No Second Bite Of The Cherry - Navigating Around A Terminated DOCA

In the recent case of Shiny (Trustee), in the matter of Navigate Global Payments Pty Ltd (Receivers and Managers Appointed) [2023] FCA 1089, the Federal Court of Australia considered an application by the secured creditor of Navigate Global Payments Pty Ltd (Receivers and Managers Appointed) (Navigate) seeking orders to place Navigate back into administration and to allow the administrators to convene another meeting of creditors.

By way of background, Navigate’s creditors had previously resolved that Navigate should enter into a deed of company arrangement.  DCF Australian Private Debt Fund (managed by DCF Asset Management Pty Limited) (DCF) was the secured creditor of Navigate, and did not vote on the DOCA, electing instead to preserve its right to realise its security over Navigate.  However, the DOCA did not complete, and a creditor of Navigate, Shiny Pty Ltd (Shiny) sought and obtained orders that the DOCA be terminated with the result that Navigate was placed into liquidation.

DCF then applied for orders that Navigate be returned to administration so that the creditors could vote on an alternative DOCA proposed by DCF.  This application was opposed by Shiny as well as other creditors of Navigate.  In her decision, Justice Markovic considered the object and purpose of Part 5.3 of the Corporations Act 2001 (Cth) (Act) as well as the commercial and practical aspects of the matter before deciding against returning Navigate to administration.


Navigate provided foreign exchange and currency hedging services to its clients and held an Australian Financial Services Licence (AFSL) that enabled it to carry on its business.  Navigate traded from 3 November 2016 to 28 June 2023 and was placed into voluntary administration on 30 June 2023.  On the same day (30 June 2023) DCF appointed receivers and managers to Navigate (Receivers).

In the course of the administration of Navigate, one of the directors of Navigate put forward a DOCA proposal.  The second meeting of Navigate’s creditors was held on 4 August 2023.  By the time of the meeting, the director’s DOCA proposal was the only DOCA proposal that had been received.  Navigate’s creditors resolved to approve the DOCA.  DCF did not vote in favour of the DOCA, but gave evidence that it would have sought an adjournment of the meeting if it appeared that the resolution to approve the DOCA was not going to pass.

At the same time, in July and August 2023, the Receivers conducted a sale process for the business of Navigate.  By 11 August 2023 the Receivers had received nine non-binding indicative bids, and by 18 August 2023 five of the bidders had been short listed to continue into the second stage of the sale process with final offers due on or by 30 August 2023.  By this time it had become clear to the Receivers that the Navigate AFSL was one of the most valuable assets of the business, and that if Navigate went into liquidation this could result in the AFSL being cancelled which would adversely affect the sale process.

Then, on 23 August 2023, Shiny commenced proceedings seeking orders under section 445D or alternatively section 447A of the Act that the DOCA be terminated.

By the time the matter came on for hearing before the Court on 1 September 2023:

  • the deed administrator and Navigate had confirmed that they did not oppose Shiny’s application to terminate the DOCA; and
  • the Receivers had filed an application seeking orders that Navigate be placed back into administration so that creditors could consider an alternative DOCA to be proposed by DCF which would include a number of components including the preservation of the AFSL and sale of the shares in Navigate.

The Receivers’ application was supported by the directors of Navigate, but was opposed by Shiny and certain other creditors of Navigate.

Justice Markovic noted at the outset of the hearing that as Shiny’s application to terminate the DOCA was not opposed, and as there were good grounds for the application, the application should be granted and made an order that the DOCA be terminated.  As a result, all that was left to be determined at the hearing was whether the Receivers’ application should be granted.

The Decision

In considering the Receivers’ application, Markovic J noted that the question of how to proceed and what is in the best interests of Navigate was finely balanced in this matter. 

However, Her Honour ultimately concluded that the better course was to refuse the Receivers’ application and for Navigate to remain in liquidation for the following reasons.

Objectives of Part 5.3A

The Court discussed the objects of Part 5.3A of the Act, which include that the business and property of an insolvent company be administered in a way that maximises the chance of the company continuing in existence or, if that is not possible, results in a better return for the company’s creditors and members than would result from an immediate winding up.

Justice Markovic noted that the voluntary administration process contemplated under Part 5.3A had already been completed.  Creditors were given an opportunity to propose a DOCA at the second meeting, and a DOCA proposal had been received and had been voted upon by the creditors.  Justice Markovic observed that DCF had the opportunity to put up a competing DOCA proposal at the time of the second meeting but made a strategic decision not to do so.  In the circumstances, the Court considered that DCF should not have a “second bite of the cherry”.

DCF’s Proposed DOCA Terms

The Court also observed that there were limited details available as to the terms of DCF’s proposed DOCA as at the time of the hearing.  For example, the Court noted that DCF proposed to allocate up to $20,000 to fund a new administrator, which might not be sufficiently attractive to creditors.  Justice Markovic accepted that if more time was available, DCF may have been able to provide more details as to its proposed DOCA, but that in the circumstances there was limited evidence as to the benefit that could flow from the potential DOCA (and no evidence as to what surplus might be available to creditors).

Sale Process

Justice Markovic also found that there was no evidence that putting Navigate into liquidation would have any effect on the AFSL.  Navigate’s AFSL had already been suspended as Navigate was no longer trading.  There was no evidence that Navigate being placed into liquidation would result in the AFSL being terminated.  Further, Markovic J noted that the only way in which the AFSL could deliver value was in relation to a sale of the shares in Navigate, and that it appeared that this could not assist the creditors of Navigate (as any surplus from such a sale would not add to the funds available to those creditors).

Power to appoint an administrator

Finally, the Court also observed that a liquidator could, if appropriate, appoint an administrator to Navigate under section 436B of the Act.  This meant that even if Navigate were to remain in liquidation, this would not preclude DCF from developing its DOCA proposal and seeking to have the company returned to administration at some point in the future.

Lavan comments

This case provides useful strategic guidance for creditors or parties who are considering putting forward a proposal for a DOCA, and suggests that it may be beneficial for such parties to seize the opportunity to do so during the administration rather than waiting for a potential opportunity if another DOCA proposal fails.

However, the case also shows that there are options available if a DOCA proposal can’t be advanced in the administration and if an incumbent DOCA subsequently fails.  The Court was clear that in different circumstances the Receivers’ application could have been granted, and noted the possibility for the company to be reversed out of liquidation and into administration if that became appropriate at a future date.

If you have any questions about this decision, or about the DOCA process in general, the experienced Lavan team is here to assist.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.