This week’s TGIF considers the decision of Ziziphus Pty Ltd v Pluton Resources Limited (Receivers and Managers Appointed) (Subject to Deed of Company Arrangement) where the Court favoured the public interest in terminating a DOCA


A company which was engaged in iron ore mining, had been struggling financially for a number of years. In 2013, receivers were appointed to manage the company’s property and since mid-2015, the company had failed to discharge its royalty obligations to the State of Western Australia.

In August 2015, the company made a final attempt to raise funds, which involved a related company providing it with funding. The provision of funding was contingent upon the company entering into administration and executing a deed of company arrangement (DOCA), which it subsequently entered into in January 2016.

In February 2016, one of the company’s directors resigned, leaving it without the requisite number of directors required by the Corporations Act and without one director being ordinarily resident in Australia.

The plaintiffs (who were shareholders and creditors of the company), sought an order that the DOCA be terminated on the basis that the company was hopelessly insolvent. The company had an estimated deficiency of $142m and a potential recovery of approximately $24m.

The defendants (the deed administrators) argued that creditors were likely to be better off if the DOCA was permitted to proceed.

The Court has the power to terminate a DOCA under section 445D of the Corporations Act if it is satisfied that:

  • Information about the company’s affairs which was given to the administrator or creditors was false or misleading;

  • There has been a material contravention of the DOCA;

  • The provisions of the DOCA are oppressive; or

  • For some other reason.


His Honour noted that when it comes to determining whether a DOCA ought to be terminated, the authorities make it plain that the public interest can outweigh the benefits to creditors of a DOCA proceeding.

His Honour stated that in this case it was difficult to assess whether creditors would be better off if the DOCA had been permitted to proceed, but that it was not unreasonable to assume that that was the case.

Notwithstanding that he held that the DOCA ought to be terminated for the following reasons::

  • The company was hopelessly insolvent.

  • The company displayed a lack of disclosure. For example, the company had not made royalty payments to the State of Western Australia since 2014. His Honour noted that there was no evidence at all as to the standing of the tenements, which was a significant issue in mining related cases and, in his Honour’s view, ought to have been addressed.

  • There was no explanation as to how and why the company had gotten into such serious financial difficulties from 2014 onwards.

  • There appeared to be no plan or structure in place as to how the company would run and how it expected to meet its obligations in the future.

  • The DOCA preserved the claims of some creditors but there was no explanation as to how those claims, which were not insubstantial, would be met.

  • No explanation was proffered as to how the requirements of the Corporations Act in relation to the requisite number of directors a company should have, would be rectified.

While his Honour stated that he was not being in any way critical of the conduct of the administrators, he did not accept that all necessary and relevant disclosures had been made

He noted that in this case he did not consider that the company should go into liquidation in order that the directors and other affairs of the company could be examined. Rather, he considered that it was not in the public interest to have a company which has struggled for years doing business and incurring debts which it may not be able to pay.


This decision confirms that when determining whether a DOCA ought to be terminated, the public interest can, and often will, outweigh any benefit to creditors of the DOCA being permitted to proceed.