In the Matter Of Globaltech Corporation Pty Ltd (Administrators Appointed)
[2024] WASC 196
•27 MAY 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: IN THE MATTER OF GLOBALTECH CORPORATION PTY LTD (ADMINISTRATORS APPOINTED) [2024] WASC 196
CORAM: STRK J
HEARD: 24 MAY 2024
DELIVERED : 24 MAY 2024
PUBLISHED : 27 MAY 2024
FILE NO/S: COR 75 of 2024
MATTER: IN THE MATTER OF GLOBALTECH CORPORATION PTY LTD (ADMINISTRATORS APPOINTED)
EX PARTE
ROBERT CONRY BRAUER as joint and several administrator of GLOBALTECH CORPORATION PTY LTD (ADMINISTRATORS APPOINTED)
First named First Plaintiff
SHAUN ROBERT FRASER as joint and several administrators of GLOBALTECH CORPORATION PTY LTD (ADMINISTRATORS APPOINTED)
Second named First Plaintiff
GLOBALTECH CORPORATION PTY LTD (ADMINISTRATORS APPOINTED)
Second Plaintiff
Catchwords:
Corporations - Management and administration - Application pursuant to the Corporations Act 2001 (Cth) s 447A - Orders sought for the modification of the operation of the 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
Result:
Application granted
Category: B
Representation:
Counsel:
| First named First Plaintiff | : | AR Fleming |
| Second named First Plaintiff | : | AR Fleming |
| Second Plaintiff | : | AR Fleming |
Solicitors:
| First named First Plaintiff | : | Clayton Utz |
| Second named First Plaintiff | : | Clayton Utz |
| Second Plaintiff | : | Clayton Utz |
Cases referred to in decision:
Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) [2022] FCA 1506
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
Correa v Whittingham [2013] NSWCA 263; (2013) 278 FLR 310
Deputy Commissioner of Taxation v Portinex Pty Ltd [2000] NSWSC 99
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
Preston, in the matter of Qenos Pty Ltd (Administrators Appointed) [2024] FCA 461 at [24] (Button J), citing Crosbie (administrator), in the matter of Godfreys Group Pty Ltd (administrators appointed) [2024] FCA 60
R v Toohey; Ex parte Northern Land Council [1981] HCA 74; (1981) 151 CLR 170
Re Bosnjak Holdings Pty Ltd [2005] FCA 275; (2005) 53 ACSR 8
Re Greg Sewell Forgings Pty Ltd (1995) 17 ACSR 602
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) 51 ACSR 432
Re Unlockd Ltd (Administrators Appointed) [2018] VSC 345
Robert Michael Kirman and Robert Conry Brauer as joint and several administrators of Marine Produce Australia Pty Ltd (Administrators Appointed) and Ors [2023] WASC 236
Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (admins apptd) [2011] FCA 1493
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
STRK J:
Introduction
Robert Conry Brauer and Shaun Robert Fraser are the joint and several administrators of Globaltech Corporation Pty Ltd (administrators appointed).
By an interlocutory process filed on 17 May 2024, the administrators sought various orders. In particular, they sought to limit their personal liability under a funding deed dated 14 May 2024 between Veracio Limited as lender and the administrators as borrowers (Funding Deed), such that any liability be solely limited to the assets of Globaltech Corporation, without any recourse to the administrators personally beyond those assets.
As was explained on behalf of the administrators, the basis of the application for relief was that the administrators require funding to complete the steps necessary in the sale of Globaltech Corporation's primary asset, the intellectual property of mining technology developed by Globaltech Corporation, and to continue to trade Globaltech Corporation's business during that public sale process. Absent funding, Globaltech Corporation would be unable to trade through a sale or restructuring process, which the administrators had formed the view was necessary to achieve the best return to creditors.
At the hearing of the application, counsel for the administrators pressed for orders in the following terms:
(a)pursuant to s 447A of the Corporations Act, pt 5.3A of the Corporations Act is to operate as if s 443A(1) of the Corporations Act provides that any debts or liabilities of the administrators incurred under the Funding Deed (including but not limited to moneys borrowed, interest in respect of moneys borrowed, and borrowing costs) are in the nature of debts incurred by the administrators in the performance and exercise of their functions and powers as joint and several administrators of Globaltech Corporation, such that any liability arising against the administrators in relation to the Funding Deed is limited solely to the assets of Globaltech Corporation; and
(b)pursuant to s 447A of the Corporations Act, the operation of s 443A(1) of the Corporations Act is modified, insofar as it applies to any liability of the administrators (in their capacities as joint and several administrators of Globaltech Corporation) pursuant to the Funding Deed, so that if the indemnity of the administrators under s 443D of the Corporations Act from Globaltech Corporation is insufficient to meet any amount for which the administrators may be liable arising out of or in connection with the Funding Deed, then the administrators will not be personally liable to repay any such amount to the extent of such insufficiency.
When the interlocutory process was filed, the administrators intended to also seek an order pursuant to s 90-15(1) of the Insolvency Practice Schedule (which is sch 2 to the Corporations Act 2001 (Cth)), that the administrators were justified in entering into the Funding Deed. While included in the interlocutory process, that relief was not pressed at the hearing of the application, and leave was granted to amend the interlocutory process so as to reflect the same.
The application was made ex parte, was supported by an outline of written submissions filed on 23 May 2024, and was heard on 24 May 2024.
Upon reading the materials filed and after hearing counsel for the administrators, I granted the relief sought and indicated that I would publish my reasons. These are my reasons.
Evidence
In support of the application counsel for the administrators read three 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.
First Brauer affidavit
By an originating process filed on 8 May 2024, the administrators applied to extend the convening period as defined in s 439A(5)(b) of the Corporations Act as it applied to Goldtech Corporation. That application was heard and relief was granted by Master Russell on 10 May 2024.
That application was supported by, among other things, an affidavit sworn by Mr Brauer on 8 May 2024, to which Mr Brauer attached documents marked RCB1 to RCB6. At the hearing of this application (made by interlocutory process filed in the same proceeding), counsel read Mr Brauer's first affidavit.
Among other things, in his first affidavit, Mr Brauer deposed that he and Mr Fraser were appointed as joint and several voluntary administrators of Globaltech Corporation on 12 April 2024 pursuant to s 436A of the Corporations Act; and that he has had the principal day to day conduct of the administration of Globaltech Corporation.
Mr Brauer described Globaltech Corporation's background, deposing that it was incorporated in Western Australia on 23 April 1999 and designs, develops and manufactures exploration instrumentation, analysis software, real-time remote monitoring systems and data analytics for global mining and exploration operations. He further deposed that on or about 31 October 2013, Globaltech Corporation entered into an equipment distribution agreement with Boart Longyear Australia Pty Ltd (BLY Australia), which was amended on 1 January 2016, and pursuant to which BLY Australia agreed to purchase certain products and services from Globaltech Corporation; in around 2018, Votraint No. 1609 Pty Ltd (Votraint), an entity within the Boart Longyear group of companies (BLY Group), acquired approximately 35% of the shares in Globaltech Corporation; Votraint gradually increased this shareholding to approximately 58%, which was transferred to Veracio Limited, a member of the BLY Group, in around 2022; and as at the date of the administrators' appointment, Veracio Limited owned approximately 58% of the shares in Globaltech Corporation.
In his first affidavit, Mr Brauer also deposed that it was his belief, and that of Mr Fraser, that it was necessary to extend the convening period to allow further time for the administrators to undertake and complete their investigations, which would include the administrators assessing the need to obtain a valuation of Globaltech Corporation's intellectual property assets, and the receiving and considering any proposals for a deed of company arrangement (DOCA).
In his first affidavit, Mr Brauer also deposed to the assets and liabilities of Globaltech Corporation. Among other things, he deposed that the assets included intellectual property in relation to the mining technology developed and manufactured by Globaltech Corporation, in relation to which Globaltech Corporation had either registered or applied for a total of 80 patents in Australia, Canada, Chile, South Africa, United States of America, Ukraine, Brazil, and the African Regional Intellectual Property Organisation; that the administrators had received proofs of debt from unsecured creditors of Globaltech Corporation (which included Veracio Corporation), which proofs came to a total of approximately $23,915,744.17; and that there are outstanding employee entitlements.
Mr Brauer further deposed to the activities that had been conducted by the administrators since their appointment; and as to the reasons the administrators sought an extension of the convening period. Among other things, Mr Brauer deposed that there were a number of tasks that the administrators needed to complete to be able to prepare a report to creditors, which included undertaking further work to understand the potential value of Globaltech Corporation's intellectual property assets in the hands of different parties; and undertaking a process for the sale of Globaltech Corporation's intellectual property assets and/or the sale of the business as a going concern, or recapitalising Globaltech Corporation. Mr Brauer deposed that based on Mr Brauer's previous experience in undertaking sales campaigns, he estimated the outstanding tasks would take approximately 4 to 6 weeks.
Second Brauer affidavit
In support of this application, Mr Brauer swore a second affidavit on 16 May 2024, to which he attached one document marked RCB7.
In his second affidavit, Mr Brauer summarised the financial position of Globaltech Corporation; and the further work he believed was required to understand the value of Globaltech Corporation's intellectual property assets, to confirm the value of its inventory and stock in trade, and to recover its book debts.
Mr Brauer deposed that based on his investigations, he believed that third party funding was required for the administration of Globaltech Corporation.
He again deposed that there remained a number of steps that the administrators needed to complete in the administration, which included a sale process in relation to Globaltech Corporation's intellectual property assets or recapitalisation; reviewing any DOCA proposals received following that sale process; undertaking preliminary investigations and preparing the report to creditors; and, if creditors resolved to accept a DOCA proposal, completing the steps required under that DOCA.
Mr Brauer estimated that the administrators' cost for completing the steps described above, and continuing to trade the business of Globaltech Corporation during the administration, would be approximately $478,749.
Mr Brauer further noted that, in addition to the tasks described above, the administrators continued to trade Globaltech Corporation's business during the period of the administration, and based on his review and understanding, he believed that the administrators required funding of approximately $321,339 to meet operating costs, including rent; insurance; general operations costs such as internet services; legal fees; and wages and entitlements for Globaltech Corporation's two remaining employees.
Mr Brauer deposed that based on the current financial position of Globaltech Corporation, he believed that the administrators would require third party funding for the administration, particularly to fund the expected costs of a public sale process and to complete any transaction.
Mr Brauer attached to his second affidavit a copy of the Funding Deed. As to the Funding Deed, Mr Brauer deposed that Veracio Limited, being the majority shareholder and one of the two largest creditors of the company, had offered to provide the administrators with a funding facility up to an amount of $800,000 from which the administrators could draw funding for the administration. He also deposed to the key terms of the Funding Feed; that based on his experience he considered the terms of the Funding Deed to be reasonable, commercial and appropriate in the circumstances of voluntary administration, having regard to the availability of the funds, the amount of funds, that the loan was unsecured, the interest rate and the repayment terms; and that he believed the Funding Deed was the best option available to the administrators to fund any sale process so as to allow for a potential sale or recapitalisation to occur, and to fund the ongoing costs of trading and operating the business of Globaltech Corporation during the administration.
Mr Brauer also noted that the administrators had received one other proposal for funding the administration of Globaltech Corporation, but that proposal had been withdrawn. Mr Brauer further deposed that he intended to give notice of the interlocutory application to creditors (by posting a copy on the McGrathNicol website) and to the Australian Securities and Investment Commission (ASIC).
Finally, I had noted that Mr Brauer not only described the terms of the Funding Deed, but by reference to cl 10, had suggested that the Funding Deed's operation and effect were conditional on the administrators obtaining the requested relief from this court.[1]
[1] Affidavit of RC Brauer sworn 16 May 2024, par 21, referring to RCB7 (Funding Deed cl 10.1, page 17 of the affidavit).
As was accepted by counsel, this was not a case where the parties had agreed that Veracio Limited, as lender, was not obliged to advance funds unless the court granted the relief sought by the administrators in the application. Indeed, funds had already been advanced as at the date of the hearing.[2] Nor was the grant of relief one of the conditions precedent to the obligation to fund prescribed at cl 4 of the Funding Deed.[3]
[2] ts 17 (24 May 2024).
[3] Affidavit of RC Brauer sworn 16 May 2024, RCB7 (Funding Deed cl 4, page 14 of the affidavit).
While Mr Brauer referred to cl 10 of the Funding Deed, cl 10 did not provide that the Funding Deed's operation and effect was conditional on the administrators obtaining the requested relief from this court. Clause 10 concerned court approval and the recourse of Veracio Limited and was in the following terms:[4]
[4] Affidavit of RC Brauer sworn 16 May 2024, RCB7 (Funding Deed cl 10, pages 17 and 18 of the affidavit).
10.Court approval and recourse of the Lender
10.1Orders for relief of personal liability
(a)The parties acknowledge that the Borrowers will make an urgent application to a Court for orders that pursuant to section 447A(1) of the Corporations Act and section 90-15 of the Insolvency Practice Schedule (Corporations). Part 5.3A of the Corporations Act is to operate in relation to the Borrowers as if section 443A(1) of the Corporations Act provides that:
(i)the liabilities of the Borrowers in their capacities as Administrators incurred with respect to any obligations arising out of, or in connection with this deed, are in the nature of debts incurred by the Borrowers in the performance and exercise of their functions as Administrators; and
(ii)notwithstanding that the liabilities referred to in clause 10.1(a)(i) are debts incurred by the Borrowers in the performance and exercise of their functions as Administrators, the Borrowers will not be personally liable to repay such debts or satisfy such liabilities to the extent that the Assets are insufficient to satisfy the debts and liabilities incurred by the Borrowers arising out of, or in connection with, this deed,
(the Court Orders).
(b)The Borrowers shall notify the Lender promptly on (a} issuing the application for the Court Orders to be made; and (b) the Court Orders being made.
(c)The Lender agrees to support the application for the Court Orders.
10.2Recourse of the Lender
Notwithstanding any other provision of this deed (including, for the avoidance of doubt, clauses 6.1 and 6.5):
(a)if the Court Orders are not made, the Lender will have no recourse against the Borrowers in respect of the Principal Outstanding and all other Outstanding Moneys owing under this deed; or
(b)if the Court Orders are made, the liability of each Borrower under this deed will only be liable under section 443A of the Corporations Act on a limited recourse basis, namely limited to the assets of the Company from which the Borrowers are indemnified for their personal liability under section 443D of the Corporations Act and for which the Borrowers have a lien over the assets of the Company under section 443F of the Corporations Act.
By way of a correction, in the course of the hearing counsel for the administrators noted that:[5]
(a)the administrators were obliged under the Funding Deed to repay the 'Principal Outstanding' and all other 'Outstanding Moneys', in full within five business days of the 'Termination Date';[6]
(b)'Termination Date' was defined in the Funding Deed to mean the earlier to occur of events which included 'a refusal by the relevant Court to make orders in the form of, or with substantively the same effect as, the Court Orders';[7] and
(c)this court's refusal of the application would be a termination event under the Funding Deed, and the practical effect of a refusal would be to bring the Funding Deed to an end.
[5] ts 16 - 18 (24 May 2024).
[6] Affidavit of RC Brauer sworn 16 May 2024, RCB7 (Funding Deed cl 6.1, page 15 of the affidavit).
[7] Affidavit of RC Brauer sworn 16 May 2024, RCB7 (Funding Deed cl 1.1 (Definitions), page 10 of the affidavit).
Counsel also explained that all moneys that had been received to date would be returned by the administrators to Veracio Limited as lender, if the relief sought was not granted.[8]
Fleming affidavit
[8] ts 18 (24 May 2024).
In support of the application, Alistair Ronald Fleming swore an affidavit on 24 May 2024 to which he attached documents marked ARF3 and ARF4.
Mr Fleming attached to his affidavit correspondence with ASIC and I was satisfied that ASIC had been given notice of this application.
Disposition
Personal liability
Division 9 of pt 5.3A of the Corporations Act concerns the liability of administrators and the indemnity for debts of the administration.
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.
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.
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.
By the application, the administrators sought to modify the application of s 443A so as to limit their personal liability under the Funding Deed.
Applicable principles - limitation of personal liability
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.[9]
[9] 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].
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.
While I accepted that the power is broad, I also proceeded on the basis that the power was not unlimited.[10] 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.[11] 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.
[10] 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.
[11] R v Toohey; Ex parte Northern Land Council [1981] HCA 74; (1981) 151 CLR 170, cited in Correa v Whittingham [4] (Barrett J).
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.[12]
[12] Australasian Memory Pty Ltd v Brien; Re Greg Sewell Forgings Pty Ltd (1995) 17 ACSR 602; Correa v Whittingham [4] (Barrett J).
Section 447A empowers the court to limit the personal liability of voluntary administrators under s 443A of the Corporations Act for liabilities incurred by the company to which they are appointed.[13] In these reasons, I adopt the observations made by Banks-Smith J in Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) at [47] to [50] as if set out here in full.
[13] Re Spyglass Management Group Pty Ltd (admin apptd) (2004) 51 ACSR 432; Re Malanos [2007] NSWSC 865; Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (admins apptd) [2011] FCA 1493; Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) [2022] FCA 1506. See also the recent decision of Whitby J in Robert Michael Kirman and Robert Conry Brauer as joint and several administrators of Marine Produce Australia Pty Ltd (Administrators Appointed) and Ors [2023] WASC 236 [17], citing Re Unlockd Ltd (Administrators Appointed) [2018] VSC 345.
Applying the principles summarised above, and summarised by Banks Smith J, in considering whether to grant the relief sought on behalf of the administrators, I found as follows.
Standing
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).
Power
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 [4] above.
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 funding arrangement to enable the company's business to continue to trade for the benefit of the creditors of the company. I accepted that the court had the power to make the orders promoted on behalf of the administrators pursuant to s 447A, which I considered had a clear nexus with how pt 5.3A was to operate in relation to Globaltech Corporation.
Further, I accepted that the orders proposed on behalf of the administrators were designed to achieve in relation to Globaltech Corporation the objects of pt 5.3A as stated in s 435A of the Corporations Act. That is, I was satisfied that Funding Deed and the orders sought promoted the administration of the affairs of the company in administration in a way that maximised the chances of it and its business continuing in existence.
I was also 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. In this case, the temporal requirement was satisfied by the fact that the orders will have effect from the time of their making.[14]
Discretion
[14] In the matter of Renex Holdings (Dandenong) 1 Pty Ltd (administrators appointed) [2015] NSWSC 2003 [14]; recently citied and applied in 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.
In the disposition of the application, I weighed the following matters in the balance:[15]
(a) whether the proposed arrangements were in the interests of the company's creditors and were consistent with the objectives of pt 5.3A of the Corporations Act;
(b) whether the arrangements proposed enabled the company's business to continue to trade for the benefit of the company's creditors;
(c) whether the creditors of the company were not prejudiced or disadvantaged by the types of orders sought and stood to benefit from the administrators entering into the arrangement; and
(d) whether notice had been given to those who may be affected by the order.
[15] Preston, in the matter of Qenos Pty Ltd (Administrators Appointed) [2024] FCA 461 at [24] (Button J), citing Crosbie (administrator), in the matter of Godfreys Group Pty Ltd (administrators appointed) [2024] FCA 60 [70] - [75] (Beach J).
There did not appear to be any significant discretionary factors which counted against making the orders sought on behalf of the administrators pursuant to s 447A of the Corporations Act.
The evidence before the court was comprehensive, and I accepted that the proposed arrangements were in the interests of Globaltech Corporation's creditors, and were consistent with the objectives of pt 5.3A of the Corporations Act. Further, I accepted that the arrangements proposed would enable Globaltech Corporation's business to continue to trade for the benefit of its creditors
In so concluding, I was cognisant that the administrators did not have sufficient assets available to them to meet the costs of any public sale/recapitalisation process, and the costs of continuing to trade the business during the administration.
As was submitted on behalf of the administrators, the facility which Veracio Limited had made available to the administrators by the Funding Deed provided the administrators with the ability to draw down funds for the administration of the Globaltech Corporation, particularly for the sale of its intellectual property assets and/or a recapitalisation of Globaltech Corporation, and for the continuation of the business while the administration continued, and a sale process was completed. Upon the making of the orders, Veracio Limited would have the benefit of the administrators' statutory indemnity and lien to the company's assets to the extent of the drawn down funds, but no new security over Globaltech Corporation's assets.
I accepted that the orders sought would facilitate the Globaltech Corporation trading on for the benefit of creditors and for the purposes of maximising the return to creditors, uninfluenced by any concerns as to personal liability on the part of the administrators. I was cognisant that all moneys received to date would be returned by the administrators to Veracio Limited if the application was refused.[16]
[16] ts 18 (24 May 2024).
As was emphasised on behalf of the administrators, it was Mr Brauer's evidence, an insolvency practitioner with over 20 years of experience, that in his view the terms of the Funding Deed was reasonable, commercial, and appropriate in the circumstances, and he believed it to be the best option available for the administrators to fund the ongoing costs of trading and the operation of the business of Globaltech Corporation. The opinion of Mr Brauer held considerable weight.
I considered that there was unlikely to be any material prejudice or disadvantage to creditors by limiting the personal liability of the administrators, as the orders sought simply relieved the administrators from personal liability for a loan, which was otherwise unsecured and which was provided so as to allow the continued trading of Globaltech Corporation and a potential sale or recapitalisation, which would be for the benefit of creditors.
Veracio Limited would clearly be affected by the orders sought. As lender, it had entered into the Funding Deed in which it had acknowledged that the administrators, as borrowers, were to make this application to the court;[17] and it had agreed to support the application.[18]
[17] Affidavit of RC Brauer sworn 16 May 2024, RCB7 (Funding Deed cl 10.1(a), page 17 of the affidavit).
[18] Affidavit of RC Brauer sworn 16 May 2024, RCB7 (Funding Deed cl 10.1(c), page 18 of the affidavit).
Creditors had been put on notice of the application through information available on the McGrathNichol website, and no creditor has sought to be heard in relation to the application.
The administrators also proposed an order which required them to give notice of the orders to creditors of Globaltech Corporation, and the orders sought provided for anyone affected by them to have liberty to apply on 48 hours' notice. I took comfort that any person affected by the orders would be afforded an opportunity to be heard.
Finally, I was cognisant that ASIC was on notice of the application, but had not sought to intervene.
Weighing all of these matters in the balance, I was prepared to make the orders sought.
Costs
By the interlocutory process, the administrators sought an order that the costs of the application be treated as costs in the administration of Globaltech Corporation. I was satisfied that the application was a necessary incidence of the administrators' role and that the costs order as promoted on behalf of the administrators was appropriate.
Conclusion and orders
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 interlocutory process. The orders made on 24 May 2024 are reproduced at sch A to these reasons.
Sch A – Orders made on 24 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 Hon Justice Strk
27 MAY 2024
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