COMMISSIONER OF INLAND REVENUE V DAMIEN GRANT AND STEVEN KHOV HC AK CIV-2009-404-7388

COMMISSIONER OF INLAND REVENUE V DAMIEN GRANT AND STEVEN KHOV HC AK CIV-2009- 404-7388 25 May 2010IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2009-404-7388UNDER Companies Act 1993 Part 15A and High Court Rules Part 19 IN THE MATTER OF the voluntary administration of JONES PUBLISHING LIMITED now JPU LIMITED (subject to Deed of Company Arrangement) BETWEEN COMMISSIONER OF INLAND REVENUE Applicant AND DAMIEN GRANT AND STEVEN KHOV Respondents Hearing: 22 April 2010 Counsel: N H Malarao and J Blythe for Applicant R M Dillon for Respondents Judgment: 25 May 2010 at 4:30pmRESERVED JUDGMENT OF HUGH WILLIAMS J.This judgment was delivered by The Hon. Justice Hugh Williams on25 May 2010 at 4:30pmpursuant to Rule 11.5 of the High Court Rules .. Registrar/Deputy RegistrarA. As a result of the analysis in this judgment as to what amounts to a "casting" vote Mr Grant, not being a Jones creditor and not holding proxy or postal votes in favour, was not entitled to vote at the Jones creditors' meeting on 21 January 2008 and the vote which he purported to cast under s 239AK(3) was not a "casting" vote in accordance with that section. The vote for the DOCA at the Jones watershed meeting on 21 January 2009 should have been declared lost, and the Jones DOCA is void.B. Had the Jones DOCA not been declared void for non-compliance with s 239AK(3) the Court would have declared it invalid under s 239ADD as being oppressive or unfairly prejudicial against the Commissioner but not invalid on the other grounds in that section. C. Further leave is reserved to the parties as set out in para [102] of this judgment and any applications for costs are to be dealt with in accordance with para [103].____________________________________________________________________Table of ContentsParagraphIntroduction [1] Facts:1. Up to 21 January 2009 [6]2. Watershed Meeting: 21 January 2009 [17]3. 23 January 2009 to 7 March 2009 [23]4. Did Mr Grant's vote comply with s 239AK? What is a "Casting Vote" (a) Statute [29](b) Dictionaries [33](c) Cases [39](d) Discussion [44](e) Texts: Australian approach [63]5. Result on application to invalidate DOCA [72]6. Was the Jones DOCA oppressive, unfairly prejudicial or unfairly discriminatory against the Commissioner – or was there sufficient other reason to terminate it? [76]7. Material contravention of the DOCA [83]8. Was there sufficient other reason to terminate the DOCA? [87]9. Estoppel [92]Result [101]____________________________________________________________________Introduction[1] On 5 December 2008 the respondents, Messrs Grant and Khov, were appointed administrators of Jones Publishing Limited ("Jones"), 1 Dish Publishing Limited ("Dish") and Top Gear NZ Limited ("Top Gear"). The applicant, the Commissioner of Inland Revenue ("Commissioner") was a creditor of each company. [2] On 2 February 2009 a Deed of Company Arrangement ("DOCA") was executed concerning administration of all three companies. [3] On 6 November 2009 the Commissioner filed an application to declare the DOCA void, or terminate it. The grounds on which relief was sought were: a) A ruling pursuant to s 239ACX(1) 2 of the Companies Act 1993 3 that the DOCA was not entered into in accordance with Part 15A and was accordingly void. That essentially centres around whether the voting to approve the DOCA was in accordance with s 239AK(3) because Mr Grant, as chair of a creditors' meeting, exercised what he claimed was his casting vote in favour; b) An order under s 239ADD(2) terminating the DOCA on the grounds there has been a material contravention of it by the respondents; that it is oppressive, unfairly prejudicial and unfairly discriminatory against the Commissioner; or that there is sufficient other reason to terminate the Deed. That essentially revolves around the terms of the1 The company has changed its name to JPU Limited but it is convenient to use its former name in this judgment.2 In its quest for "clarity" (Presentation of New Zealand Statute Law R 104 October 2008 para 1.27ff p 20) the Law Commission, in conjunction with the Parliamentary Counsel Office may, with respect, have overlooked the unhelpful practice of numbering sections in amending legislation with numerous alpha-numeric combinations which can be six or seven characters in length. This can be confusing, difficult to follow and adds little in "clarity". See also e.g. Local Government Act 1974 and Property (Relationships) Act 1976, Tables of Contents and the contents themselves.3 All statutory references in this judgment are to the Companies Act 1993 unless otherwise specified.DOCA and the actions taken by the respondents under it since 7 March 2009. [4] The administrators' amended Notice of Opposition challenges the issues raised by the Commissioner; asserts the DOCA was validly approved with the use of the casting vote; challenges the way the Commissioner has acted in relation to the debt owing by Jones; raises what was called an estoppel arising out of the Commissioner's email of 2 February 2009; and generally rebutted the Commissioner's contentions. [5] Counsel were agreed that with Part 15A only enacted with effect from 1 November 2007, this may be the first occasion when its provisions - especially the casting vote provision in s 239AK – has come under judicial scrutiny.Facts:1. Up to 21 January 2009[6] Jones first defaulted in its obligations to the Commissioner in March 2007 with further defaults continuing fairly regularly thereafter. There are evidential differences arising out of the dates of imposition of penalties and interest concerning the level of the Jones debt to the Commissioner but by the watershed 4 meeting held on 21 January 2009 the three companies owed the Commissioner the following sums: Jones: $349,315.90 total of which $290,249.18 was claimed to be preferential debt. Dish: $7,941.77 total of which $4,730.96 was claimed to be preferential. Top Gear: $4,886.83 total of which $3,980.27 was claimed to be preferential.4 The adjective is Parliament's: s 239B.[7] There was a dispute as to whether the amounts asserted to be preferential were properly so called at that stage, but no dispute as to the totals. [8] The Jones Group consisted of the three companies mentioned. Top Gear and Dish were subsidiaries incorporated to publish magazines of the same name with Jones printing them and other titles. Both magazines were making losses, though Dish was near break even. With one exception, there was a common ownership and directorship of the three companies. [9] Two days prior to the administrators being appointed all three companies licensed the use of their intellectual property and sold their book debts and physical assets to a company called Tangible Media Limited ("TML") for $1.00. The licences gave TML the right to publish on payment of a fee. TML is owned by Image Centre Holdings Limited, the holding company for the Image Centre Group. [10] Messrs Grant and Khov were appointed joint administrators of the three companies on 5 December 2008 by the shareholders pursuant to s 239I, and on 8 December 2008 public notice was given of a first meeting of creditors of the companies to be held on 16 December 2008. One agenda item was to consider removing the administrators from office and appointing alternatives. Agenda items for the 16 December 2008 meeting were to review the administrators' report, decide whether each company should execute a DOCA or, alternatively, whether administration should end and the companies be put into liquidation. The watershed meeting was advertised for 18 December 2008. [11] The administrators' report for the watershed meeting reviewed the history of the Jones Group and advised that the companies' debtors amounted to $323,559.00, most of which was forecast to be collected by the end of December 2008. A substantial amount of the collection was to be used for an initial distribution to creditors if the DOCA was voted for. The administrators' fees were to be $20,000 plus GST. [12] The companies' creditors totalled $973,311.91 (Jones), $459,813.10 (Top Gear) and $525,484.39 (Dish), a total of $1,958,609.40. The largest sums apartfrom the debts to the Commissioner were owing to Image Centre but there were a number of other substantial debts. The Commissioner was shown as being owed $243,204.00 by Jones, $13,425.00 by Dish and nothing by Top Gear. [13] The report discussed voidable and other transactions and administrators' powers, saying the respondents had "discovered some payments to creditors that we consider to be voidable transactions" but even if recovery action was successful it would not provide a "better outcome" for creditors than the proposed DOCA. [14] The report also discussed alternatives open to creditors at the watershed meeting including that "if the DOCA is not accepted the company automatically falls into liquidation and the current administrators become liquidators", though alternative liquidators could be appointed. Alternatively, creditors could vote to accept the DOCA whereupon the directors had 10 days to accept it, with liquidation in default. Profit forecasts were included for each company. The administrators recommended acceptance of the DOCA including acceptance of the sales of the businesses, an initial distribution on a pro rata basis, with a 36 month repayment plan of 100 per cent of the profits from TML also being distributed pro rata. Image Centre was to be excluded from the initial distribution. [15] At the 16 December 2008 meeting Messrs Grant and Khov were confirmed as administrators for Dish and Top Gear but not for Jones, for lack of the required support by value. In relation to that last, 10 creditors holding $461,000.00 in value voted for confirmation with three, including the Commissioner, holding $585,000.00 of debts, voted against. That notwithstanding, after taking legal advice, the administrators advised that the failure to confirm their Jones' appointment did not remove them from office. They continued to act. [16] The watershed meeting was postponed from 18 December 2008 to 15 January 2009 and on 23 December 2008 the Commissioner wrote to the administrators requiring substantial company constitutional and financial data and directors' minutes. Other information sought included how the companies incurred the level of indebtedness, detail about the overdrawn current accounts, lack of provision for tax and concern relating to the $1.00 sale price of the businesses. The respondents sent afull reply on 19 January 2009 explaining why pursuit of the voidable transactions was unlikely to yield sufficient funds. The $1.00 sale price was justified on the basis that the magazines were losing money, attempts to sell them had been fruitless and, in Mr Grant's opinion, "the magazines are worthless", particularly given Image Centre had assumed liability for wages and other payments and were waiving their claim to any share in the distribution. Mr Grant concluded:It is clear that the position of the IRD would be better under a liquidation than a DOCA. On this basis I expect the IRD would vote against the DOCA, as perhaps they should.2. Watershed Meeting: 21 January 2009[17] The watershed meeting actually occurred on 21 January 2009. Largely following the form of their 10 December 2008 report, the administrators notified creditors that $200,575.00 of the (now) $357,794.00 due to the companies had been recovered leaving $156,720 to be collected. The administrators' concerns relating to the licence arrangements between the companies and TML had been settled by way of a deed between the administrators and Image Centre. The companies' debt position at 5 December 2008 had been adjusted to a total of $2,143,891.00 of which the Commissioner's debts were shown at the totals earlier recounted. The explanation concerning the voidable transactions largely followed that given to the Commissioner on 19 January 2009 but included additional detail as to the distributions, saying that in the months before administration the "directors waived the debt they owed to the business and in return waived the debt owed by the companies to their family trusts". Unwinding that transaction would simply substitute one debt for another. Liquidation was discussed as a possibility, including possible recovery from the directors. [18] The Commissioner's preferential position was discussed with the conclusion that the "net position is a substantial improvement to the recovery of the IRD, who would probably get paid in full, and a reduction in the position of unsecured creditors who optimistically would get three-and-a-half per cent and would more likely get nothing".[19] Then, after discussing the companies' financial position and possible distribution, the administrators recommended that the "unsecured creditors vote to support the DOCA" but because the Commissioner's debt would probably be payable in full on liquidation "we would recommend to the IRD that they should vote for the liquidation of the company". [20] The attached DOCA was in the same form as the earlier draft. Clause 18 provided that it covered all three companies and was conditional on all three executing the Deed and the creditors in all three approving it plus approval by the three boards within 15 working days. [21] Clause 18.5 provided:This Deed cannot come into operation by one company unless it comes into operation by all three companies. If the creditors or board of one company vote against this Deed then this Deed shall not come into force.[22] Events at the watershed meeting were described by Ms To, an IRD officer, in the following terms :18. The first resolutions to be put to vote were whether Top Gear NZ, Dish Publishing and Jones Publishing, execute the proposed DOCA. Each vote was conducted separately. The votes were as follows: (a) In relation to Top Gear NZ, the Commissioner voted against the resolution. Five other creditors (by proxy or by personal representation) voted for the resolution. The Administrators held that the resolution had passed. (b) In relation to Dish Publishing, the Commissioner voted against the resolution. Seven other creditors (by proxy or by personal representation) voted for the resolution. The Administrators held that the resolution had passed. (c) In relation to Jones Publishing, the Commissioner voted against the resolution. Ten other creditors (by proxy or by personal representation) voted for the resolution. 19. The Commissioner took no issue with the first two votes. The resolutions passed both in terms of number and value. However, the Commissioner noted that in relation to Jones Publishing, the total debt it owed to creditors was $1,173,215. This was made up of $349,316 owed to the Commissioner and $823,899 to other creditors. Thus, the Commissioner was owed around 30% of the total debt and the other creditors owed around 70%. Accordingly, the votes of the other creditors in favour of resolution did notamount to 75% of the value of Jones Publishing's total debt. I understand from s238AK(2) of the Companies Act that for a resolution to pass it has to be adopted by a majority in number representing 75% in value is required and thus it was the Commissioner's view that the resolution did not pass. The Commissioner's representatives raised this issue with the Administrators and the other creditors present at the meeting. The Administrators took a brief break to confer with their legal advisers and, upon resumption of the meeting, purported to use a casting vote in favour of the resolution and held that the resolution had passed.3. 23 January 2009 to 7 March 2009[23] On 23 January 2009 an IRD officer queried Mr Grant concerning the votes and why he exercised his casting vote as he did. A reply the same day said the Commissioner's opposition had been expected and as a result Mr Grant had looked at s 239AK and the commentary in Brookers Companies and Securities Law.5 He also relied on Australian legislation and cases and concluded:After reviewing the legislation, we were confident that, in the event that a majority of creditors by number, but not 75% by value, were to support the Doca, we had a casting vote that we could support, or not, the Doca. It was our opinion that, with our support, the Doca would become pass [sic] the creditors meeting on our casting vote.[24] Mr Grant's explanation also said that because the administrators were treating all three companies as one business the percentage of total debt owing to the Commissioner was under 25% though there was no single administration order under subpart 21 of Part 15A in force. [25] Distribution the following day was promised and in that time span Ms To said it was not possible for the Commissioner to decide whether to challenge the casting vote by litigation. Accordingly on 2 February 2009 Ms To emailed Mr Grant recording a conversation on 29 January and saying that:After thoughtful consideration from Senior Manager we, Inland Revenue, will not precede [sic] legal action on this matter.[26] The DOCA was apparently executed on 2 February 2009 by the respective directors and filed (though without appendices) with the Registrar of Companies on5 Brookers Companies and Securities Law vol 1 para CA239AK.06 p 1-1528-1529.20 February 2009, with an amendment to the background section saying the creditors of Dish and Top Gear had supported the DOCA "with over 50% in the number of creditor and 75% in value" but, in relation to Jones, "over 50% in the number of creditors but not over 75% in value" supported so the "administrators elected to use their casting vote to support the DOCA" despite IRD's opposition. The passage continued:The Inland Revenue have confirmed they will not be proceeding to challenge the DOCA in Court and the administrators have put this DOCA to the board of all three companies for ratification.[27] Ms To said that explanation was incorrect and the "Commissioner merely confirmed by the deadline that legal proceedings were not contemplated at that stage" and that the "Commissioner certainly did not waive his rights to take legal action in the future". [28] The DOCA forecast two distributions. On 7 March 2009 the Commissioner received $38,270.79 for Jones, $535.40 for top Gear and $870.09 for Dish. The second distribution is yet to be paid.4. Did Mr Grant's vote comply with s 239AK? What is a "Casting Vote"? (a) Statute[29] When the resolution was first put to the watershed meeting that the Jones' creditors confirm the DOCA, 10 of the 11 voting creditors voted for it. Their debts did not total 75 per cent by value. After taking legal advice, Mr Grant then purported to use the casting vote conferred on chairs of creditors' meetings by s 239AK(3) in favour of the resolution and declared it passed. Was he correct in that? [30] Section 239AK reads:239AK Conduct of creditors' meetings(1) The following clauses of Schedule 5 apply to creditors' meetings called under this Part as if references to the liquidator were references to the administrator: (a) Subject to second 239AC, clause 4; and (b) Clauses 6 to 11. (2) At any meeting of creditors or class of creditors held under this Part, a resolution is adopted if a majority in number representing 75% in value of the creditors or class of creditors voting in person, or by proxy vote or by postal vote, vote in favour of the resolution. (3) The administrator or the administrator's nominee must chair a creditors' meeting, and has a casting vote. (4) For the purposes of voting at a creditors' meeting, the administrator may estimate the amount of a creditor's claim that is for any reason uncertain. (5) On the application of the administrator, or of a creditor who is aggrieved by an estimate made by the administrator, the Court must determine the 7amount of the claim as it sees fit.[31] The first question which arises is whether the vote Mr Grant cast was a "casting vote". That raises the question: what is a casting vote? [32] That question needs to be considered with reference to general dictionary definitions, legal dictionary definitions, and such authority as there is. The conclusion to that point is then to be tested by reference to s 239AK and other provisions of the Act plus, to the extent relevant, texts and Australian precedent and regulatory provisions on the topic.(b) Dictionaries[33] Dealing first with general dictionary definitions, the Oxford English Dictionary6 makes clear that the verb "cast" is used in two separate ways in relation to voting. "Casting a vote" and "a casting vote" use the verb in quite different senses. A "casting vote" uses the verb meaning "to turn (the scale or balance)" a usage which, apart from "casting vote", is obsolete, or archaic while "casting a vote" etymologically uses "cast" in the sense of "to lay, place, put".6 Oxford English Dictionary 2nd ed Vol.II pp 947-952.[34] The notion of a "casting vote" being one which resolves what would otherwise be an even vote for both sides of a resolution, is one which is confirmed by legal text-writers and lexicographers alike. [35] Mr Malarao, leading counsel for the Commissioner, submitted the definition of "casting vote" from Dictionary.Com: "the deciding vote of the presiding officer of a deliberative body, made when the other votes are equally divided" and "casting vote" as "the vote of a presiding officer ... given to break a tie". [36] In New Zealand, Pitchforth Meetings Practice and Procedure in New Zealand 7 says:At common law the chair person has no casting vote. If there is equality there is no majority in favour of the motion, and it is lost. ... If, after the chairperson has voted, there is an equality, the chairperson has a further vote, the casting vote.[37] Spiller Butterworths New Zealand Law Dictionary8 also defines a casting vote as the "vote given by the chairperson of a deliberative assembly, where the votes are equally divided". [38] The same seems to be true in Britain (see Burke Jowitt's Dictionary of English Law; Greenberg Stroud's Judicial Dictionary of Words and Phrases),9Australia (see Nygh et al Butterworth's Australian Legal Dictionary), 10 the United States of America (Garner A Dictionary of Modern Legal Usage)11 and in Canada (Dukelow and Nuse The Dictionary of Canadian Law). 12(c) Cases7 Pitchforth: Meetings Practice and Procedure in New Zealand 3rd ed (1999) para 3-191 p 64.8 Spiller: Butterworths New Zealand Law Dictionary 6th ed 2005 p 42.9 Burke Jowitt's Dictionary of English Law 2nd ed 1977 vol 1, p 293; Greenberg Stroud's Judicial Dictionary of Words and Phrases 7th ed 2006 vol.1 p 379;10 Nygh et al Butterworth's Australian Legal Dictionary 1997, 170.11 Garner, A Dictionary of Modern English Usage 2nd ed 1995 p 136.12 Dukelow & Nuse The Dictionary of Canadian Law (1991) p 141.[39] Turning to case law, the necessity for a tie or an equality of voting on the first round to justify employment of a casting vote also seems to have been accepted by such decisions as there are which bear on the subject. [40] In Turner v Pickering 13Casey J held that where there is no express provision for a casting vote the question is "one of common law as to whether a chairman of a meeting has such a vote in addition to a deliberative vote". [41] In Nell v Longbottom 14 Cave J observed:When, as the result of the chairman's giving his vote, the numbers on either side become exactly equal, the common law appears to have provided no way out of the difficulty. The institution of a second or casting vote, as it is called, is the creature of the statute law introduced for the purpose of avoiding the deadlock which would otherwise ensue.going on to give some statutory examples. [42] In R v Bradford Metropolitan City Council, ex p Corris 15Neill J first observed: 16The uses of a casting vote in general:The word "casting" in this context appears to be derived from an archaic use of the word "cast" as meaning to turn or tilt a scale or balance. A casting vote is therefore a vote which is decisive in that it turns or tilts the scales on one side or another. The dictionaries indicate that the phrase "casting vote" was in use in the 17th century and it may be noted that Richard Bentley used it in one of his Boyle lectures in 1692. [See Oxford English Dictionary, 2nd ed, vol 2 (1989) p 956].and then held: 17A person who has a second or casting vote is clearly under a duty to exercise it honestly and in accordance with what he believes to be the best interests of those who may be affected by the vote. Subject to this, however, it seems to13 Turner v Pickering [1976] 1 NZLR 129, 134.14 Nell v Longbottom (1894) 1 QB 767, 771.15 R v Bradford Metropolitan City Council, ex p Corris [1990] 2 QB 363, 369, and see R v Bradford City Metropolitan Council ex parte Wilson [1990] 2 QB 375.16 Ibid at 369.17 At 371.me that the person presiding at a meeting is fully entitled to use his vote as he thinks fit. Though counsel for the applicant struggled valiantly to find some sound basis for his principle of impartiality I am afraid that I for my part remained unpersuaded.[43] Therefore, although variously expressed, the dictionaries and such authorities as the Court's researches have found, are unanimous that a casting vote is one that must be expressly created and can only be utilised following a first round of voting where the votes for and against a resolution are equal in number. It then must be exercised honestly and in accordance with what appear to be the best interests of those affected.(d) Discussion[44] In this case, the Commissioner accepts Mr Grant exercised the vote he cast honestly and in accordance with what he believed to be the interests of creditors and the companies but the question remains whether the vote he cast was a "casting vote" under s 239AK(3) and the Court accordingly turns to that question. [45] In this case Mr Grant purported to exercise the casting vote conferred on him as chair of the creditors' meetings by s 239AK(3) when there was no equality of views on the first round. Ten out of 11 creditors in number were in favour and one against, and those 10 were owed 70.23 per cent of the Jones' total debt being voted, as against the 29.77 per cent owed to the Commissioner. [46] When attention is turned to s 239AK(2), although the phrasing is not entirely clear, the subsection requires: a) the meeting be a meeting of creditors or class of creditors held under Part 15A; and b) a resolution put to the meeting is adopted if the vote satisfies the statutory criteria and if the "vote in favour of the resolution" by creditors is by any of the means of voting set out in the subsection, including postal and proxy votes; andc) the "vote in favour of the resolution" must be that of a –• majority, which is a• majority in number, and which• represents 75 per cent in value of the creditors voting. [47] That analysis demonstrates that two statutory pre-requisites must be satisfied before there can be a valid "vote in favour of the resolution": what may be called "Condition 1" requiring a majority in number of creditors voting in person and by permissible alternative voting means voting in favour of the resolution and "Condition 2" requiring that majority to represent "75 per cent in value" of the creditors voting. [48] For the reasons which follow, the Court's conclusion is that the "casting vote" in s 239AK(3) cannot be used by a chairing administrator in satisfaction of Condition 2 but only in satisfaction of Condition 1, and then only in very limited circumstances. [49] The reasons leading to that conclusion follow. [50] Dealing first with Condition 1, as is well understood, "majority" is the "number by which, in voting, the votes cast on one side exceed those cast on the other", 18 so, for voting purposes, a "majority" can be any percentage of votes from 50.1 per cent of those cast up to 100 per cent. [51] The possible situations which might arise in relation to any resolution put to a creditors' meeting under s 239AK are: a) A proposed resolution at a creditors' meeting is supported by a majority in the number of creditors voting and they collectively hold 75 per cent or more in value of the debts of the company. That majority is able to satisfy both Conditions 1 and 2 and the resolution18 Oxford English Dictionary 2nd ed Vol.IX p 233.is adopted. No question of a casting vote arises. The chair of the meeting may vote if he or she is a creditor or holds proxies, but that is a deliberative vote, not a casting vote. b) At such a meeting a minority in number of those voting vote in favour of the resolution. In such a case the resolution cannot be adopted even if the minority voting in favour of the resolution collectively holds 75 per cent or more in value of the debts being voted because they can satisfy Condition 2 but are unable to satisfy Condition 1. The casting vote provision of s 239AK(3) is again inoperative. Any vote the chair casts is again a deliberative vote, not a casting vote. c) At such a meeting a majority of the creditors voting are in favour of adopting a resolution but they collectively do not hold 75 per cent or more in value of the company's debts, that is to say those in favour of the resolution can satisfy Condition 1 but not Condition 2. Again, any vote cast by the chair can only be a deliberative vote and the casting vote for which s 239AK(3) provides remains inoperative as there is not a tie in the numbers of creditors voting. The chair does not have a casting vote. d) As a result of the initial vote on a resolution at such a creditors' meeting there are equal numbers of creditors voting for and against the resolution, with those voting for it collectively holding 75 per cent or more of the value of the company's debts, that is to say those in favour of the resolution can satisfy Condition 2 but are unable to satisfy Condition 1 unless the chair uses his or her casting vote under s 239AK(3) in favour of the resolution. This is the only situation in which s 239AK(3) operates to give the chair a casting vote, irrespective of whether he or she has voted deliberatively. Provided the chair exercises the casting vote in accordance with the authorities - that is honestly and in what he or she believes to be the best interests of the company - the casting vote may be exercised for or against the resolution. The authorities show there is no obligation on the chair tovote either way and in particular no obligation to vote against the resolution to preserve the status quo and because there is no clear mandate for the resolution's adoption. e) For completeness, the final example is where, at a creditors' meeting, only a minority support a resolution and do not hold 75 per cent or more in favour of the company's debts. They are unable to satisfy both Conditions 1 and 2 and the resolution is lost. Again, no question of a casting vote arises. [52] The reasons why the chairing administrator cannot cast his or her vote or votes in relation to the "75 per cent in value" Condition 2 requirement can be demonstrated by reference to the chairing administrator's position if he or she is a creditor or holds post or proxy votes. [53] Section 239AK(3) requires the administrator of a company under Part 15A (or his or her nominee) to chair creditors' meetings under that part. Creditors, it seems, may be administrators under Part 15A, provided they are not disqualified under s 239F. Though inapplicable to s 239AK meetings, cl 5(3) of the Fifth Schedule seems to confirm that to be the case. It follows that at any meeting under s 239AK the chairing administrator may be a creditor or may hold proxies from other creditors or may have been the recipient of postal votes from other creditors. If any of those situations apply to those chairing meetings under s 239AK, they will be entitled to cast a vote on resolutions put to the meeting, but that would be a deliberative vote, not a casting vote. [54] To elaborate, a chairing administrator may vote when a resolution is first put to a s 239AK meeting in any of the capacities just mentioned, in which case his or her deliberative vote is entitled to be counted both as part of the majority in number and as constituting part of the 75 per cent in value. If chairing administrators who otherwise qualify to vote abstain during the first vote on a resolution and the result of that first round does not result in a "vote in favour of the resolution" because Condition 1 or Condition 2 or both are not met, the qualifying chairing administrator or the remainder of the creditors might be entitled to ask for the vote to be put againand, if that is approved, the chairing administrator may vote on that second round to ascertain whether both statutory pre-conditions can then be satisfied, but again that is a deliberative vote, not a casting vote. [55] Obviously, either when the vote is first put or when it is put again following the chair's abstention, the chair's vote as a creditor (or votes, if the chair holds proxy or postal votes) can be counted to see if Condition 1, the majority in number, can be satisfied. Obviously, too, the chair's vote or votes in either of those situations can be counted to see if Condition 2, the "75 per cent in value" pre-condition is satisfied. What cannot occur is that the chair's debt is counted as a deliberative vote to ascertain whether Condition 2 is satisfied on the first round (or on the vote being put again) and then counted again as a "casting vote". That would amount to double- counting of the debt held or being exercised by the chair. [56] From all of that, it must follow that the casting vote created and conferred by s 239AK(3) can apply only if the first vote does not satisfy Condition 1, the majority in number requirement when the results of the first vote are known. The casting vote in s 239AK(3) cannot apply to whether Condition 2, the 75 per cent in value condition, can be satisfied. [57] For completeness – though something of a gloss on the main theme of this discussion – it should be noted that the phrase "being voted" has been used this part of this judgment because the wording of s 239AK(2) is clear in requiring a majority in number and 75 per cent in value of the creditors actually voting at the meeting by being present or voting by proxy or post for the resolution to be passed, not a majority in number and 75 per cent in value of the company's total creditors, some of whom may have declined to participate. [58] Here, the initial vote of the Jones creditors on the proposed DOCA satisfied the requirements of s 239AK(2) that the "vote in favour of the resolution" was that of a "majority in number": 90.9 per cent of creditors voted to confirm the DOCA. The vote satisfied Condition 1.[59] The next question is whether those creditors who voted in favour of the resolution represented "75 per cent in value" of the debts represented by all the voting Jones creditors. It is clear they did not. IRD held 29.77 percent of the Jones debt. Condition 2 could therefore not be satisfied. [60] There being no equality of voters in number, no tie and no need to "turn the scale or balance", s 239AK(3) was inoperative and Mr Grant had no casting vote. His purported exercise of a casting vote under that section was therefore a nullity and accordingly the Jones vote should have been declared lost. He could not exercise the casting vote to make up a "majority in number" because the vote was already that of a majority. He could not exercise the casting vote to make up the "75 per cent in value" because he had no voting debt he could exercise personally or in proxy and it was not open to him to, as it were, appropriate part of the IRD's debt which had just been voted against the resolution and, by means of a second or "casting" vote, apply it in favour. [61] Those Jones creditors who voted in favour of the DOCA at the watershed meeting may protest that, in the circumstances of the meeting, that interpretation of s 239AK gave the Commissioner a veto over the Jones administration continuing irrespective of the views of the other Jones creditors. It effectively disenfranchised them. The answer to that, however, is that appears clearly to be what Parliament intended in enacting the section. Those holding, jointly or collectively, more than a quarter in value of a company's debts are given substantially greater powers in connection with the company's affairs than other creditors, quite irrespective of the number or the total value of their debts as long as they do not amount to 75 per cent of the total value. [62] To this point, therefore, the conclusion remains that on the authorities, pursuant to the dictionaries, and under s 239AK(3) the resolution to adopt the DOCA put at Jones watershed creditors meeting on 21 January 2009 was not adopted and should have been declared lost.(e) Texts; Australian approach[63] Mr Grant, however, purported to exercise the casting vote he thought he had, relying on legal advice, one of the leading New Zealand texts on Company Law and its discussion of Australian precedent 19 . Do they affect the conclusion reached thus far? [64] The first observation must be, of course, that text-writers' discussion and precedents from other jurisdictions may be helpful to those involved in making a decision where there are no New Zealand precedents in point, but they are not binding. [65] There being not a great deal of New Zealand commentary on the exercise of a chair's casting vote, it was not unreasonable for Mr Grant to be given advice based on the commentary from Brookers, but the advice was not entirely helpful since it depended on the Australian statutory and regulatory position – and Australia has been rather more prescriptive in that regard than Parliament in New Zealand. Brookers does, however, cite from the Explanatory Memorandum to the Corporations Regulations (Amendment) Statutory Rules. 20 That statement – in a passage rather more detailed than that appearing in Brookers - explains the Australian position as follows:109. New subregulation 5.6.21(3) provides that a resolution is not carried if, after the calling of a poll, a majority in number and value vote against the resolution. 110. Where the vote by numbers and the vote by value arrive at different results, for example:• a minority in number but a majority in value vote in favour of a resolution;• a majority in number but a minority in value vote in favour of a resolution;• a minority in number but a majority in value vote against a resolution; or• a majority in number but a minority in value vote against a resolution.19 Brookers Companies and Securities Law Vol I para CA239A.06, 07 p 1-1528-1530.20 Corporations Regulations (Amendment) Statutory Rules 1993 No.135 (C'th).new subregulation 5.6.21(4) provides that the chairperson may determine the outcome of the resolution by either:• exercising a casting vote in favour of the resolution – in which case the resolution is carried; or• exercising a casting vote against the resolution – in which case the resolution is not carried. 111. The term 'casting vote' thus has a broader meaning in this context than is usual and will allow the chairperson to effectively decide between the interests of the creditors with the preponderance in numbers and the interests of the creditors with the preponderance of value. It is envisaged that the exercise of such a casting vote would be most appropriate in circumstances such as where:• the creditors with a majority in value have such an overwhelming interest that it is inappropriate to allow a majority in number, who do not have the same monetary interest, to carry the day, or vice versa; or• the inability to arrive at any decision, because of continuing deadlocks, affects the welfare of the company concerned. 112. New subregulation 5.6.21(4) also allows the chairperson to exercise a 'casting vote' in the usual situation contemplated by that term, namely where a vote on either number or value is not decisive in that it results in an even number of votes in each direction (ie 50:50).[66] The balance of the Brookers commentary discusses Australian precedent as to the way in which the casting vote should be exercised. [67] Mr Grant might also have gained assistance from an earlier passage in Brookers than the one to which he was referred where, in discussing voting thresholds, the authors say: 21It means that a creditor holding (in value) 26 percent of the company's indebtedness can by itself block a resolution at the watershed meeting in favour of a deed of company arrangement (unless there is a majority in number in favour and the administrator votes his casting vote with the majority). It has been suggested that a creditor such as the Inland Revenue that is likely to be a significant creditor in many company administrations will be reluctant to support "work outs" by deeds of company arrangement, and will be more likely to vote down a proposed deed resulting in the company being put into liquidation. That is because the Inland Revenue retains its priority as a preferential creditor in company liquidations. A liquidation may in some circumstances provide Inland Revenue with a better return. However, it would be expected that a deed of company arrangement21 Companies Act 1993 Part 15A s239AK.04(1) p 1-1527.will recognise the Revenue's preferential status in most instances to avoid being challenged under s 239ADD (termination [of deed] by Court).[68] Mr Grant was apparently not referred to Heath and Whale Insolvency. 22 That work contains an interesting discussion on what amounts to a casting vote and what should be the manner of its exercise. That text says:There is a body of case law as to how the administrator should exercise his or her discretion in that regard. If the administrator used the casting vote to carry or not carry a resolution, then the vote may be reviewed by the Court on the application of a person who voted the other way. There is no general principle that an administrator is required to exercise a casting vote in favour of the majority in value of creditors; rather, an administrator must exercise his or her casting vote honestly in the best interests of those affected by the vote in weighing up all the relevant factors. In Australia, the threshold for voting at a creditors' meeting is a majority in number and in value, but in New Zealand, there is no reference to how the casting vote is to operate in a situation where a majority in number, but 75 per cent in value, of creditors voting by person or proxy, must vote in favour of a resolution for it to pass. The adoption of the casting vote procedure was no doubt intended to reflect its operation in Australia where the administrator can use it to deal with the situation where the majority of creditors in number reach a different result from the majority in value. In respect of Part 14 Companies Act, the Fifth Schedule expressly states that the chair of the meeting does not have a casting vote. The answer must be that the casting vote under Part 15A, as in Australia, is broadly defined,23and is not a true casting vote in a situation of deadlock, since the requirement for a majority in number is additional to the requirement for at least 75 per cent in value if the resolution is to be passed; in that situation there will never be a "deadlock" as such.[69] While those commentaries may suggest a different definition of "casting vote" and a different role for its use in relation to creditors' meetings, especially under s 239AK, with respect none seems to have considered all the permutations and combinations of majorities or minorities in numbers or value which this judgment has considered. [70] For reasons earlier discussed, it does not seem possible on the wording for a chair to, as it were, appropriate part of a vote which has just been cast against the resolution and cast it in favour. If the chair is a creditor, as discussed, he or she may cast a deliberative vote but, other than that, there seems no reason to allow a chair a22 Heath & Whale Insolvency (LexisNexis NZ looseleaf ed para 17.12, 260,302).23 The reference is to the Australian Corporations Regulations.casting vote in those circumstances. The notion which seems to be suggested in the material just reviewed that a chair can somehow override the statutory requirement for creditors to be able to satisfy Condition 1, Condition 2 or both, and declare passed a vote which cannot satisfy the statutory thresholds would give administrators, however well intentioned, much greater powers than the creditors whose meeting it is. Indeed, on this Court's interpretation, much greater powers than Parliament conferred on them. While such possibility may be open in Australia from the very much more detailed régime adopted in that country, to give chairs of creditors' meetings a "casting vote" with such far-reaching powers, including the power to declare passed a resolution just lost, would require much more detailed empowering provisions than the mere conferment of a "casting vote". [71] It follows that the casting vote created under s 239AK(3) can, on analysis, only apply to the majority in number and only then in the circumstances earlier outlined, namely that the votes for and against the resolution are tied and the 50 per cent of votes who are in favour of the resolution also hold 75 per cent in value of the company's debt. If the chair has debts to vote it may be possible for him or her to vote that debt deliberatively, but not otherwise.(5) Result on application to invalidate DOCA[72] In the result, the appropriate conclusion must be that Mr Grant, not being a Jones creditor and not holding proxy or postal votes in favour, was not entitled to vote at the Jones creditors' meeting on 21 January 2008 and the vote which he purported to cast under s 239AK(3) was not a "casting vote" in accordance with that section, nor in accordance with the dictionaries or any authority on the topic. [73] It follows that the Jones' DOCA is void. [74] In the event of that being the result, counsel did not address in any detail the effect of the making of the first distribution to the Commissioner and other Jones' creditors nor whether those payments were invalid. Nor did counsel address what the position might be in relation to Dish and Top Gear, given the reports to creditors and the DOCA itself specifically said that if the vote to approve the DOCA failed inrespect of one company, it failed in respect of all three. Those points will need to be addressed by the parties and counsel.(6) Was the Jones DOCA oppressive, unfairly prejudicial or unfairly discriminatory against the Commissioner or was there sufficient other reason to terminate it?[75] In view of the conclusions just reached, there is, strictly, no need to consider whether the DOCA was oppressive, unfairly prejudicial or unfairly discriminatory against the Commissioner or whether there was sufficient other reason to terminate it, but as this is apparently the first time Part 15A has arisen for judicial decision and against the possibility this judgment comes under further consideration, the issues may be dealt with briefly. [76] This Court has express power to terminate DOCAs pursuant to s 239ADD which relevantly reads:s 239ADD(2) The Court may terminate a deed of company arrangement if it is satisfied that – (a) an information breach has occurred; or (b) there has been a material contravention of the deed by a person bound by it; or (c) effect cannot be given to the deed without injustice or undue delay; or (d) the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be done or make under the deed would be, - (i) oppressive or unfairly prejudicial to, or unfairly discriminatory against, 1 or more of the creditors; or (ii) contrary to the interests of the company as a whole; or (e) the deed should be terminated for some other reason. (3) The Court must not terminate the deed without first taking into account the rights of third parties.[77] Mr Malarao submitted the DOCA was oppressive and unfairly prejudicial against the Commissioner because it made no allowance for the fact that over 83 per cent of IRD's debt was preferential under Schedule 7. The initial distribution was to be made from collections from the companies' debtors which were to be distributed to all creditors on a pari passu basis, but without distribution to Image Centre. The trading distribution, intended to be the second, was to come from funds due under licence agreements with half going to each of Image Centre and the remaining creditors, the latter on a pari passu basis. He said the Commissioner would receive more from having the IRD debt treated as preferential than under the DOCA, as supported by the terms of the DOCA itself. [78] By reference to a number of Australian cases, Mr Malarao submitted that compromise agreements were well established as being unlikely to be approved if they did not treat differentially debts which would be preferential in a liquidation from other debts (Re V & M Diagnostic Services Pty Ltd; Re Northern Newcastle Constructions Pty Ltd;24 Expile Pty Ltd v Jabb's Excavations Pty Ltd).25 In Expile, a case which centred round the Corporations Act 2001 (C'th), 26 Palmer J held, in reliance on a number of Australian decisions:44 I am satisfied that the Deed should be terminated under s.445D(1)(g) because its invocation of the provisions of Part 5.3A operates to deprive Expile of the priority in respect of its costs of the winding up application which it would otherwise have received under s.466(2) and s.556(1)(b): in my opinion, it is contrary to the policy of the Corporations Act to permit a deed of company arrangement to operate in that way. Further, if the Deed stands there is no way in which Expile can retain priority for its costs. Other creditors of Jabb's will benefit by the destruction of Expile's statutory right. For this reason, the continuation of the Deed is oppressive and unfairly prejudicial to Expile as a creditor, within the meaning of s.445D(1)(f)(i). My reasons are as follows. 45 The authorities discussed below establish, in my opinion, that where a creditor would have a particular priority under the Corporations Act or other legislation if a company were to be wound up in insolvency, the Court, as a general rule, does not approve or permit any other régime of distribution of the company's assets which would disturb that priority. Essentially, this is so because the legislature has indicated, in the statutory priorities for24 Re V & M Diagnostic Services Pty Ltd; Re Northern Newcastle Constructions Pty Ltd (1985) 9 ACLR 663, 666, 667.25 Expile Pty Ltd v Jabb's Excavations Pty Ltd [2004] NSWSC 28426 Corporations Act 2001 (C'th) s 445D(1)(f)(i) which is in pari materia with s 239ADD.distribution in a winding up, which claims should be preferred where there is insufficient for all creditors to be satisfied. 46 In Re V & M Diagnostic Services Pty Ltd (1985) 9 ACLR 663, a company sought approval for a scheme of arrangement under s.315(b) of theCompanies (NSW) Code. A debt owing to the Commissioner for Payroll Tax would have had priority under s.441 of the Code if the company had been wound up but the scheme of arrangement treated the debt pari passu with other unsecured debts. Cohen J approved the scheme only upon the basis that it would be amended to provide for the retention of the Commissioner's priority. His Honour said at 668: "Should the court, when asked to approve an arrangement with the creditors of an insolvent company which takes the place of a winding up, require as a condition of that approval that the policy of priorities be applied in the same way as it would in that winding up? My view is that in general the court should so require. There may well be cases where that requirement need not be made, and it would be a fetter on the court's discretion to suggest that this should be an invariable rule. The principle which has been established by statute, has been intended for situations where, in simple terms, there is not enough to go around for everyone who is entitled. Some are to be preferred to others. There seems little basis to alter that principle because the distribution of whatever is available is to be made by a manager or administrator under a scheme rather than by a liquidator under a winding up."[79] Both counsel also referred to Inland Revenue Commissioners v Wimbledon Football Club Limited27but the terms of that judgment do not need discussion because it was clearly influenced by a statutory provision requiring proposed voluntary arrangements to honour preference. [80] Since the point is not pivotal to this judgment, this is the first time that Part 15A has come under judicial scrutiny and circumstances may arise in other cases where lack of priority for debts which would be preferential in a liquidation will nonetheless satisfy any Court considering, say, an application under s 239ADD it would be inappropriate to attempt to lay down guidelines. However, it must nonetheless be the case that when DOCAs are envisaged, it may justifiably be expected that some separate treatment be allowed which acknowledges the special position of debts which would be preferential in a liquidation. It is true, as27 Inland Revenue Commissioners v Wimbledon Football Club Limited [2004] EWHC 1020.Mr Dillon submitted, that the whole point of voluntary administration is that it is not a liquidation and thus Schedule 7 preferences do not arise, but nonetheless voluntary administration is intended to enable the affairs of companies in straitened financial circumstances to be appropriately dealt with –with liquidation in default – and the fact such arrangements are just short of liquidation should probably be acknowledged. [81] Here, the Commissioner's preference in liquidation was noted and the fact the Commissioner would do better in liquidation than under the DOCA was expressly referred to - to the point where administrators recommended the Commissioner vote against the DOCA. That said, there was no special treatment accorded the Commissioner's debts in the DOCA. In those circumstances, when the debts owing to the Commissioner were only to be dealt with pari passu under the DOCA, the debtor companies and their administrators should arguably have recognised that altered priorities would apply in liquidation so that, should default occur and were the DOCA to come under judicial scrutiny, termination would be likely unless some recognition of those consequent priorities was acknowledged. [82] The Court's conclusion is therefore that the DOCA was oppressive and unfairly prejudicial against the Commissioner for that reason. More broadly, those proposing DOCAs where debts preferential in liquidation are amongst the company's total indebtedness, should propound schemes which recognise that factor to a degree at least, or explain why no such recognition is proposed.(7) Material contravention of the DOCA[83] The Commissioner's submission that the administrators were in material contravention of the DOCA centred round the fact that only the initial distribution has been made and that, despite promises the trading distribution would follow shortly and cl 8 of the DOCA saying distributions would be made "in a timely manner" after receiving payment, the trading distribution has still not been made.[84] This issue can be dealt with shortly because the evidence now makes it clear that Mr Grant, on receiving notification that the Commissioner intended to challenge the DOCA in the ways discussed in this judgment, decided to withhold the trading distribution until the outcome was known and in order to meet the costs of the challenge. [85] It does not seem unreasonable for the administrators to have withheld the second distribution for that reason. [86] This ground accordingly fails.(8) Was there sufficient other reason to terminate the DOCA?[87] The submission that there was another reason to terminate the DOCA arose out of the failure by the administrators to comply in a timeous way with the obligation to file accounts 28 and by charging more than originally forecast. [88] Mr Dillon acknowledged on behalf of the administrators that the accounts had not been timeously filed, but said that would be rectified in the near future. [89] Despite the Commissioner's challenge and the uncertainties that must have caused in the administration of the companies, the administrators should have complied with their statutory obligations in respect of the accounts, but they had reason not to file the accounts within the statutory time limits and, with no discernible prejudice to any creditor apart from some delay in knowing the true state of the debtor companies, it would not be right to terminate the DOCA on this ground. [90] The suggested overcharge is of little moment, particularly as the administration has become more costly as a result of this litigation.28 Section 239ACZ.[91] This ground also fails.(9) Estoppel[92] Mr Dillon advanced the proposition – though not with great assurance – that the Commissioner should be held to have been estopped from pursuing this claim as a result of Ms To sending Mr Grant her email of 2 February 2009. [93] The point may be dealt with in short order. [94] Mr Dillon pointed to the terms of the email indicating, he submitted, a consideration of the Commissioner's position and a deliberate decision not to take any action such as the present proceedings. He suggested the email amounted to estoppel by representation, relying on Laws NZ Estoppel. 29[95] The probanda for estoppels by representation of fact are set out by Feltham et al Spencer Bower: Estoppel by Representation 30 where the following appears:I.2.3 From this statement of the governing principle of estoppel by representation of fact it may be gathered that the following elements must be established in order to constitute a valid estoppel by representation of fact: (1) that the alleged representation of the party sought to be estopped was such as is in law deemed a representation of fact; (2) that the precise representation relied upon was in fact made; (3) that the representation, or case, which the party is later sought to be estopped from making, setting up, or attempting to prove, contradicts in substance his original representation, according to proper canons of construction; (4) that such original representation was of a nature to induce, and was made with the intention (actual or presumed) and the result of inducing the party raising the estoppel to alter his position on the faith thereof to his detriment; (5) that such original representation was made by the party sought to be estopped, or by some person for whose representations he is deemed in law responsible, and was made to the party setting up the estoppel, or to some person in right of whom he claims.29 Laws NZ Estoppel paras 47-49 p 40-41.30 Feltham et al Spencer Bower on Estoppel by Representation 4th ed 2004 para I.2.3 pp 4-5.[96] Of those probanda it is necessary only to discuss the third, and that briefly. [97] As Spencer Bower says, the representation must be unambiguous, 31 and here Ms To makes clear that the Commissioner's decision to take no action was temporary not permanent. In that regard it is apposite to note that in Burbery Mortgage Finance & Savings Limited v Hindsbank Holdings Ltd 32Richardson J held:... It is well settled that where one party has by words or conduct made to the other a clear and unequivocal promise or assurance intended to affect the relations between them and to be acted on accordingly, then once the other party has taken him at his word and acted on it, the one who gave the promise or assurance is bound by that assurance unless and until he has given the promisee a reasonable opportunity of resuming his position (16 Halsbury's Laws of England (4th ed) para 1514). Although there are indications in some of the authorities that there must be a pre-existing contractual relationship between the parties, I am of the view that the doctrine applies in appropriate cases where there is a pre-existing legal relationship (Durham Fancy Goods Ltd v Michael Jackson (Fancy Goods) Ltd [1968] 2 QB 839, 847); or where the promise affects a legal relationship which will arise in the future (Bank Negara Indonesia v Hoalim [1973] 2 MLJ 3 (PC)); or more broadly where, as here, the promisor and promisee have interests in the same subject-matter.[98] In this case, the Commissioner has issued these proceedings challenging the DOCA. He is therefore resuming the position his representatives expressed at the creditors' meetings. There could hardly be a more unequivocal indication to the administrators and the Jones' creditors of the Commissioner's intention to resume his position than litigation, despite what Ms To may have ambiguously said on his behalf in her email. [99] Further, the Commissioner is under a statutory obligation to collect the appropriate amount of tax: Tax Administration Act 1994. 33 Here, if the Commissioner were to be successful in challenging the validity of the DOCA, the liquidation of Jones would result in possible consequences concerning the liquidation or administration of "Dish" and "Top Gear" and the debts to the Commissioner, instead of being paid pari passu, would acquire preferential status. As the administrator said, the Commissioner would be paid more in liquidation than31 Op.cit para IV.2.1 p 76.32 Burbery Mortgage Finance & Savings Limited v Hindsbank Holdings Limited [1989] 1 NZLR 356, 361.33 Tax Administration Act 1994 s 6A(3)pursuant to the DOCA. Challenging the DOCA was accordingly in pursuance of the Commissioner's statutory duty. He could not be estopped from complying with his statutory obligations. [100] This ground of objection – even though only faintly advanced – therefore also fails.Result[101] Had the Court not terminated the DOCA for non-compliance with s 239AK, it would have terminated the DOCA on the grounds of it being oppressive or unfairly prejudicial to the Commissioner - though the rights of third parties are required to be taken into account under s 239ADD(3) and there was no evidence on that score – but would have dismissed the Commissioner's application based on material contravention of the DOCA or that the Deed should be terminated for some other reason. [102] In view of the fact that the consequences of termination of the DOCA were not spelt out by counsel, there should be leave reserved to apply to deal with the effect on the initial distribution and the other issues discussed in paragraph [74] of this judgment. [103] If the Commissioner wishes to pursue costs, memoranda may be filed (maximum five pages) with that from the Commissioner being due within 28 days of delivery of this judgment and that from the respondents due within 35 days of that date. .................................................................HUGH WILLIAMS J.Solicitors:Meredith Connell, P O Box 2213 Auckland 1140, for applicant Gaze Burt, P O Box 301 251 Albany, North Shore City 0752, for respondentsCopy forCase Officer: Nilson.Geiger@justice.govt.nz