DOCA's: Can a company rise again…and again?
Reid, IMO Pint Club Incorporated [2026] FCA 1451 (“Pint Club”)
Australian DOCA's can be equivalent to a “Chapter 22”. A failed deed may be replaced by a new deed by court order.
The association in Pint Club operated a club providing bar, bistro, entertainment and gambling facilities (the “Club”). Its affairs were regulated, in a legislative sense, by the Associations Act 2003 (NT). That Act incorporates Part 5.3A of the Corporations Act (Cth) (“CA”).
In 2023, the Club undertook what was, in practical effect, a DOCA. The DOCA provided or contemplated that:
- the Club’s voluntary administrators would be the administrators of the DOCA;
- management of the Club’s operations would be returned to its committee;
- its continued operation would be funded from trading revenue; and
- the Club’s creditors who were bound by the DOCA were to be paid 100 cents in the dollar on their claims in 2028.
As the Club’s trading transpired, it continued to operate at a loss.
The administrators of the DOCA received a proposal from another club under which it would acquire the Club by means of an alternative DOCA. The alternative DOCA involved:
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the adoption by the Club of a new constitution; and
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the establishment of a fund under that alternative DOCA in the amount of $600,000 which would enable payment in full of the claims of creditors who enjoyed priority and the payment of the dividend of 6 to 7 cents in the dollar to its ordinary unsecured creditors, being those creditors to whom liabilities were incurred prior to the undertaking of the existing DOCA (“DOCA creditors”) as well as to creditors to whom liabilities were incurred whilst the Club continued to trade under that DOCA (“Post-DOCA creditors”).
The court considered two possible means by which the existing DOCA could be amended or varied in a way which bound both the DOCA creditors and the Post-DOCA creditors.
Whilst s 445A of the CA provides for the variation of the terms of an existing DOCA, the court held that that provision could not be invoked for the purpose of extending the operation of the existing DOCA so as to bind the claims of Post-DOCA creditors.
In that regard, the court in Pint Club said (at [24]):
“Having regard to the overall scheme of Part 5.3A, it contemplates that generally the terms of the deed and subsequent steps in relation to the deed are a matter for the creditors at the time of the administration. Further, where Part 5.3A refers to creditors it refers to the creditors with claims in the administration. The legislation does not include any express mechanism by which a creditor whose claim arises against the company by reason of dealings undertaken pursuant to the deed may be brought within the terms of the deed. A creditor of that kind could take steps to wind-up the company. There may be consequences for insolvent trading by the company whilst in administration. However, the legislative scheme does not contemplate creditors such as the [Post-DOCA creditors] in the present case being brought within the terms of the deed.”
The alternative which was considered was whether the court could exercise its power under s 447A of the CA to amend the existing DOCA so that it bound all of the Club’s creditors.
As a general matter, the court in Pint Club noted (at [27]) that:
“It is well established that the Court has power under s 447A to provide that Part 5.3A will operate as if provisions in a deed of company arrangement had been varied…” (citations omitted)
However, the exercise of that power is circumscribed by the following consideration (at [28]):
“'Ordinarily, any variation of a deed of company arrangement should be by resolution of creditors under s 445A’. As to resort to s 447A, [Barrett J in IMO Derwent Howard Media Pty Limited [2011] NSWSC 1164] said at [12]: ‘Generally speaking, however, the court should be reluctant to exercise this power (and thereby to deprive creditors of their role under section 445A) except in circumstances that are uncontentious in the sense that no prejudice to creditors is involved’”
So far as concerned the application in relation to the Club, the court observed that it involved an outcome which could be achieved by having interdependent DOCA's, each of which involves a release of the claims of creditors which they bind in consideration for payments which would be made to them from the funds distributed under both DOCA's: see Pint Club at [37].
In the circumstances, the court concluded that it could exercise its power under s 447A to vary the terms of the existing DOCA to extend its operation so that it applied to the claims of all of the Club’s creditors. In that regard, the court said (at [39]):
“I regard the proposal as seeking to truncate the kind of steps that I have outlined which might establish an administration for the [Post-DOCA creditors] which then adopts a deed in similar terms to that applying to the [DOCA creditors] thereby compromising the claims of all creditors. On that basis, I consider the application to be for orders that seek to establish an administration of the kind contemplated by Part 5.3A. Unlike [earlier cases], it does not seek to simply add a new creditor into an existing deed. Rather, it seeks to effect two administrations of the kind provided for by s 447A and to bring them together.”
The remaining issue for the court was whether it should exercise its discretion to make the orders sought. It was satisfied that it should do so for reasons which, in essence, were to the effect that:
- it made commercial sense in procedural terms;
- the option, being the liquidation of the Club, was unlikely to result in any dividend being paid to its ordinary unsecured creditors;
- all creditors had been given notice of the application and none of them had objected; and
- the order assured the continued operation of “a long-standing community institution that supports local sporting and community organisations”: see Pint Club at [42]–[52].
Authors: Michael Sloan, Partner and Richard Fisher, Consultant.
