developments in deeds of company arrangement - DibbsBarker

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contractual arrangements down in order to impose a particular scheme of determiningpriority between creditors under the DOCA.3.2 Creditors’ voting rightsMaylord Equity Management Pty Ltd v ReelTime Media Ltd 12 considered an applicationfor termination of a DOCA on the grounds that Deed Administrators had unfairly dealtwith the Maylord’s creditor claim. The case provides an interesting example of a DOCAwhich has the effect of suppressing the interests of an individual creditor.FactsReelTime Media Ltd (Reeltime) was placed in voluntary administration on 6 March2008. On 9 May 2008, the creditors of ReelTime resolved to approve a DOCA. MaylordEquity Management Pty Ltd (Maylord), claimed to be a creditor of ReelTime. Maylordvoted against the resolution to execute a DOCA at the second creditors’ meeting. TheDOCA was executed on 30 May 2008, and Maylord applied to have the DOCAterminated pursuant to s 445D of the Corporations Act 2001 (Cth).Maylord sought relief on the grounds that the Administrators had wrongly estimated thevalue of its claim to limit their potentially decisive voting power. Maylord argued thatthis was grounds for termination of the DOCA under s 445D. Maylord valued their claimat $1 million, whereas the Administrators argued that the true value of the claim wasaround $10,000.12 [2008] NSWSC 104511899717 v1 Brisbane 05 08 098
The Administrators argued that even though a loan of $1 million had admittedly beenmade to Reeltime, the loan had been induced by a misrepresentation made by Maylord,and therefore was not claimable under the DOCA.IssueThe Court was required to determine first whether or not the true value of the claim was$10,000, as claimed by the Administrators and then whether or not the Court shouldexercise its discretionary power to terminate the DOCA.DecisionThe Court rejected the Administrators’ claim that they had correctly assessed Maylord’sclaim as $10,000. The Court said the Administrators’ reasoning was “specious” andsuggested that the argument had not been made in good faith. Palmer J stated:“The Administrators have valued Maylord’s claim for $1M at nil by a process ofreasoning which began with a wrong assertion that Maylord had provided “noevidence”, proceeded by misstating the nature of Maylord’s claim and concluded byapplying the wrong basis of assessment.”The Court held that as a result of the unjust estimation of their claim, Maylord had beendeprived of their rightful voting rights at the second creditors’ meeting. The Courtreasoned, based on the material before it, that if Maylord’s full claim had been included,the vote in favour of the DOCA would not have carried as the claims of the creditors who11899717 v1 Brisbane 05 08 099
Page 1 and 2: DEVELOPMENTS IN DEEDS OF COMPANYARR
Page 3 and 4: DEVELOPMENTS IN DEEDS OF COMPANY AR
Page 5 and 6: inevitable disadvantage of potentia
Page 7: IssueThe Court was asked to decide
Page 11 and 12: 3.3 Liquidation as an event termina
Page 13 and 14: If the administrator were required
Page 15 and 16: DecisionThe Court found that the DO
Page 17 and 18: ecommended that Storm be wound up.
Page 19: 4.3 Opting for a DOCA instead of wi
Page 22 and 23: Courts have shown a willingness to

developments in deeds of company arrangement - DibbsBarker

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