The High Court, in Mighty River International Limited v Hughes  HCA 38, by a majority of 3 v 2 has finally put to bed the issue of whether practitioners can use a holding deed of company arrangement (DOCA) in an external administration.
The majority’s reasons for decision were delivered by Kiefel CJ and Edelman J, with whom Gageler substantially agreed. Nettle and Gordon JJ dissented.
The majority of the High Court found that the holding DOCA in question was:
a DOCA that complied with the Corporations Act1, and was more than simply a deed of extension of time, as it conferred certain obligations on the administrators, such that the administrators were required to (among other things) conduct further investigations and deliver further reports.
not contrary to the objects of Part 5.3A of the Act as:
Not invalid as a result of the fact that the DOCA did not make any property available for distribution to creditors.
This decision provides some much needed clarity to practitioners about their ability to use holding DOCAs in external administrations.
While this decision effectively resolves this issue for the time being, practitioners should still be mindful of entering into DOCAs that do not impose any further obligations.
At a minimum, we recommend that practitioners ensure that any proposed holding DOCA imposes obligations on the administrator to conduct further investigations and to report to creditors on their findings, that is in addition to providing a moratorium on creditors’ claim.