Cameron Hugh Shaw as joint and several administrator of G N Construction (Aust) Pty Ltd (Administrators Appointed), Ikonstrukt Pty Ltd (Administrators Appointed), Main Administration Services Pty Ltd...

Case •

[2024] WASC 190

•

20 MAY 2024

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   CAMERON HUGH SHAW as joint and several administrator of G N CONSTRUCTION (AUST) PTY LTD (ADMINISTRATORS APPOINTED), IKONSTRUKT PTY LTD (ADMINISTRATORS APPOINTED), MAIN ADMINISTRATION SERVICES PTY LTD (ADMINISTRATORS APPOINTED) [No 2] [2024] WASC 190

CORAM:   STRK J

HEARD:   ON THE PAPERS

DETERMINED       :   16 MAY 2024

PUBLISHED           :   20 MAY 2024

FILE NO/S:   COR 31 of 2024

MATTER:   IN THE MATTER OF RE G N CONSTRUCTION (AUST) PTY LTD (ADMINISTRATORS APPOINTED) & ORS

EX PARTE

CAMERON HUGH SHAW as joint and several administrator of G N CONSTRUCTION (AUST) PTY LTD (ADMINISTRATORS APPOINTED), IKONSTRUKT PTY LTD (ADMINISTRATORS APPOINTED), MAIN ADMINISTRATION SERVICES PTY LTD (ADMINISTRATORS APPOINTED)

First Plaintiff

RICHARD ALBARRAN as joint and several administrator of G N CONSTRUCTION (AUST) PTY LTD (ADMINISTRATORS APPOINTED), IKONSTRUKT PTY LTD (ADMINISTRATORS APPOINTED), MAIN ADMINISTRATION SERVICES PTY LTD (ADMINISTRATORS APPOINTED)

Second Plaintiff

HANSON CONSTRUCTION MATERIALS PTY LTD

Interested Party


Catchwords:

Corporations - Management and administration - Orders sought for modification of operation of Corporations Act 2001 (Cth) s 443A - Application to limit administrators' personal liability - Whether interest of creditors best served by administrators' actions - Whether creditors are prejudiced or disadvantaged by orders sought - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 443A, s 443D and s 447A
Insolvency Practice Schedule (Corporations), s 90-15
Rules of the Supreme Court 1971 (WA), O 67B r 5(3)
Supreme Court (Corporations) (WA) Rules 2004, r 2.8(3)

Result:

Application granted

Category:    B

Representation:

Counsel:

First Plaintiff : No appearance
Second Plaintiff : No appearance
Interested Party : No appearance

Solicitors:

First Plaintiff : Mills Oakley
Second Plaintiff : Mills Oakley
Interested Party : Patane Lawyers

Cases referred to in decision:

Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270

Brash Holdings Ltd (Administrator Appointed) v Katile Pty Ltd [1996] 1 VR 24

Cameron Hugh Shaw as joint and several administrator of G N Construction (Aust) Pty Ltd (administrators appointed), Ikonstrukt Pty Ltd (administrators appointed), Main Administration Services Pty Ltd (administrators appointed) [2024] WASC 86

Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524

Correa v Whittingham [2013] NSWCA 263; (2013) 278 FLR 310

Deputy Commissioner of Taxation v Portinex Pty Ltd [2000] NSWSC 99; (2000) 156 FLR 453

Ex parte Frigger [2020] WASC 365

GDK Projects Pty Ltd, Re Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541

Honest Remark Pty Ltd v Allstate Explorations NL [2006] NSWSC 735; (2006) 234 ALR 765

In the matter of Renex Holdings (Dandenong) 1 Pty Ltd (administrators appointed) [2015] NSWSC 2003

Nipps (Admin) v Remagen Lend ADA Pty Ltd, Re Adaman Resources Pty Ltd (Admin Apptd) (No 4) [2021] FCA 644

R v Toohey; Ex parte Northern Land Council [1981] HCA 74; (1981) 151 CLR 170

Re Autocare Services [2021] FCA 167

Re Bosnjak Holdings Pty Ltd [2005] FCA 275; (2005) 53 ACSR 8

Re Broens Pty Ltd (in liq) [2018] NSWSC 1747

Re Geographe Workforce Pty Ltd (Administrators Appointed) [2022] WASC 250

Re Greg Sewell Forgings Pty Ltd (1995) 17 ACSR 602

Re Halifax Investment Services Pty Ltd (No 8) [2020] FCA 533; (2020) 144 ACSR 292

Re Hawden Property Group Pty Ltd (in liq) [2018] NSWSC 481; (2018) 125 ACSR 355

Re Malanos [2007] NSWSC 865

Re New Tel Ltd (in liq) [2004] FCA 1154; (2004) 210 ALR 270

Re Spyglass Management Group Pty Ltd (admin apptd) [2004] FCA 1469; (2004) 51 ACSR 432

Re Union Standard International Group Pty Ltd (Administrators appointed) (No 2) [2020] FCA 1111

STRK J:

Introduction

  1. Cameron Hugh Shaw and Richard Albarran are the joint and several administrators of G N Construction (Aust) Pty Ltd (administrators appointed), Ikonstrukt Pty Ltd (administrators appointed), and Main Administration Services Pty Ltd (administrators appointed).

  2. By an originating process filed on Wednesday, 6 March 2024, the administrators sought various orders on an urgent basis. In particular, they sought to extend the convening period for the companies in administration; to limit their personal liability pursuant to certain agreements; and for leave to be granted to members of the committee of inspection for each of Ikonstrukt and Main Administration Services to derive a profit or advantage from the external administrations of those entities. For the reasons published on 22 March 2024, the application was granted: Cameron Hugh Shaw as joint and several administrator of G N Construction (Aust) Pty Ltd (administrators appointed), Ikonstrukt Pty Ltd (administrators appointed), Main Administration Services Pty Ltd (administrators appointed) [2024] WASC 86.

  3. As was recorded in the earlier reasons, Mr Shaw had deposed that G N Construction (Aust), among other things, operates the business known as 'G N Construction', which has been involved in construction of commercial, industrial and residential buildings (the Business); holds contracts in relation to complex construction projects including the Joondalup Health Campus Stage 2 Redevelopment and Nine The Esplanade (Elizabeth Quay  6) (together the Projects); and had entered into two tripartite agreements with Multiplex Constructions Pty and Hanson Construction Materials Pty Ltd.

  4. As was also recorded in the earlier reasons, I was satisfied that the tripartite agreements, and the orders sought with respect to the administrators' personal liability under those agreements, promoted the administration of the affairs of the companies in administration in a way that maximised the chances of them and the Business continuing in existence. The orders made on 12 March 2024 included an order the effect of which was to limit the liability of the administrators under the tripartite agreements to the assets of G N Construction (Aust), and to exclude personal liability.

  5. By order 6 of the orders made on 12 March 2024, liberty to apply in relation to any other matter arising in the administration of G N Construction (Aust), Ikonstrukt and Main Administration Services was expressly reserved.

  6. After the relief was granted in March 2024, the administrators considered it necessary to enter into arrangements with alternative suppliers so as to continue to trade on the Business and progress the Projects. By a minute of proposed orders filed on 14 May 2024, the administrators applied to the court for further relief by way of an order pursuant to s 447A of the Corporations Act 2001 (Cth) and s 90‑15(1) of the Insolvency Practice Schedule (Corporations) (which is sch 2 to the Corporations Act), that pt 5.3A of the Corporations Act is to operate such that:

    (a)the personal liability of administrators in their capacity as joint and several administrators of G N Construction (Aust) incurred with respect to any liability or debt arising out of, or in connection with:

    (i)subcontract 111449-031 entered into between Multiplex Constructions Pty Ltd and G N Construction (Aust) in respect of the concrete and formwork package for the Joondalup Health Campus Project (the JHC Subcontract); and

    (ii)subcontract 111455.T.006 entered into between Multiplex Constructions and G N Construction (Aust) in respect of the concrete and formwork package for the Nine The Esplanade (EQ Lot 6) Project (the NTE Subcontract),

    be limited to the assets of G N Construction (Aust);

    (b)the operation of s 443A(2) of the Corporations Act is modified, so far as it applies to the personal liability of the administrators in their capacities as administrators of G N Construction (Aust) pursuant to the JHC Subcontract and/or NTE Subcontract, so as to permit the personal liability of the administrators to be limited to the assets of G N Construction (Aust); and

    (c)the operation of s 443A(1) of the Corporations Act is modified, so far as it applies to the personal liability of the administrators in their capacities as administrators of G N Construction (Aust) pursuant to the JHC Subcontract and/or NTE Subcontract, that if the indemnity of the administrators under s 443D of the Corporations Act from G N Construction (Aust) is insufficient to meet any amount for which the administrators may be personally liable arising out of or in connection with the JHC Subcontract and/or NTE Subcontract, whether before the making of this order or after, then the administrators will not be personally liable to repay such debts or satisfy such liabilities to the extent of that insufficiency.

  7. As the application was accompanied by a certificate which recorded that it was of an urgent nature, it was referred to chambers for prompt consideration. As to the urgency, the court understood that the second meeting of creditors of G N Construction (Aust) had been convened and was intended to be held on Friday, 17 May 2024.

  8. In light of the urgency and limited ambit of the application, the administrators requested that the application be determined on the papers. In addition to the evidence filed in support of the application (described below), the application was supported by an outline of written submissions filed on 15 May 2024.

  9. Upon requesting that the application be determined on the papers, the administrators' representatives were informed that they were to notify Hanson Construction (which entity had filed a notice of appearance to the proceeding on 7 March 2024 and had instructed counsel to appear at the hearing on 8 March 2024 with respect to the relief sought on behalf of the administrators by the originating process), the Australian Securities and Investments Commission (ASIC) and any other interested party that they had until 4:00 pm on Wednesday, 15 May 2024 to advise the court that they wished to be heard in relation to the administrators' application; if no advice was received, the court would deal with the application on the papers on the morning of Thursday, 16 May 2024; and if ASIC or any interested party wished to be heard, the application would be listed for hearing on Thursday, 16 May 2024 at not before 10:00 am.

  10. As no advice was received, the application was considered on the papers. Relief was granted and the orders made on 16 March 2024 are reproduced at sch A to these reasons.

  11. Given the urgency of the application, the administrators were informed that their application had been favourably considered and that reasons for the orders made would follow. Set out below are my reasons, which are to be read with my earlier reasons.

Evidence

  1. In support of the application, the administrators relied upon five affidavits. Set out below is an overview of the evidence that was before the court. It is not intended to be a comprehensive description of all of the evidence.

The first Shaw affidavit

  1. The first was the affidavit of Mr Shaw sworn on 6 March 2024 to which Mr Shaw annexed 11 documents marked CHS‑01 to CHS‑11. At [10] to [27] of my earlier reasons, I described the matters deposed to by Mr Shaw in his first affidavit, which I do not repeat here.

The second confidential Shaw affidavit

  1. The second was the affidavit of Mr Shaw also sworn on 6 March 2024 which had been marked 'confidential', and to which Mr Shaw had annexed four documents marked CHS‑01 to CHS‑04. The annexed documents included the subcontracts for the Projects, and the tripartite agreements described by Mr Shaw in his first affidavit. As was noted at [29] of my earlier reasons, I was satisfied that Mr Shaw's second affidavit contained confidential information, and it was appropriate to restrict access to it. I made an order pursuant to the Rules of the Supreme Court 1971 (WA) O 67B r 5(3) that Mr Shaw's second affidavit be marked 'confidential' and not published or accessed except pursuant to an order of the court.

  2. These reasons have also been prepared so as to not disclose the substance of the confidential information before the court, which I weighed in the balance in the determination of this application.

The third confidential Shaw affidavit

  1. The third was the affidavit of Mr Shaw sworn on 14 May 2024 in support of the application filed on 14 May 2024, which had been marked 'confidential', and to which Mr Shaw had annexed a document marked CHS‑05.

  2. I made an order pursuant to the Rules of the Supreme Court O 67B r 5(3) that Mr Shaw's third affidavit be marked 'confidential' and not published or accessed except pursuant to an order of the court. Again, these reasons have been prepared so as to not disclose the substance of the confidential information before the court, which I weighed in the balance in the determination of this application.

  3. It is possible however to here record that among other things, in his third confidential affidavit, Mr Shaw deposed to the changing arrangements put in place between G N Construction (Aust) and its suppliers for the Projects; and to the agreement reached with Multiplex Constructions to limit the administrators' personal liability under the NTE Subcontract and JHC Subcontract which was documented in a letter dated 8 May 2024 (8 May Letter), a copy of which was annexed by Mr Shaw to his confidential affidavit.

The fourth Shaw affidavit

  1. The fourth was the affidavit of Mr Shaw also sworn on 14 May 2024 in support of the application, to which Mr Shaw had annexed documents marked CHS‑12 to CHS‑14.

  2. Among other things, Mr Shaw annexed to his fourth affidavit a copy of the administrators' report to creditors for G N Construction (Aust). Among other things, the report to creditors contained a description of the credit and asset position of the company, which description included liability details with respect to employee entitlements; secured creditors; unsecured creditors; and contingent liabilities.

  3. Among other things, Mr Shaw deposed that since the appointment of the administrators on 10 February 2024, he and his staff had considered the directors' report on company activities and property; completed initial investigations into the financial position of the directors and related corporate parties; reviewed the interactions of G N Construction (Aust) with the related corporate parties; reviewed and assessed a deed of company arrangement (DOCA) proposal that had been received; prepared a report to creditors of G N Construction (Aust); and convened the second meeting of creditors, to take place on Friday, 17 May 2024.

  4. Mr Shaw deposed that at the second meeting, the creditors of G N Construction (Aust) would be asked to make a decision by passing a resolution in respect of the options available to them; deposed that it would be his recommendation that the creditors resolve to execute the DOCA proposal in the form described at annexure 'D' to the report to creditors; and noted that the reasons for his recommendation were set out at pt 9 of the report to creditors.

  5. Mr Shaw also referred in his affidavit to the changing arrangements that had been put in place between G N Construction (Aust) and its suppliers on the Projects; and to the agreement that had been reached with Multiplex Constructions to limit the administrators' personal liability under the NTE Subcontract and JHC Subcontract documented in the 8 May Letter. While the details of the 8 May Letter are of a commercially sensitive nature, Mr Shaw deposed in his 'open' affidavit that Multiplex Constructions had agreed that the administrators had not adopted the subcontracts for the NTE Project or the JHC Project, and were otherwise released from any and all personal liability under those subcontracts.

  6. As to the relief sought, Mr Shaw deposed that he was seeking to exercise his powers and functions as administrator to trade on the Business to complete the Projects, in the interests of creditors.

  7. Mr Shaw further deposed to his belief that:

    (a)the limit to personal liability set out in the 8 May Letter was in the interests of the creditors of G N Construction (Aust) and was consistent with the objectives of pt 5.3A of the Corporations Act because it had enabled the administrators to continue to trade on the Business, and specifically to continue work on the Projects, thereby maximizing the chances of G N Construction (Aust), or as much as possible of the Business, continuing in existence;

    (b)the limit to personal liability set out in the 8 May Letter did not disadvantage or prejudice creditors in circumstances where Multiplex Constructions was the only creditor that was potentially impacted, and it had consented to the release of the administrators from personal liability; and

    (c)the limit to personal liability set out in the 8 May Letter enabled the Business to continue to trade including up to the second creditors meeting, at which time creditors would determine whether to support his recommendation that G N Construction (Aust) approve the DOCA Proposal.

  8. As to the DOCA Proposal, Mr Shaw deposed that it contemplated:

    (a)a contribution to the 'Deed Fund' of $1,922,315 to satisfy in full employee entitlements as at the appointment date (in contrast to a potential nil return to employees on an immediate winding up of G N Construction (Aust));

    (b)a further contribution of $890,000 to the 'Deed Fund' to satisfy the claims of the unsecured creditors of G N Construction (Aust) (in contrast to a nil return in a liquidation scenario); and

    (c)a further 'cost contribution' to make payment of certain other expenses and liabilities as set out in the DOCA Proposal.

  9. Mr Shaw further deposed that if the relief sought was granted by the court, then the administrators would take all reasonable steps to cause notice of the court's orders to be given within two business days of the making of the orders to creditors by placing a scanned, sealed copy of the application and orders on the website maintained by the administrators, and by email to Multiplex Constructions.

The second Pye affidavit

  1. The fifth was the affidavit of Lucy Elizabeth Pye sworn on 15 May 2024 to which Ms Pye annexed four documents marked LEP‑05 to LEP‑07. Ms Pye is employed as a special counsel by Mills Oakley, the solicitors for the administrators.

  2. In summary, Ms Pye deposed to notice of the application having been given to ASIC and to interested parties, and to the responses received.

Disposition

Personal liability

  1. Division 9 of pt 5.3A of the Corporations Act concerns the liability of administrators and the indemnity for debts of the administration.

  2. Section 443A(1) of the Corporations Act provides that an administrator of a company is liable for debts he or she incurs in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator, for services rendered; or goods bought; or property hired, leased, used or occupied, including property consisting of goods that is subject to a lease that gives rise to a Personal Property Securities Act 2009 (Cth) security interest in the goods; or the repayment of money borrowed; or interest in respect of money borrowed; or borrowing costs.

  3. Section 443A(2) of the Corporations Act provides that the liability of an administrator under s 443A(1) cannot be excluded by any agreement; and s 443A(1) does not otherwise prejudice an administrator's rights to bring an action or make a claim as against the company or anyone else.

  4. However, the administrators have a right of indemnity out of the company's property (subject to an exception that is not presently relevant) for such debts: s 443D(a). Subject to s 556 (priorities in a winding up), the right of indemnity under s 443D has priority over all the company's unsecured debts, certain PPSA security interests and debts secured by circulating securities interests. The administrators also have a statutory lien over the company's property to secure the right to the indemnity pursuant to s 443F.

  1. By the application, the administrators sought to modify the application of s 443A so as to limit their personal liability under the JHC Subcontract and the NTE subcontract.

Applicable principles - limitation of personal liability

  1. Relief was sought pursuant to s 447A of the Corporations Act, which empowers the court to make such orders as it thinks appropriate about how pt 5.3A is to operate in relation to a particular company. Section 447A gives the court broad powers, including the power to alter what would otherwise be the operation of pt 5.3A in relation to a particular company.[1]

    [1] Brash Holdings Ltd (Administrator Appointed) v Katile Pty Ltd [1996] 1 VR 24, 26 - 27; Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270; Re Bosnjak Holdings Pty Ltd [2005] FCA 275; (2005) 53 ACSR 8 [9].

  2. As was observed in my earlier reasons, courts have interpreted s 447A as a provision conferring upon them an extremely wide jurisdiction to make any order considered appropriate for the operation of the regime. In this regard, Austin J in Deputy Commissioner of Taxation v Portinex Pty Ltd [2000] NSWSC 99; (2000) 156 FLR 453 at [30], noted that the proper interpretation of s 447A was in issue in Australasian Memory Pty Ltd v Brien, and that twelve propositions emerge from the cases, which relevantly include the following:

    (a)the power is not to be read down or confined to curing defects or remedying consequences of departures from other provisions of pt 5.3A;

    (b) the section permits the court to make orders with respect to a particular provision of pt 5.3A, altering the operation of that provision, even where the provision would on its separate construction exclude such an order;

    (c) the section is not confined to filling in the gaps in the legislative scheme of pt 5.3A;

    (d)the section does not empower the court to make a declaration as to how pt 5.3A does operate, only how it is to operate; and

    (e)by empowering the court to make orders about 'how this Part is to operate', the section looks to the future rather than the past, but the temporal requirement is satisfied if the orders have effect from the time of their making. That is, it is possible for the court to make an order with future effect in respect of past matters or events.

  3. While I accepted that the power is broad, I also proceeded on the basis that the power was not unlimited.[2] It is well‑established that the power vested in a court by s 447A is a statutory power which may be exercised only for the purpose for which it was granted.[3] As was noted by Brereton J in Honest Remark Pty Ltd v Allstate Explorations NL at [66], in reliance on Re New Tel Ltd (in liq) at [7], 'an order under s 447A must have a nexus with how pt 5.3A is to operate in relation to a particular company'. Further, Barrett JA in Correa v Whittingham at [4] observed:

    … The 'nexus' with the operation of Pt 5.3A to which reference is made in the decided cases must be understood accordingly. The relevant purpose is to be ascertained by reference to the language of the statute, its subject matter and objects and the consequences of a decision that the power has been exceeded: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355. The principal source of constraint and limitation upon the power is therefore the statement of the object of Pt 5.3A in s 435A, coupled with the nature, incidents and aims of the particular form of external administration as gathered from the provisions of Pt 5.3A as a whole.

    [2] Correa v Whittingham [2013] NSWCA 263; (2013) 278 FLR 310 [2] ‑ [8] (Barrett J), [97] ‑ [105] (Gleeson JA), [304] (Tobias AJA), citing Honest Remark Pty Ltd v Allstate Explorations NL [2006] NSWSC 735; (2006) 234 ALR 765 and Re New Tel Ltd (in liq) [2004] FCA 1154; (2004) 210 ALR 270.

    [3] R v Toohey; Ex parte Northern Land Council [1981] HCA 74; (1981) 151 CLR 170, cited in Correa v Whittingham [4] (Barrett J).

  4. I accepted that any order granted pursuant to s 447A must be designed to achieve in relation to a particular company, the objects of pt 5.3A as stated in s 435A of the Corporations Act.[4]

    [4] Australasian Memory Pty Ltd v Brien; Re Greg Sewell Forgings Pty Ltd (1995) 17 ACSR 602; Correa v Whittingham [4] (Barrett J).

  5. The administrators sought orders and relief pursuant s 447A and s 90-15 of the Insolvency Practice Schedule (Corporations).

  6. Division 90 of the Insolvency Practice Schedule (Corporations) concerns the review of an external administration of a company, which may be undertaken by the court (div 90 subdiv B), or by another registered liquidator (div 90 subdiv C). The court is afforded wide powers to inquire into the external administration of a company and s 90-15(1) of the Insolvency Practice Schedule (Corporations) provides a source of power for the court to make orders.

  7. While the court's power under s 90-15(1) is 'very broad',[5] the ambit of s 90-15 has not yet been fully considered by the authorities.[6]

    [5] Re Halifax Investment Services Pty Ltd (No 8) [2020] FCA 533; (2020) 144 ACSR 292 [51] (Gleeson J), cited by Stewart J in Re Union Standard International Group Pty Ltd (Administrators appointed) (No 2) [2020] FCA 1111 [7].

    [6] Re Broens Pty Ltd (in liq) [2018] NSWSC 1747 [39] (Gleeson J); see also Re Hawden Property Group Pty Ltd (in liq) [2018] NSWSC 481; (2018) 125 ACSR 355 [7] - [8] (Gleeson JA), cited in Ex parte Frigger [2020] WASC 365 [12] (Allanson J).

  8. The court may make such orders as it thinks fit in relation to the external administration of a company,[7] and s 90-15(3) gives examples of the types of orders that the court may make under s 90-15(1). This includes an order determining any question arising in the external administration of the company.[8] Further, s 90-15(3)(a) accommodates the determination of substantive rights, provided appropriate notice has been afforded to potentially affected parties.[9]

    [7] Section 90-15(1) of the Insolvency Practice Schedule (Corporations).

    [8] Section 90-15(3)(a) of the Insolvency Practice Schedule (Corporations), see Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524 [166] (Gordon J).

    [9] Re Autocare Services [2021] FCA 167 [44] (Farrell J), cited by Banks-Smith J in Nipps (Admin) v Remagen Lend ADA Pty Ltd, Re Adaman Resources Pty Ltd (Admin Apptd) (No 4) [2021] FCA 644 [37].

  9. In GDK Projects Pty Ltd, Re Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541 at [33], Farrell J recognised the power in s 90-15(1) to be 'in its terms, unconstrained', but held that 'despite the breadth of the power … it is difficult to envisage circumstances where the power could be exercised if the court could not be satisfied that it would be just and unless the applicant had demonstrated sufficient utility to the external administration'.

  10. When orders under s 90-15 are sought, regard should also be had to the objects of the Insolvency Practice Schedule (Corporations), reproduced below:[10]

    [10] Nipps (Admin) v Remagen Lend ADA Pty Ltd, Re Adaman Resources Pty Ltd (Admin Apptd) (No 4) [24].

    1-1 Objects of this Schedule

    (1) The object of this Schedule is to ensure that any person registered as a liquidator:

    (a)      has an appropriate level of expertise; and

    (b)      behaves ethically; and

    (c) maintains sufficient insurance to cover his or her liabilities in practising as a registered liquidator.

    (2) The object of this Schedule is also:

    (a) to regulate the external administration of companies consistently, unless there is a clear reason to treat a matter that arises in relation to a particular kind of external administration differently; and

    (b) to regulate the external administration of companies to give greater control to creditors.

  11. Section 90-15(4) contains a non-exhaustive list of matters that the court may take into account in exercising the discretion under s 90-15.

  12. Applying the principles summarised above, in considering whether to grant the relief sought on behalf of the administrators, I found as follows.

Notice to ASIC

  1. As noted above, the administrators sought orders and relief pursuant to s 90‑15 of the Insolvency Practice Schedule (Corporations).

  2. The Supreme Court (Corporations) (WA) Rules 2004 r 2.8(3) provides that unless the court otherwise orders, if an application is made pursuant to s 90‑20 for an order under s 90‑15 of the Insolvency Practice Schedule (Corporations), the applicant must serve on ASIC a reasonable time before the hearing of the application, a copy of the originating process and supporting affidavit in respect of the application.

  3. I was satisfied that there had been compliance with Supreme Court (Corporations) (WA) Rules 2004 r 2.8(3).[11]

Standing

[11] Affidavit of LE Pye affirmed 15 May 2024, pars 3 - 4, LEP-05. See also the affidavit of CH Shaw sworn 14 May 2024, par 14, CHS-13.

  1. By operation of s 447A(4)(c) of the Corporations Act, the administrators had standing to apply for an order pursuant to s 447A(1), and by operation of s 90-20 of the Insolvency Practice Schedule (Corporations), standing to apply for an order pursuant to s 90-15(1).[12]

Power

[12] Section 90-20(1)(d) of the Insolvency Practice Schedule (Corporations), read with s 9 of the Corporations Act (par (d) of the definition of 'officer').

  1. By the application, s 443A was the provision in pt 5.3A of the Corporations Act the operation of which was sought to be modified, and the administrators sought that pt 5.3A of the Corporations Act operate as set out at [6] above.

  2. It is well established that the power of the court conferred under s 447A(1) extends to modifying the manner in which s 443D operates to order an indemnity where the statutory indemnity is insufficient or in doubt, and the manner in which s 443A operates so as to limit an administrator's personal liability. Applications for orders similar to those sought in this application have been favourably considered in circumstances where the court has been satisfied that the administrator entered into the arrangement to enable the company's business to continue to trade for the benefit of the creditors of the company.[13] I accepted that the court had the power to make the orders promoted on behalf of the administrators pursuant to s 447A, which had a clear nexus with how pt 5.3A was to operate in relation to G N Construction (Aust).

    [13] By way of example, see Re Spyglass Management Group Pty Ltd (admin apptd) [2004] FCA 1469; (2004) 51 ACSR 432 [3]; Re Malanos [2007] NSWSC 865; as referenced in Re Geographe Workforce Pty Ltd (Administrators Appointed) [2022] WASC 250 [42].

  3. Further, I accepted that the orders proposed on behalf of the administrators were designed to achieve in relation to G N Construction (Aust) the objects of pt 5.3A as stated in s 435A of the Corporations Act. That is, I was satisfied that the 5 May Letter and the orders sought promoted the administration of the affairs of the companies in administration in a way that maximised the chances of them and the Business continuing in existence.

  4. I was cognisant that by empowering the court to make orders about 'how this Part is to operate', s 447A(1) looks to the future rather than the past. However, I was also cognisant that the temporal requirement would be satisfied if the orders had effect from the time of their making. That is, I proceeded on the basis that it was possible for the court to make an order with future effect in respect of past matters or events, and in this case, it was possible for the court to modify the operation of s 443A(1) of the Corporations Act, so far as it applies to the personal liability of the administrators in their capacities as administrators of G N Construction (Aust) pursuant to the JHC Subcontract and/or NTE Subcontract, such that with future effect, if the indemnity of the administrators under s 443D of the Corporations Act from G N Construction (Aust) was insufficient to meet any amount for which the administrators may be personally liable arising out of or in connection with the JHC Subcontract and/or NTE Subcontract, whether before the making of this order or after, then the administrators will not be personally liable to repay such debts or satisfy such liabilities to the extent of that insufficiency. Plainly, by seeking an order after the event the administrators exposed themselves to a degree of commercial risk in the interim, but the fact that the order was sought after the event was no reason not to make it if it was otherwise a proper order to be made.[14]

    [14] In the matter of Renex Holdings (Dandenong) 1 Pty Ltd (administrators appointed) [2015] NSWSC 2003 [14].

  5. Finally, I note that while there was ample power under s 447A(1) to modify the operation of pt 5.3A of the Corporations Act as was promoted on behalf of the administrators, the administrators also made their application under s 90-15 of the Insolvency Practice Schedule (Corporations). While I considered the invocation of s 90-15 to be unnecessary, I proceeded on the basis that it was within the court's power to make the orders promoted pursuant to s 447A of the Corporations Act and s 90-15 of the Insolvency Practice Schedule (Corporations).

Discretion

  1. In the disposition of the application, I weighed the following matters in the balance.

  2. First, the relief was sought in circumstances where the administrators had caused G N Construction (Aust) to continue to perform the NTE Subcontract and JHC Subcontract with the agreement of Multiplex Constructions so as to enable the Business to continue to trade for the benefit of creditors, up to and including the second creditors meeting where creditors will determine whether to support the administrators' recommendation that G N Construction (Aust) resolve to approve the DOCA Proposal.

  3. It was appropriate to give considerable weight to Mr Shaw's evidence that in his view, continued compliance with the NTE Subcontract and JHC Subcontract was in the interests of the creditors of G N Construction (Aust) and consistent with the objectives of Part 5.3A of the Corporations Act. I accepted that entry into arrangements with alternative suppliers, outside of the ambit and protection of the orders made on 12 March 2024, was in the interests of creditors.

  4. Secondly, there was no evidence to suggest that creditors would be materially prejudiced or disadvantaged by the orders proposed.

  5. It was appropriate to give considerable weight to Mr Shaw's evidence that the continued compliance with the NTE Subcontract and JHC Subcontract did not disadvantage or prejudice the creditors, particularly in circumstances where Multiplex Constructions was the only other party to the NTE Subcontract and JHC Subcontract, and had consented to (as recorded in the 8 May Letter) and did not seek to be heard in relation to the relief sought.

  6. Multiplex Constructions had been served with a copy of the minute of proposed orders filed on 14 May 2024 and had been given notice that if it wished to be heard with respect to the application, it was to notify the court of the same by 4.00 pm on Wednesday, 15 May 2024. By an email communication sent by Elisabeth Edwards, Regional Legal Counsel for Multiplex on 15 May 2024, it was confirmed that Multiplex did not seek to be heard.[15]

    [15] Affidavit of LE Pye affirmed 15 May 2024, pars 7- 8, LEP-07.

  7. I was also cognisant that Hanson Construction Materials had been served with a copy of the minute of proposed orders filed on 14 May 2024 and had been given notice that if it wished to be heard with respect to the application, it was to notify the court of the same by 4.00 pm on Wednesday, 15 May 2024.[16] There was no communication to the court on behalf of Hanson Construction Materials indicating that it sought to be heard.

    [16] Affidavit of LE Pye affirmed 15 May 2024, par 5, LEP-06. See also the affidavit of CH Shaw sworn 14 May 2024, par 15, CHS-14.

  8. The making of this application was foreshadowed to all creditors of G N Construction (Aust), by the inclusion of pt 7.2 in the report to creditors, reproduced below:[17]

    7.2 Personal Liability

    In order to ensure the viability of the continued trade on of the business of the Company, I have instructed my solicitors to make an application to Court to obtain orders that:

    •The liabilities of Richard Albarran and I (in our capacity as Administrators) pursuant to the subcontracts with Multiplex is limited to the assets of the Company; and

    •Consequential orders are made modifying the operation of Section 443A(1) and (2) of the Act, so as to permit the limit of liability of the Administrators to the assets of the Company.

    [17] Affidavit of CH Shaw sworn 14 May 2024, CHS-12 (page 32 of the affidavit).

  9. No creditor notified of the application through pt 7.2 of the report to creditors raised any objection to the relief sought on behalf of the administrators.

  10. Thirdly, the administrators proposed, and I included in the orders made, a requirement that the administrators serve the orders on the creditors of G N Construction (Aust), and expressly granted to any person affected by the orders liberty to apply on the giving of two business days' notice to the administrators.[18] I took comfort that any person affected by the orders would be accorded an opportunity to be heard.

    [18] Order 4 of the orders made on 16 May 2024 (see sch A to these reasons).

  11. Fourthly, I was cognisant that ASIC was on notice of the application, but did not seek to intervene.

  12. There appeared to only be one discretionary factor which counted against making the orders sought on behalf of the administrators pursuant to s 447A of the Corporations Act. That is, there was a modest delay in the making of the application. As noted above, after relief was granted to the administrators in March 2024, they formed the view that it was necessary to enter into arrangements with alternative suppliers so as to continue to trade on the Business and progress the Projects so as to enable the Business to continue to trade including up to and including the second creditors meeting; and had documented their agreement with Multiplex Constructions on 8 May 2024. The administrators understood that the agreement of Multiplex Constructions as documented in the 8 May Letter would not exclude the operation of s 443A(1).[19] Nevertheless, the application was filed on 14 May 2024, sometime after the arrangements with alternative suppliers had been entered into and only days before the second meeting of creditors on 17 May 2024.

    [19] Corporations Act s 443A(2).

  13. While there was some delay, it was relatively short and the application was prosecuted in circumstances where it came as no surprise to Multiplex Constructions. Weighing all of these matters in the balance, I was prepared to make the orders sought.

Confidentiality

  1. As noted above, I was satisfied that the third affidavit of Mr Shaw contained confidential information, and the application for a confidentiality order was appropriately made.

  2. In all of the circumstances, having given careful consideration to the matters deposed by Mr Shaw and the document annexed to his third affidavit, I was satisfied that it was appropriate to restrict access to it pursuant to the Rules of the Supreme Court O 67B r 5(b). I ordered that the affidavit would be treated as confidential and not published or disclosed except pursuant to an order of the court.

Costs

  1. I was satisfied that it was appropriate that the administrators' costs of and incidental to the application be their costs in the administration of G N Construction (Aust) and be paid out of the assets of that company, and I ordered that such costs be so treated.

Conclusion and orders

  1. For these reasons, I determined it was appropriate for the court to grant to the administrators the relief sought by the application made by the minute of proposed orders filed on 14 May 2024. The orders made on 16 May 2024 are reproduced at sch A to these reasons.

Sch A – Orders made on 16 May 2024

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

SE

Associate to the Judge

20 MAY 2024


Actions
Download as PDF Download as Word Document