enforce its security to recover its outstanding debt. It is a significant decision as while the secured creditor’s right to deal with the secured property to which its charge attached immediately prior to any DOCA being entered into remains, they will no longer be able to recover any after-acquired property.
In April 2014, Bluenergy’s directors resolved to place the company into voluntary administration. As a result, the company entered into a DOCA.
A secured creditor, Keybridge abstained from voting on the creditors’ decision for the Bluenergy to enter into a DOCA and purported to appoint a secondary administrator under its security.
The administrators were appointed as the deed administrators for the DOCA and sought a declaration from the Court that the secondary administration should be terminated.
The key issue for the Court to consider in this case was whether or not a secured creditor, having abstained from voting on a proposed DOCA, was entitled to rely upon its security and appoint a secondary administrator to a company which was subject to a DOCA.
The deed administrators’ primary argument was that the secured creditor’s debt was extinguished by the execution of the DOCA and given that the secured creditor had no debt it was therefore unable to enforce its security against the whole of Bluenergy Group. This meant that the secured creditor was unable to appoint the secondary administrator.
Keybridge argued that its secured debt could not be separated or excluded from the relevant security and that the security could not be realised without making and proving a claim for the debt. This meant that a debt must be preserved if the security is preserved by s444D(2) of the Corporations Act 2001.
The Court held that the second administration should be terminated and also held that:
The Court’s decision in this case shows that in circumstances whereby a secured creditor’s debt far exceeds the current value of the realisable secured property held at the time that a DOCA is considered, then the secured creditor may wish to consider taking an active role in the DOCA negotiations to ensure that the full amount of their debt is recoverable.