This week's TGIF considers the case of In the
matter of Bluenergy Group Limited (subject to a Deed of Company
Arrangement) (administrator appointed)  NSWSC 977, in
which the court found that a DOCA will extinguish a secured
creditor's debt, although the secured creditor will remain able
to 'realise' or 'otherwise deal' with the secured
Administrators were appointed to a company and as a result, the
company entered into a Deed of Company Arrangement
After the DOCA had been entered into, a secured creditor who had
abstained from voting on the decision of whether the company should
enter into the DOCA, purported to appoint an administrator under
The deed administrators sought a declaration from the Court that
the second administration should be terminated (amongst other
In holding that the second administration should be terminated,
the Court held that:
The terms of the DOCA extinguished the secured creditor's
debt, even though the secured creditor had abstained from voting on
the DOCA proposal.
Notwithstanding the extinguishment of the debt, s 444D(2) of
the Corporations Act 2001 preserved the secured
creditor's right to 'realise' or 'otherwise
deal' with the secured property to which its charge attached
immediately prior to the release of claims effected by the
DOCA. However, the secured creditor would not have any right
to realise or deal with any after-acquired
Given the extinguishment of the debt, the secured creditor was
not a creditor at the time it purported to appoint an administrator
and would not be considered a creditor for the second
However, s 444D(2) preserved the secured creditor's
entitlement to appoint an administrator under s 436C of the
Corporations Act, as the preservation of the secured
creditor's right to realise or otherwise deal with the secured
property extended to the whole or substantially the whole of the
This case is a departure from the previous thinking on this
matter that a secured creditor (who did not consent) stood outside
of the DOCA process. It is significant as while the secured
creditor's right to deal with the secured property to which its
charge attached immediately priorto any DOCA
being entered into remains, they will no longer be able to recover
any after-acquired property.
This case considers Australian Gypsum Industries Pty Ltd v
Dalesun Holdings Pty Ltd (2014) 283 FLR 471 which was the
subject of a previous TGIF which can be found
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A recent NSW decision has implications for liquidators of trustee companies dealing with trust funds and priority debts.
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