Termination stayed after funding conundrum resolved

Orders terminating an unjustifiably prejudicial DoCA and appointing liquidators have been stayed after the parties worked out how to prevent the incumbent deed administrators from consuming the entirety of the deed fund in the event the deed proponent appeals.

In the matter of Academy Construction & Development Pty Ltd (subject to Deed of Company Arrangement) [2024] NSWSC 842, orders were made on July 10 terminating the deed because it was found to have been unfairly prejudicial to a single creditor.

Nor was the character of the prejudice imposed simply unfair.

NSW Supreme Court judge Ashley Black found that the deed proponent could not show any rational or commercial reason for the differential treatment, which saw an owners corporation debt reduced from more than $7 million to $200,000.

Other unsecured creditors however, among them related parties and none with sizeable claims, were to be paid in full.

During the hearing of the termination application the deed administrator was grilled relentlessly about the extent of his pre-appointment involvement with the deed proponent, an involvement which the judge likened to the role of “special advisor”.

But ultimately the judge wasn’t required to rule on allegations as to the conduct of Jirsch Sutherland partner Andrew Spring and in the immediate aftermath of delivering judgment Justice Black heard an interlocutory application brought by ACD and its director, John Michael Beaini on July 9.

Aware of the possibility that the judge would order that the deed be terminated and that with the inevitable winding up that would flow from such an order, Bean’s builder’s license would be imperilled, ACD and Beaini sought to have the effect of the July 10 orders stayed while an appeal was contemplated.

In his ex-tempore judgment of July 11 Justice Black detailed how the granting of a stay would prevent the applicant’s nominee liquidators – DW Advisory’s Anthony Elkerton and Paul Weston – from taking possession of the funds held by Spring and Jirsch colleague Peter Moore.

Further, he explained how the parties had addressed the inevitable detriment caused by Spring and Moore remaining in place while an appeal was contemplated, brought and heard, “where they would incur entitlements as to remuneration, costs and expenses in the period, and the amount which would otherwise be transferred to the liquidators on termination of the DoCA, would be eroded.”

ACD and Beaini will provide the funds necessary to ensure that the amount to be transferred to Elkerton and Weston being held by the deed administrators will be topped up whenever required whilst grounds for an appeal are considered and any subsequent challenge heard.