A Deed of Company Arrangement is essentially an agreement between the company and its creditors, dealing with how the company will meet its financial obligations. The Deed Administrator is a neutral party, appointed by the creditors to oversee the operations of the Deed and to carry into affect that which has been agreed between the other parties to the Deed.

Neither the Deed Administrator, nor his predecessor the Voluntary Administrator, has any vote in deciding whether the Deed should be accepted by creditors. The only exception to this is where the votes of the creditors are tied, in which case the Voluntary Administrator may use a casting vote.

Should circumstances change the company has the ability to ask creditors to accept a variation to the Deed. When this happens the creditors vote on the proposed variation in the same way and subject to the same rules as applied when the Deed was first approved.

But even if the creditors accept the variation to Deed the Court has decided that the variation has no affect until the Deed Administrator has consented to the variation. In effect this gives a Deed Administrator a veto over any variation … even one approved by creditors (2000 SCWA Surber V Lean)

It is true that strictly speaking the Deed Administrator is a party to the Deed, but unless the variation is one which has some impact on his remuneration it can hardly be said that his interests are in some way impacted. Certainly he has not come into the agreement (that is the Deed) as the result of a bargain whereby he gave up or modified some right or obligation.

It has been observed that a Deed Administrator who is not happy with a variation to a Deed can always resign. Creditors, of course, do not get that option. So it seems strange that a Deed Administrator has the power to overrule the bargain that creditors are happy to accept.

Although giving the Deed Administrator a veto of any variation to a Deed of Company Arrangement would seem to be at odds with the underlying scheme of Part 5.3A, and has been criticized in various academic papers, there is no reason to think that the decision in Surber v Lean is not good law. In Whittingham: re The Spanish Club Limited, Suber v Lean was cited as authority for the proposition that the consent of the Deed Administrators must be obtained. Also in the Laws of Australia, the commentary on varying a DoCA states : “Creditors of a company, with the consent of the administrator, may vary the terms of a deed of company arrangement by resolution passed at a meeting ….” Surber v Lean is quoted as the authority for that proposition.

Prior to making any decision on whether to accept a variation to a Deed of Company Arrangement It would therefore seem appropriate to determine whether the Deed Administrator not only recommends for/against the variation, but also whether he would consent to the variation if creditors were minded to accept what is proposed. If the Deed Administrator is not going to consent to the variation then there seems little point voting on the resolution.