Daniel Woodhouse Hayden White and Kathryn Warwick as administrators of Savannah Nickel Mines Pty Ltd (Administrators Appointed) (ACN 103 729 282) v Barminco Limited (ACN 109 439 894) - [2024] WASC 354

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   DANIEL WOODHOUSE HAYDEN WHITE AND KATHRYN WARWICK as administrators of SAVANNAH NICKEL MINES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 103 729 282) -v- BARMINCO LIMITED (ACN 109 439 894) [2024] WASC 354
CORAM:   COBBY J
HEARD:   17 SEPTEMBER 2024
DELIVERED          :   27 SEPTEMBER 2024
FILE NO/S:   COR 135 of 2024
BETWEEN:   DANIEL WOODHOUSE HAYDEN WHITE AND KATHRYN WARWICK as administrators of SAVANNAH NICKEL MINES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 103 729 282)
First Plaintiff
SAVANNAH NICKEL MINES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 103 729 282)
Second Plaintiff
AND
BARMINCO LIMITED (ACN 109 439 894)
Defendant

Catchwords:

Corporations - Voluntary Administrators - Agreement for the Provision of Mining Services - Administrators issuing purchase orders in relation to existing agreement - Whether contract to replace or vary existing agreement - Intention to create legal relations - Whether administrators personally liable for suspension costs and rise and fall claims - Whether a debt for services rendered

Legislation:

Corporations Act 2001 (Cth) s 419(1), s 443A(1), s 443B, s 443BA, s443C, s 443D

Result:

Application allowed
Declarations made

Representation:

Counsel:

First Plaintiff	:	W C J Zappia
Second Plaintiff	:	W C J Zappia
Defendant	:	J Garas SC

Solicitors:

First Plaintiff	:	Gilbert + Tobin
Second Plaintiff	:	Gilbert + Tobin
Defendant	:	Blackwall Legal LLP

Case(s) referred to in decision(s):

AGL Victoria Pty Ltd v Lockwood [2003] VSC 453; (1003) 10 VR 596
Apple and Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280; (2016) 343 ALR 112
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424
Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524
Equuscorp Pty Ltd v Glengallan Investemnts Pty Ltd [2004] HCA 55; (2004) 218 CLR 471
Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95
Federal Commissioner of Taxation v Sara Lee Household & Body Care (Aust) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520
GDK Projects Pty Ltd v Umberto Pty Ltd (in liq) [2018] FCA 541
HL Diagnostics Pty Ltd v Psycadian Ltd [2005] WASC 234
Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11
Molit (No 55) Pty Ltd v Lam Soon Australia Pty Ltd (administrator apptd) (No 2) [1996] FCA 659; (1996) 148 ALR 472
Newstart 225 Pty Ltd v Condon [2024] NSWSC 788
R v Small Claims Tribunal; Ex parte RACV General Insurance Pty Ltd [1981] VR 602
Re Hawden Property Group Pty Ltd (in liq) (ACN 003 528 345) [2018] NSWSC 481; (2018) 125 ACSR 355
Re Quirky Mama Productions Pty Ltd [2021] QSC 345
Re Workcover Queensland [2000] 1 Qd R 107
Standard Chartered Bank of Australia v Antico [Nos 1 & 2] (1995) 38 NSWLR 290
Tallerman and Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93
Tipperary Developments Pty Ltd v Western Australia [2009] WASCA 126; 38 WAR 488

COBBY J:

The first plaintiffs are the joint and several voluntary administrators of the second plaintiff, Savannah Nickel Mines Pty Ltd (Administrators Appointed) (ACN 103729282) (Company).
At the time the first plaintiffs were appointed administrators of the Company, the defendant was providing mining services to the Company at the Company's nickel mine, located approximately 250 km by road south-west of Kununurra, pursuant to an agreement between the Company and the defendant dated 8 July 2021 known as the Underground Mine Services Agreement (UMSA).[1]
[1] The UMSA was varied in terms which are not presently relevant by a deed of settlement and variation prior to the appointment of the plaintiffs in 2023.
On 8 January 2024, the plaintiffs informed the defendant that the Company would cease operations at the mine, and would put the mine on a 'care and maintenance' basis. The dispute between the parties concerns whether the plaintiffs are personally liable for certain suspension costs said to be payable as a consequence of that decision.
By amended originating process filed 9 September 2024, the first plaintiffs seek declarations or orders pursuant to s 90-15(1) of the Insolvency Practice Schedule (Corporations) (IPS) or in the court's inherent jurisdiction to the effect that:
(a)the amount of $1,012,100.08 for 'suspension costs' relating to the period 8 to 15 January 2024 claimed in the defendant's payment claim for January 2024; and/or
(b)the amount of $257,073.42 claimed as 'rise and fall' costs by the defendant in respect of those suspension costs,
are, to the extent that they reflect liabilities of the second plaintiff, pre appointment claims in the administration for the second plaintiff; and
(c)that the plaintiffs have no undischarged personal liability to the defendant under s 443A of the Corporations Act in respect of those costs.
Section 90-15(1) of the provides that the court may make such orders as it thinks fit in relation to a company's external administration, including an order determining any question arising in the external administration of a company.[2]
[2] IPS s 90-15(3)(a); Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524 [166].
The power conferred by s 90-15 extends to the determination of substantive rights as between parties, provided that appropriate notice is given to potentially affected parties,[3] the court is satisfied that it would be just to do so and the applicant has demonstrated sufficient utility to the external administration.[4]
[3] Re Hawden Property Group Pty Ltd (in liq) (ACN 003 528 345) [2018] NSWSC 481; (2018) 125 ACSR 355 [8].
[4] GDK Projects Pty Ltd v Umberto Pty Ltd (in liq) [2018] FCA 541 [33].
The plaintiffs submit that the defendant's claims have created a material uncertainty in relation to negotiations for a deed of company arrangement proposed to be put to the Company's creditors, although I suspect that may have lessened as a result of various issues between the parties having been resolved prior to the final hearing. In any event, as the plaintiffs would be entitled to be indemnified from the Company's assets if the defendant's contentions are correct,[5] and as the defendant is the party directly affected by the application, I am satisfied that it is open to make the orders sought pursuant to s 90-15.
[5] Section 443D. References to legislation are to provisions of the Corporations Act 2001 (Cth) unless otherwise stated.
The administrators were appointed to the Company on 14 December 2023 pursuant to s 436A of the Corporations Act2001 (Cth) ('the Act').
Craig Earnshaw of the defendant spoke to Mr Woodhouse of the plaintiffs that day, during which conversation Mr Woodhouse told him that he considered the plaintiffs had 'been brought early with cash at bank' and that Mr Woodhouse therefore 'believed that they could continue to trade'.
Mr Earnshaw's evidence was that he has been admitted to practice as a solicitor in Western Australia since 2006, and has 'extensive experience in the negotiation and drafting underground mining services agreements in Australia, Africa and North America'.
It appears two purchase orders in the Company's name addressed to the defendant were prepared on or before 15 December 2023, with the plaintiffs' authority. Both bore that date. Each comprised a single page.
The first purchase order was in the amount of $2.93 million, and contained the item description:
Mining Svcs 14/12 – 31/12/23
Purchase order has been issued as an estimate of the value of the work to be undertaken and is subject to actual work performed and/or deliveries made by directed by Savannah Nickel Mines Pty Ltd (Administrators Appointed).
It was common ground that a second purchase order, also dated 15 December 2023, was also issued by the plaintiffs to the defendant. The second purchase order was in identical terms to the first, other than the total of the order was $2.85 million, and the period over which the services were to be provided was stated to be 1 to 15 January 2024.
There was no suggestion that there had been any communication between the plaintiffs and the defendant regarding the terms of either purchase order, including as to the mining services to be provided by the defendant.
There was no evidence as to when and how the purchase orders were provided to the defendant, save that Mr Earnshaw's email to Mr Woodhouse dated 16 December 2023 suggests that the defendant may have received at least the first purchase order by that date and Mr Earnshaw received that purchase order by email on 17 December 2023 in the circumstances described below.
It was common ground that on Saturday, 16 December 2023 Craig Earnshaw of the defendant telephoned Mr Woodhouse of the plaintiffs.
At some point during that call, Mr Earnshaw asked Mr Woodhouse for confirmation that the plaintiffs wished the defendant to continue to provide mining services to the Company, and was told that Mr Woodhouse would provide a purchase order that had been issued but that he (Mr Woodhouse) regarded that as a formality because the plaintiffs approved the defendant's continued provision of services to the Company.
During the same call, Mr Earnshaw told Mr Woodhouse that the defendant had an outstanding invoice in respect of mining services provided by the defendant to the Company during November 2023. Mr Woodhouse said that the plaintiffs would not pay the invoice as it related to services rendered prior to their appointment, to which Mr Earnshaw said that the defendant intended to issue a show cause notice under the UMSA if the plaintiffs' intention was to not pay the invoice when it fell due, with the defendant immediately suspending works and terminating the UMSA after the expiry of the show cause period.
Mr Woodhouse then asked whether the defendant intended to take that step immediately or 'would allow further time to consider'. I infer that Mr Woodhouse asked, in effect, whether Mr Earnshaw would allow the plaintiffs time to consider their position regarding payment of the invoice.
At 7.10 pm that day, Mr Earnshaw sent an email to Woodhouse, which said in part:
We reference our call this morning in which we discussed our November payment claim which was finalised yesterday and due for payment on 29 December 2023. You advised that at this time it was not the intent to pay that invoice. Accordingly we do intend to issue a Show Cause Notice based on the intent to not comply with the contract payment terms with a show cause period of 2 days, failing which we would immediately suspend works and then issue termination notice. You enquired if we intended to do it immediately or if we could wait for you to have a little time to consider and engage with other stakeholders.
We have decided to not send the notice today, of course reserving all rights, and are having a further discussion internally tomorrow afternoon. It would seem to us from the conversation this morning that the support (or not) of Trafigura for your intent to continue to trade is quite pivotal whatever we decide around timing to allow you to consider solutions for payment of our payment claim. Accordingly, it may be helpful to let us know of any discussion with Trafigura that may have occurred or other potential solution that be under consideration by 2pm tomorrow afternoon. Happy to take your call tomorrow also after about 1pm if that assists.
Could you also finalise for us some administrative matters that may have been provided to others In our organisation (and you have verbally and in email confirmed) but we have not seen the usual formalities for yet:
1.The creditors circular, and in particular the formal authorisation to continue to provide our mining services under contract;
2.The PO you referenced in other correspondence for the ongoing works.
Mr Woodhouse responded the next day, 17 December 2023, as follows:
Thank you for coming back to us and we appreciate you taking the time to outline Barminco's current position.
We are currently meeting with Trafigura on Monday and so anticipate we will only be able to respond to your query regarding Trafigura late Monday. However, based on our interactions to date, we understand Trafigura is supportive of our strategy to continue to trade the business, whilst pursuing a sale or recapitalisation, for the benefit of all stakeholders. As discussed, and as previously announced, the company had already commenced this process with Treadstone Partners, a well credentialed mining focused investment bank that we have previously worked with. We have adopted this process and are continuing its momentum in Administration.
Andrew Bantock (copied), who was on our call yesterday, is now traveling back to Perth today and would be able to meet in person, if that would be of benefit to you. If so, please let us know,
Otherwise, as requested, I attach:
·our initial circular to suppliers; and
·an initial purchase order for the estimated work to be undertaken from 14 December 2023 to 31 December 2023. We anticipate a true up or down, depending on the actual work undertaken for this period.
The Circular to Creditors was dated 15 December 2023 and stated, so far as is presently relevant:
As Voluntary Administrators we have assumed control over all aspects of the Companies, which we are continuing to trade, whilst we work with the management team to assess the financial position of the Companies and the options for a recapitalization or sale of the business. We are seeking your continued support while we undertake this process.
…
OPERATIONS AND TRADING - ONGOING SUPPLY TO THE COMPANIES
The Companies will raise purchase orders for goods and services that are required during the period of the administration. Orders will continue to be placed using the Companies' current processes. Persons authorised to sign purchase orders are listed at Appendix A. Goods supplied or services rendered to the Companies after our appointment will be paid in accordance with these procedures provided that:
1.A purchase order has been issued for the applicable good or service;
2.The purchase order has been authorised by the Administrators or one of our authorised representatives; and
3.The Administrators' liability does not exceed the amount specified on the purchase order.
Suppliers must comply with the following procedures:
1.Close any existing accounts against the Companies. These accounts will be for goods supplied and services rendered up to and including the date of appointment;
2.Open a new account for the relevant Companies with the words "Administrators Appointed" added after the Companies' names. This new account is to be used for goods supplied and services rendered to the respective Companies during the period of the administration;
3.Update contact details for the Companies within your systems to also include the Administrators' contact details; and
4.Please ensure your invoices include the Administrators' purchase order number. This will likely be a new number sequence to help demarcate pre- and post-appointment orders.
PAYMENTS AND ACCEPTANCE OF LIABILITY FOR GOODS AND SERVICES
For all new orders placed according to these processes, these amounts are guaranteed by the Voluntary Administrators and will be paid on normal terms.
…
We understand that this is a very difficult time for all suppliers and creditors. Your continued support is important during this voluntary administration whilst we undertake an assessment of the options available for a recapitalization or sale.
The purchase order attached to Mr Woodhouse's email was a copy of the first purchase order described above.
The evidence does not disclose when or how the second purchase order was issued, nor when the defendant received it. The evidence of the telephone conversation on 16 December 2023 and the emails of 16 and 17 December 2023 suggests that Mr Earnshaw was not aware of the second purchase order as at those dates.
However, the parties proceeded on the basis that the second purchase order was issued on the same day as the first and received by the defendant the same day. I have proceeded on that basis.
On 18 December 2023, Mr Earnshaw sent an email to Mr Woodhouse which stated:
We refer to the Underground Mining Services Agreement dated 8 July 2021 (as subsequently amended) between the Savannah Nickle Mines Pty Ltd (Administrator Appointed) (Company) and Barminco Limited (Agreement) and your appointment on 14 December 2023 as Administrator.
We attach Invoice No. 2120126/24 in the amount of $6,289,471.24 issued pursuant to clause ll.2(d) of the Agreement for payment (Invoice) together with the relevant Progress Claim signed by the Company while under administration on 15 December 2023. Given the invoice has arisen from the payment claim signed under Administration we consider that the Administrators' are liable for payment of the Invoice which was incurred pursuant to section 443A(l)(a) of the Corporations Act 2001 (Cth).
We require that payment be made no later than the due date of 30 December 2023. We note that due to the Christmas break, in order to effect payment by 30 December 2023 payments should be made on or before 29 December 2023.
We would be happy to discuss at proposed call tonight.
There was no evidence as to whether the proposed call referred to in that email occurred, and the dispute between the parties as to the plaintiffs' liability to pay the November 2023 invoice was resolved prior to the hearing before me.
The defendant continued to provide mining services at the mine site over the period between 14 December 2014 to 8 January 2024. The evidence does not disclose what work was carried out, but I infer that it was in accordance with the mine plan contained in the UMSA, the communications between the parties lacking any reference to the scope of the works to be performed.
On 21 December 2023, the defendant's then solicitors wrote to Mr Woodhouse, stating (amongst other things) that:
Pursuant to clause 20.1 (b)(ii) of the Agreement, the failure to make payment of the Invoice by the Payment Date will amount to a material breach for the purposes of clause 20.7(a). Upon the occurrence of a material breach, Barminco will become entitled to issue a written show cause notice in accordance with clause 20.7(c), the consequence of which, if not complied with within 2 business days, is the immediate suspension of services under the Agreement.
That letter defined 'the Agreement' to be the UMSA.
The UMSA was a comprehensive agreement, comprising some 260 pages, including the various schedules thereto. As might be expected, it addressed in detail a wide range of matters, including the services, plant and equipment to be provided by the defendant, the Company's obligations, including as to payment, access to the mine site, the appointment and operation of a project management group, the mine plan and productions schedules, the parties' respective rights to suspend performance of and terminate the UMSA, and the ownership and use of the Company's intellectual property.
Clause 11 of the UMSA provided:
11.Payment
11.1Principal's payment obligation
(a)Subject to the proper performance of the Mining Services, the Principal must pay the Contractor the Service Fee calculated in accordance with Schedule 15.
(b)The Contractor accepts the payment of the Service Fee in accordance with this Agreement as full payment for the provision of the Mining Services and the performance of its other obligations under this Agreement.
11.2Monthly Claims
(a)The Contractor must submit to the Principal's Representative within 5 days after the end of each month a Monthly Claim for the previous month including
(i)the quantities for the month for which there is a specific rate In the Schedule of Rates, calculated in accordance with the method of measurement set out in Schedule 10;
(ii)the Service Fee payable calculated in accordance with Schedule 15;
(iii)the price for any changes to the scope of the Mining Services approved by the Principal's Representative;
(iv)all evidence reasonably acceptable to the Principal's Representative verifying or substantiating amounts used for the purposes of calculating the Monthly Claim; and
(v)details of the Contractor's calculations of the Monthly Claim.
(b)Following receipt of a Monthly Claim, the Principal's Representative must, within 10 days, determine the amount payable in respect of the Monthly Claim and issue a Payment Certificate to the Principal and the Contractor setting out that determination showing:
(i)the amount of the Service Fee payable for the month; less
(ii)the total of any moneys which are due, or which may become due, from the Contractor to the Principal (Payment Certificate).
(c)The Payment Certificate must include or enclose details of the Principal's Representative's calculations of the stated amounts and, if the Principal's Representative does not accept the Contractor's calculations, a statement of reasons for the differences In calculation.
(d)The Contractor must give the Principal a Valid Tax Invoice in respect of the items and amount shown In the Payment Certificate within 2 business days of receipt of that certificate.
(e)If:
(i)the Principal's Representative forms the opinion (acting reasonably, In good faith and after due consultation with the Contractor) that the Contractor is or may become unable to make any payments to its Personnel; or
(ii)the Principal's Representative has been notified that any of the Contractor's Personnel have not been or will not be paid,
then, the Principal may require the Contractor to give the Principal a statutory declaration In the form set out in Schedule 4 as a condition precedent to the Contractor receiving a payment under a Payment Certificate even If the Contractor notifies the Principal that there Is a dispute In relation to any such payments (disputed amounts).
(f)The Principal must pay the amount in the Payment Certificate to the Contractor (less any amounts which the Principal is entitled to set off under this Agreement) within 10 days of receipt of a Valid Tax Invoice submitted by the Contractor or such other time so that payment is due 30 days after the end of the month that is the subject of the relevant Monthly Claim.
(g)Any disputed amounts or amended amounts set out in a Payment Certificate will be paid to the Contractor or the Principal (as the case may be) within 14 days of it being agreed or determined in accordance with this Agreement that the Contractor or the Principal (as the case may be) is entitled to such disputed or amended amount (including any amounts subject to dispute over whether or not they were erroneously included in the Payment Certificate).
(h)If the Principal falls to pay the amount due to the Contractor, within the time specified in clause 20.7(c)(iv)20.7(c), the Contractor may Immediately suspend the Services.
11.3Fixed Rate
All rates in the Schedule of Rates are fixed and firm for the Term, unless this Agreement states otherwise.
11.4Rise and Fall
The parties agree that the Rise and Fall Adjustment will apply to the Schedule of Rates in accordance with Schedule 17.

Clause 20 provided, so far as is relevant:
20.Term, Suspension and Termination
20.1Term
(a)The Contractor must provide the Mining Services and perform its other obligations under this Agreement during the Term.
(b)The Term of this Agreement ends after the Initial Term unless the Parties agree in writing to an Extended Term prior to the expiry of the Initial Term.
(c )The Contractor must ensure, on expiration of the Term, that the Site is vacated by the Contractor in a clean condition with any outstanding rehabilitation completed and the Contractor fully demobilised.
…
20.3Suspension of Mining Services
(a)The Principal by notice to the Contractor, may suspend provision of the whole or any part of the Mining Services, stating the estimated length of and reason for the suspension (if it is possible to make such an estimate).
(b)The Contractor by notice to the Principal, may suspend provision of the whole or any part of the Mining Services In accordance with clause 11.2(h) and also where:
(i)the Principal fails to supply critical services or properly maintain the Principal's Facilities, which materially adversely impacts the Contractor's ability to perform the Mining Services or achieve the Performance Criteria; or
(ii)there is an immediate risk to the health and safety of any person, an Immediate risk of loss or damage to property or there is a health and safety event;
(iii)it is required by Law;
(iv)provided it is not due to an act or omission of the Contractor.
(c)The Contractor must on receipt or issue of a notice of suspension take all reasonable steps to reduce any delay or cost consequent upon the suspension. If requested by the Principal's Representative to do so, the Contractor must promptly re-direct its labour force and/or plant and equipment to work on a portion of the Site unaffected by the reason for the suspension.
(d)A suspension under this clause will not terminate this Agreement.
(e)Unless otherwise agreed, the Principal will pay to the Contractor the applicable standby rate listed in the Schedule of Rates or, if there is no applicable Standby rate reasonable compensation reflecting actual loss, for the period the Mining Services are suspended under this clause or as a consequence of Force Majeure declared by either party except where, in the opinion of the Principal's Representative, the suspension is necessary because of the act, default or omission of the Contractor or its employees, agents or other contractors, in which case the Contractor is not entitled to any payment or compensation for the suspension.
(f)If the parties agree demobilisation is required, the Contractor must demobilise personnel and/or equipment from the Site as specified by the Principal for the duration of a suspension of Mining Services. Payment for any partial demobilisation or subsequent remobilisation must be a pro-rata portion of the amount stated in the Schedule of Rates for demobilisation and mobilisation.
(g)The Contractor will be relieved from its obligations under this Agreement including the achievement of the Mining Schedule, Production Schedule and Production Range Requirements) if and to the extent that, any suspension under this clause:
(i)prevents the Contractor from complying with such obligations; and
(ii)is not due to any breach of this Agreement by the Contractor or any act or omission of the Contractor or its Personnel.
(h)The Principal's Representative must, when the reason for any suspension no longer exists, direct the Contractor in writing to recommence providing the Mining Services, in which case:
(i)the Contractor must promptly comply with the direction; and
(ii)any changes to the Mine Schedule, Production Schedule or Production Range Requirements, as a consequence of the suspension and recommencement of the Mining Services, will be determined as a Variation under clause 12.
20.4Termination by the Principal for convenience
Notwithstanding any other provision of this Agreement, the Principal may, at its sole discretion, terminate this Agreement for its convenience at any time, by giving the Contractor 60 days written notice in which case the Principal (without prejudice to any other rights or remedies it has) must pay to the contractor the Hardship Event Early Termination Amount (if termination is due to a Hardship Event) or the Early Termination Amount.
…
20.7Default by Principal
(a)If the Principal commits a material breach of this Agreement for which damages are not an adequate remedy, the Contractor may give the Principal a written notice to show cause.
(b)For the purposes of clause 20.7(a), material breaches are:
(i)the Principal becoming insolvent; and
(ii)the Principal's failure to make any payment which is due under clause 11.1.
(c)A notice under clause 20.7(a) must:
(i)state that it is a notice under clause 20.7(a);
(ii)specify the alleged material breach;
(iii)require the Principal to show cause in writing why the Contractor should not exercise a right referred to in clause 20.8;
(iv)specify the time and date by which the Principal must show cause (which time must not be less than 2 business days pursuant to clause 11.2(h) or for any other breech 14 days after the notice is given to the Principal); and
(v)specify the place at which cause must be shown.
The defendant issued the foreshadowed show cause notice on 2 January 2024. On 4 January 2024, it extended the time for the plaintiff to comply with that notice to 5 pm on 5 January 2024, and on 6 January 2024 to 5 pm on 8 January 2024.
At about 3 pm on 8 January 2024, Mr Woodhouse spoke by telephone to Mr Earnshaw, and informed him that the plaintiffs had decided to suspend operations at the mine. Mr Earnshaw said that the defendant would immediately cease works, but pointed out that there might be certain limited services that the plaintiff might wish the defendant to continue to provide.
On 25 March 2024, the defendant issued a termination notice pursuant to cl 20.(8)(b) of the UMSA, terminating the UMSA.
The plaintiffs do not dispute that the amounts claimed in respect of suspension costs by the defendant, including the rise and fall component, are payable by the Company, but deny that they are personally liable for those costs.
The defendant contends that 'a new agreement was formed around the time of acceptance of the [purchase orders] - being either a discrete contract picking up many of the written terms contained in the UMSA or a contract varying the UMSA'. It submits that the amounts claimed were incurred after the appointment of the plaintiffs because, amongst other things, the source of the liability was the new contract said to be formed upon the defendant's acceptance of the purchase orders.
The defendant accepts that the plaintiffs were acting as agents of the Company in issuing or authorising the issue of the purchase orders to the defendant.[6]
[6] Defendant's Outline of Submissions 13 September 2024 [46].
The defendant contends that a new contract was made on its acceptance of the first purchase order, which was then extended 'under' the second purchase order, or 'another' similar discrete contract was made on acceptance of that second purchase order.[7] It submits that, even if the UMSA was varied (as opposed to having been terminated and replaced), there was still a new post-appointment contract that governed the provision of the services, any agreement to vary the UMSA being made after the plaintiffs' appointment.
[7] Defendant's Outline of Submissions [61].
Implicit in those submissions is the proposition that the parties intended to enter into a new contract as a result of their conduct, whether that be an entirely new agreement or some lesser agreement to vary the UMSA.
I accept that the parties to an agreement may vary some of its terms by a subsequent agreement, or rescind their earlier agreement altogether and replace it. The determining factor is the parties' mutual intention, ascertained from the construction of the subsequent agreement, but in either case if the parties agreed to vary the UMSA that agreement was made after the appointment of the plaintiffs to the Company.[8]
[8] Tallerman and Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93, 144; Federal Commissioner of Taxation v Sara Lee Household & Body Care (Aust) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520 [23] - [24].
An agreement does not give rise to an enforceable contact unless a reasonable person in the position of each party would think that the other intends to create legal relations. An intention to create legal relations 'describes what it is that would objectively be conveyed by what is said or done, in regard to the circumstances in which those statements and actions happen. It is not a search for the uncommunicated subjective motives or intentions of the parties'.[9]
[9] Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 [25].
Evidence of surrounding circumstances is admissible for the purpose of objectively assessing whether parties intended to enter into contractual relations.[10] Further, extrinsic evidence of the conduct of the parties after the making of the alleged contract is admissible for the purpose of determining whether the parties had the requisite intention.[11]
[10] Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 [24] - [25]; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 [34].
[11] Tipperary Developments Pty Ltd v Western Australia [2009] WASCA 126; 38 WAR 488 [120]; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540.
An enforceable contract may be inferred where the manifest intention of the parties, objectively ascertained, establishes a 'tacit understanding or agreement' and their conduct proves all the elements of an express contract, including sufficiently clear terms.[12] In Apple and Pear Australia Ltd v Pink Lady America LLC[13] Tate JA referred to the difficulties in establishing an inferred or implied agreement as follows:
It is open to a court to infer the existence of a contract - or in this instance, a variation to a contract - from the parties' conduct on the basis of the objectively ascertained manifestation of mutual assent. But, as has been observed, such cases are rare and it will only be 'in a very clear case that a promise will be implied from facts which do not involve written or oral communication from which a promise appears.' Although, as noted above, McHugh J's observed in ICS that in the 'unrefined' commercial context the benchmarks of the classical theory of offer, acceptance, consideration and intention to create legal relations may not readily apply, and instead courts may infer a contract from conduct, he still insisted that it is necessary to draw from those circumstances 'a tacit understanding or agreement' and that the parties' conduct 'must be capable of proving all the essential elements of an express contract'. Moreover, it is 'not enough that the conduct is consistent with what are alleged to be the terms of a binding agreement. The evidence must positively indicate that both parties considered themselves bound by that agreement.' [221] emphasis original)(citations omitted).
[12] Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11, 110, at 11, 117 - 11, 118 (references omitted).
[13] Apple and Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280; (2016) 343 ALR 112.
In Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd Allsop J (as he then was) referred, in the context of discussing how the existence of a contract alleged to be implied might be established, to whether the parties' conduct 'including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract'.[14]
[14] Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424 [34].
The context in which the purchase orders were provided to the defendant included that:
(a)the plaintiffs had been appointed as administrators of the Company on 14 December 2023;
(b)they had informed Mr Earnshaw that they wished to continue to trade on 14 and 16 December 2023;
(c)both the plaintiffs and Mr Earnshaw are to be regarded as understanding that the appointment of the plaintiffs did not affect the validity or operation of the UMSA without more, the plaintiffs because they were insolvency practitioners and Mr Earnshaw because he was an experienced commercial solicitor;
(d)the purchase orders were prepared on or by 15 December 2023, without reference to the defendant;
(e)at the time the purchase orders were issued, the plaintiffs had not exercised their rights to suspend provision of all or part of the services to be provided by the defendant pursuant to cl 20.3(a) or to terminate the UMSA for convenience pursuant to cl 20.4 thereof;
(f)to the contrary, Mr Woodhouse had asked that Mr Earnshaw delay his stated decision to issue a show cause notice to the Company under the UMSA for a few days, Mr Earnshaw having stated on 16 December 2023 that the defendant intended to terminate the UMSA once the due date for payment of the defendant's November 2023 invoice had passed;
(g)the plaintiffs' stated purpose for issuing purchase orders to suppliers was to identify those debts in respect of which the administrators would 'guarantee' payment;
(h)the purchase orders were for amounts totalling $5.78 million; and
(i)clause 27.7(b) of the UMSA provided that a provision of the UMSA could not be varied except in writing signed by the parties.
As already noted, the two purchase orders each comprised a single page. Considered objectively, the reference to 'Mining Svcs' in each order can only have been understood to mean the services being provided by the defendant under the UMSA.
In my view, considered in their context, each purchase order is to be characterised as no more than a request by the administrators that the defendant continue to perform its obligations under the UMSA. Each was issued in circumstances where the plaintiffs had only very recently assumed control of the Company, had requested suppliers (including the defendant) to open new accounts in the proper name of the Company, and sought a continuance of supply of the defendant's services.
It is objectively improbable, in my view, having regard to the complexity of the UMSA, the size of the amounts payable to the defendant under that agreement for its services, the lack of any communication between the parties as to what terms might form part of any new agreement between them or, for that matter, the need for any new agreement, that the parties intended that any new contract be formed as a consequence of the issue of the purchase orders and the defendant continuing to deploy its workforce and equipment at the company's mine site in the same manner contemplated by the UMSA.
I consider the better view is that the parties intended that the UMSA continued to operate in accordance with its terms.
Further, as identified by Tate JA, where it is sought to infer or imply a contract from the parties' conduct, it is necessary that conduct must positively indicate that both parties considered themselves bound by that agreement.[15]
[15] Apple and Pear Australia Ltd v Pink Lady America LLC[221].
Each of Mr Earnshaw's email to Mr Woodhouse of 18 December 2023, the letter from the defendant's then solicitors to Mr Woodhouse dated 21 December 2023, the issue of the show cause notice by the defendant on 2 January and the issue and terms of the termination notice dated 25 March 2023 by the defendant pursuant to the UMSA are only consistent, in my view, with the defendant having considered that the UMSA remained binding on the parties throughout that period.
In particular, the issue of the termination notice is inconsistent with the UMSA having been varied or replaced, since the UMSA as varied or any new agreement would have expired by effluxion of time on 15 February 2024 had that been the parties' intention.
I accordingly am not satisfied that any new contract was made. I find that the UMSA remained in effect throughout.
However, the plaintiffs will still be personally liable for the amounts said to be due by the defendant if those amounts comprise debts incurred by them for services rendered, by operation of s 443A(1)(a).
Section 443A(1) provides:
The administrator of a company under administration 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:
(a)services rendered; or
(b)goods bought; or
(c)property hired, leased, used or occupied, including property consisting of goods that is subject to a lease that gives rise to a PPSA security interest in the goods; or
(d)the repayment of money borrowed; or
(e)interest in respect of money borrowed; or
f)borrowing costs.
The Act does not define the term 'debt'. It is to be given its common law meaning where it appears in s 443A(1).[16]
[16] Newstart 225 Pty Ltd v Condon [2024] NSWSC 788 [72]; Molit (No 55) Pty Ltd v Lam Soon Australia Pty Ltd (administrator apptd) (No 2) [1996] FCA 659; (1996) 148 ALR 472, 474.
Although the evidence of what constitutes the amount claimed in respect of 'suspension costs' is sparse, it appears that amount has been calculated by reference to tables 13 and 15 in the Schedule of Rates forming Schedule 16 to the UMSA. Each table specifies an amount payable by the Company for each day, seven day period and 30 day period for which works are suspended under the UMSA.
I find that the amount claimed by the defendant in respect of suspension costs is a debt, because it is a claim for a sum certain,[17] calculated by reference to the number of days between 8 and 15 February 2024 and the rates stated in Schedule 16 of the UMSA.
[17] As to which see HL Diagnostics Pty Ltd v Psycadian Ltd [2005] WASC 234 [27] - [28].
The plaintiffs submit that the suspension costs were not 'incurred' by them, because the source of the liability for suspension costs is cl 20.3(e) of the UMSA, such that the Company incurred a contingent liability for suspension costs when it entered into the UMSA on 8 July 2021.
They further submit that in any event, under the terms of the purchase orders the plaintiffs only caused the Company to incur liability for actual work performed and as directed by the Company, and the claimed suspension costs are therefore outside the scope of both orders.
I do not accept either proposition. A debt is incurred by a company 'when, by its choice, it does or omits to do something which, as a matter of substance and commercial reality, renders it liable for a debt for which it would otherwise not have been liable'.[18]
[18] Standard Chartered Bank of Australia v Antico [Nos 1 & 2] (1995) 38 NSWLR 290, 314.
Although it is true to say that any liability on the part of the Company under cl 20.3(e) of the UMSA was contingent, in the sense that the liability would only arise if the Company suspended the provision of mining services under the UMSA, the Company became liable to pay suspension costs as a consequence of the plaintiffs' decision to cease operations at the mine and to put the mine on a 'care and maintenance' basis, which they communicated to the defendant on 8 January 2024. In taking that step, the Company, by the plaintiff acting as its agents, rendered itself liable for the suspension costs for which it would not otherwise have been liable, and thereby incurred the debt.

Whether the plaintiffs are liable for the suspension costs depends, therefore, on the proper construction of the words 'services rendered' in the context of s 443A(1)(a).[19]
[19] Re Quirky Mama Productions Pty Ltd [2021] QSC 345 [80]; AGL Victoria Pty Ltd v Lockwood [2003] VSC 453; (1003) 10 VR 596 [23].
In AGL Victoria Pty Ltd v Lockwood,[20] Byrne J considered a claim against a receiver of a company under s 419 for the cost of the supply of electricity under an agreement whereby AGL Victoria was to procure the supply of electricity for the company, which was to pay a price fixed under the agreement at a rate per megawatts per hour. The agreement also provided for yearly electricity meter charges and a daily meter service charge. His Honour identified the origins and purpose of s 419, which is in similar terms to s 443A, as follows:
[20]AGL Victoria Pty Ltd v Lockwood [2003] VSC 453; (1003) 10 VR 596.
The mischief identified in the parliamentary debates as that which the provision was to overcome, was that of a receiver "buying goods without paying for them and, on their being sold, giving the proceeds to the debenture holder, the original seller not being paid". This practice, referred to as "the filling up of a security", which was castigated as commercially immoral, would evidently go beyond the buying and selling of goods, and the terms of s 311(4) demonstrate this. It would seem from the array of transactions mentioned in the subsection that what was intended was the filling up of the security by a receiver who entered into any of the stipulated transactions on a credit basis so that the secured creditor recovered the fruits earned from the services, goods or property, leaving the supplier to rank with other unsecured creditors.
…
It will be noted that the statutory provisions based on the South Australian model, unlike those in England and New Zealand, specify the transactions for which the receiver is fixed with personal liability…
I draw two conclusions from this brief historical excursus. First, that The mischief to which s. 419(1) is directed is wider than that of filling up the security by the buying and selling of goods. Second, that the provision operates only where the debt is one arising from a transaction of a kind specified in the sub-section; for other transactions the common law rule will apply. Further, these two conclusions suggest that the Court should not be astute to read the transactions in an unduly narrow way because, as expressed, they appear, broadly speaking, to be directed to the three principal ways in which a company acquires the resources with which to earn money from its commercial activities –
·by purchasing things for re-sale or consumption or other use in its commercial activities;
·by providing work or using it in its commercial activities; or
·by using the property of others in its commercial activities.
In any such case, the person who provides these resources on credit is entitled to be paid otherwise than by ranking with ordinary unsecured creditors of the insolvent companies. [28] [30] - [31] (citations omitted)
In Re Workcover Queensland[21] Muir J considered, but ultimately did not have to decide, whether administrators of a company were personally liable for insurance premiums in respect of workers compensation insurance. In rejecting the submission that the term 'services rendered' in s443A(1) suggested 'something in the nature of moneys paid for wages by a master in respect of work done by a servant', his Honour said:
I would be very reluctant to accept that the expression "services rendered" is so confined in meaning as the administrators submit.
Just as there is no attempt to impose any qualification or limitation in respect of types of goods bought or circumstances in which they have been bought, the subsection does not purport to qualify or restrict the description "services rendered". I cannot detect anything in the language or context of s. 443A(1) which suggests that it should be construed in a restrictive way. The meaning of "services rendered", grouped as it is with other general dealings of a commercial nature encompasses, at least, work done for the company which could be regarded as the "rendering of a service" in the ordinary sense of that expression.
[21] Re Workcover Queensland [2000] 1 Qd R 107.
Returning to AGL Victoria, Byrne J, having considered the authorities relating to the rendering of services in the context of taxation legislation, agreed with that statement of the law.[22] His Honour also referred to the decision of Gobbo J in R v Small Claims Tribunal; Ex parte RACV General Insurance Pty Ltd[23] as having held that 'an essential feature of a contract for the provision of services is the performance of positive physical acts for a person which can be characterised as services' in the context of construing the phrase 'a contract for the supply of goods or the provision of services' in the Small Claims Tribunal Act 1973 (Vic).[24]
[22] AGL Victoria [59].
[23] R v Small Claims Tribunal; Ex parte RACV General Insurance Pty Ltd [1981] VR 602.
[24] AGL Victoria [60].
Having formed the view that the fact that under the relevant agreement AGL read the electricity meters for a cost did not advance the matter, because those services were essentially for the benefit of AGL, his Honour recognised that the procuring of another to do work might amount to a service,[25] and continued:
Even so, my task is to characterise the AGL debt as a whole. The AGL submission presently under consideration involves a consideration of a question similar to that considered by Fullagar J in Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd. This was whether a contract for the design and construction of a tool for the manufacture of plastic drawers was a contract for the sale of goods or one for work and labour. His Honour, applying, albeit with reluctance, the English Court of Appeal decision in Robinson v Graves, determined this question by identifying the substance of the contract as one for the sale of goods, namely the tool. In the present case, where the performance of metering tasks represents but an activity ancillary to the principal obligation of selling electricity and one for which a very small part of the charge is referable, these do not transform the contract for the sale of electricity to a contract for work. Nor do they transform the consequent debt to a debt for services rendered. Likewise, where a dealer agrees to sell a thing to a customer, this contract is not transformed into a contract for work and labour simply because the only task the dealer performs, apart from the preparation of the necessary paperwork, is to arrange for a manufacturer to deliver the thing directly to the customer. In such a case the contract and the consequent debt is one for the sale of the thing. [62] (citations omitted)
[25] AGL Victoria [61].
His Honour's reference to the need to 'characterise the AGL debt as a whole' may have been influenced by Gobbo J's reasoning in Ex parte RACV General Insurance, who had rejected the proposition that every obligation in a widely phrased contract ought be treated as a contract for services as erroneous in principle, but it is clear that Byrne J was of the view that the fact that a small part of the debt claimed related to the provision of metering services did not 'transform the contract for the sale of electricity to a contract for work'.
Whilst I agree with the approach taken by Byrne J in AGL Victoria, which emphasises the importance of properly characterising the amount in question, I do not agree that there must be a single answer to that analysis.
The distinction has arisen in this case, where the administrators admit that part of the invoice raised by the defendant reflected charges for services rendered, which they have paid, and contend that the balance does not represent a debt for services rendered.
In my view, there is no reason why an amount claimed by a creditor comprising various amounts arising from the performance of different obligations under a contract must, as might be thought to be suggested by Byrne J in AGL Victoria, be treated as a single 'debt'. If that is the effect of his Honour's reasoning, with respect I consider it to be clearly wrong and I decline to follow it. In my opinion, it is possible that an amount claimed by a creditor may comprise debts properly the subject of s 443A(1) and other amounts, including claims for damages, which are outside the scope of the section.
In my view, the composite term 'debts for services rendered' in s 443A(1) should be construed to mean 'at least, work done for the company which could be regarded as the "rendering of a service" in the ordinary sense of that expression', consistent with Re Workcover Queensland and AGL Lockwood, it being understood that the procurement of others to perform that work is within the scope of that definition.
Further, the use of the word 'for' in s 443A(1) indicates that there must be a sufficient connection between the debt claimed and the service said to have been rendered.
That construction of the section is supported by s 443C, which limits an administrator's liability to that provided for in s 443A, s 443B and s 443BA.
In the present case, cl 20.3(e) of the UMSA provides that, unless otherwise agreed, the Company was to pay to the defendant the applicable stand by rates listed in the Schedule of Rates.
Clause S16.3 of Schedule 16 provides that compensation due to suspension of the mining services or part of the mining services shall be as set out in Schedule 16. The applicable Schedule of Rates provides that an amount is to be paid by the Company to the defendant for each period (whether a day, a week or a month) that the works are suspended.
In my opinion, the reference in cl S16.3 to compensation is not determinative of the issue whether the plaintiffs are personally liable to pay amounts in respect of the suspension of the works, although it is a factor to be taken into account.
Senior counsel for the defendant submitted that, as amounts payable in respect of suspension of mining services formed part of the 'Service Fee' as that term was defined in the UMSA, those costs were to be characterised as a debt for services rendered, consistent with the manner in which Byrne J had approached the issue in AGL Victoria, and because the suspension costs formed part of the agreed consideration for the provision of the mining services.
I do not accept that submission. In my view, the amount claimed by the defendant is not to be characterised as a debt incurred by the administrators for the services rendered, at least where the suspension of the mining services was for an indefinite period.
The amounts identified in Schedule 16 in respect of suspension costs are payable to the defendant in respect of its workforce being present on the mine site, but not providing the mining services contemplated by the UMSA by reason of the suspension of mining. They therefor represent payments for the defendant's work force and equipment not being engaged in providing a service as such, but instead remaining available at the mine.
Where, as here, the suspension was for an indefinite period of time, I consider that the necessary connection between the provision of mining services and the amounts claimed due under the contract is too remote, so that the debt is not 'for' a service rendered within s 4431(a).
The further amount of $257,073.42 said by the defendant to be payable by the plaintiffs relates to the adjustment for rise and fall on the amount of $1,012,100.08 claimed in respect of the suspension costs.
Clause S17.1 of Schedule 17 to the UMSA provides for the rates payable under the UMSA specified in Schedule 16 are, with certain presently irrelevant exceptions, to be adjusted in accordance with the formula set out in cl S17.1.4.
Had I been satisfied that the plaintiffs were liable pursuant to s 443A(1) to pay the amount claimed in respect of the suspension costs, I would have found that the amount claimed in respect of rise and fall formed part of the debt incurred by the plaintiffs for the services said to have been rendered, as the rise and fall mechanism formed part of the agreed pricing for the mining services under the UMSA.
As the defendant has not been successful in the claim for the suspension costs, the rise and fall component of the claimed debt fails for the same reason.
I accordingly find that the plaintiffs are not personally liable to the defendant in respect of either of the amounts in issue, and am prepared to make declarations in terms of paragraphs 1(a) and (b) of the amended originating process.
As there was no suggestion that the plaintiffs might be liable to the defendant on any basis other than in contract, I consider that it is also open to make a declaration in terms of paragraph 2 of the amended originating process.
I will hear the parties as to the precise form of the orders to be made and costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LT
Associate to the Hon Justice Cobby
27 SEPTEMBER 2024