Non-monetary Claims: Are they Compromised by a DoCA?
The Airtourer Co-operative Limited the Millicer Aircraft Industries Pty Ltd [2004] FCA 393 ("Airtourer").
PK Riddell Investments Pty Ltd v Onwards Up and Gone Pty Ltd [2024] VSC 159 ("Riddell Investments").
Kirkalocka Gold SPV Pty Ltd v SCL AUS Limited [2025] FCA 1490 ("Kirkalocka") (which is on appeal).
Corporations Act
Section 444D(1), Corporations Act ("CA") provides:
"A deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the [DoCA]"
Those claims, typically, are on account of "all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages)…"; s 553(1), CA.
A DoCA will release monetary claims but not all claims (such as claims for specific performance and the like). What claims will and will not be released by a DoCA has been considered in three recent cases.
Recent case law
The case law, which we discuss below, confirms that a key consideration is the status and nature of the claim as at the date of appointment of administrators.
The position is summarised in the case of Riddell Investments it was held (at [78]) where the Court held as follows:
"…the claims that may be compromised by a deed of company arrangement are those that have a basis, founded on an existing legal right, for asserting a right to participate in the division of the company's assets. The reference to 'a right to participate in the division of the company's assets' in the case of the claims that may be compromised by a deed of company arrangement are in the nature of monetary claims or at least something that may be valued and taken into account in winding-up or other administration that is under way."
What impact does a DoCA have on non-monetary claims?
In Kirkalocka the court reviewed the relevant authorities and paid particular attention to the decision in Airtourer. In relation to claims for specific performance, the following passage was cited and approved as well as the emphasis being added:
"In so far as the applicant's claim is now propounded…as a claim for specific performance which, it contends, is based upon a valid claim of an equitable assignment of specified property sustained by the passing of consideration, this claim is not, in my opinion, a claim made, or capable of being made, as at [the date the company administration commenced], as a claim of a 'Creditor', contingent or otherwise. The character of the claim is quite different, since the proceeding for specific performance has no connection with any debt, liquidated or unliquidated. The present case, in my view, may be distinguished from Zambena Pty Ltd v Capitol Laundry Pty Ltd (1995) 14 ACLC 241 where the underlying transaction was one of indebtedness."
On the basis of that passage, the court in Kirkalocka concluded not all claims involving a breach of an obligation will be released, stating (at [130]):
"The words I have emphasised in the quote are important for present purposes. They indicate that identifying that specific relief is available for breach of a given obligation is not the end of the inquiry. There is also necessary to consider whether the claim for breach is connected to a debt that is released by the operation of the deed of company arrangement."
In Airtourer, there had been an assignment of intellectual property that permitted the assignee company to manufacture aircraft subject to the condition that the assignee would return the intellectual property if it failed to produce aircraft within a specified time. The assignee did not satisfy that condition. The assignor sought an order for specific performance requiring the return of the intellectual property. The assignee resisted that claim on the basis that it had undertaken a DoCA. The court determined that the claim had not been released and allowed the claim for specific performance because, as appears from the above citation, the underlying transaction, being the obligation to return the intellectual property, was not one of indebtedness.
So, by way of further example, it is submitted that if a company has undertaken a contract for the sale of a real property, the circumstance that the vendor has undertaken a deed of company arrangement is not a bar to the purchaser seeking an order for specific performance requiring the vendor to complete the contract for sale and transfer the property to the purchaser.
By way of contrast, in Riddell Investments, the claim against the company which had undertaken the DoCA was made under the Victorian Water Act which empowered the relevant tribunal, in essence, to make orders in the circumstance so that there was a flow of water from one property to another which caused damage. Those orders could include both an order for compensation and the grant of an injunction. As the conduct in Riddell Investments in respect of which both compensation and injunctive relief was sought pre-dated the commencement of the DoCA and as the claim for injunctive relief was not a discrete non-monetary claim, it was held that the claim for injunctive relief was also bound by the DoCA.
The approach of the Court in Riddell Investments was consistent with the analysis by the court in Kirkalocka of the earlier decision in Zambena Pty Ltd v Capitol Laundry Pty Ltd (1995) 14 ACLC 241 where it concluded that analysis (at [144]) by observing:
"It is clear from this that the mere availability (or obtaining) of an order for specific performance is not enough to avoid the conclusion that a claim has been discharged by force of s 444D. It must be a claim for specific performance of an obligation that does not sound in money."
Therefore, whilst it seems clear that the starting points is that a non-monetary claim should not be released by a DoCA, that will not necessarily be the case where the claim is connected with related or alternative relief which sounds in money.
We expect to see further development in this area. The case of Kirkalocka is on appeal and is likely to further clarify the position, including, with regard to when a claim may qualify as a contingent claim and be released.
