Newsflash – High Court delivers reasons for upholding the holding DOCA in Mighty River

The High Court of Australia has this morning delivered reasons for orders it made in June 2018 dismissing two appeals from the West Australia Court of Appeal.

In Mighty River International Ltd v Brian Hughes and Daniel Bredencamp as Administrators of Mesa Minerals Ltd [2018] HCA 38 the DOCA in question inter alia provided for a moratorium on creditors’ claims, required the Administrators to conduct further investigations and report to creditors concerning possible variations to the Deed within 6 months, and provided that no property of Mesa Minerals be made available for distribution to creditors.

In Mighty River’s appeal to the High Court, it essentially made two submissions –

  1. The DOCA was not valid principally because it was an agreed extension of time not ordered by the Court under s 439A(6) and was contrary to the object of Part 5.3A, and
  2. The DOCA should have been declared void under s 445G(2) for contravening ss 438A(b) and 439A(4), or s 444A(4)(b), or both.

A slim majority of the High Court disagreed. The majority (Kiefel CJ, Edelman J and Gageler J) held that –

  1. The Deed was a valid deed of company arrangement. It was formally executed, and created and conferred genuine rights and duties. It did not involve an impermissible sidestepping of s 439A(6); the effect of extending the time for investigations by the Administrators was only incidental to the purpose of the DOCA (at the hearing there was some criticism from the bench of the use of the term “holding DOCA”). The moratorium was consistent with the object of Pt 5.3A, and
  2. The Deed was not required to be declared void under s 445G(2). Section 444A(4)(b) did not require the Deed to specify some property to be available to pay creditors’ claims, and the Administrators had formed and expressed the opinions required by s 438A(b) and, at the relevant time, s 439A(4).

In dissent their Honours Nettle and Gordon JJ took the view that in substance, the Deed did no more than purport to extend the administration of the Company (at [70]).

The judgment may be read in full here.

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