In the matter of Mandalong Projects Capital P/L ACN 164 003 589 (Administrator Appointed) and Mandalong Projects JV P/L ACN 142 445 243 (Administrator Appointed)
[2015] NSWSC 2143
•1 September 2015
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New South Wales |
Case Name: | In the matter of Mandalong Projects Capital P/L ACN 164 003 589 (Administrator Appointed) and Mandalong Projects JV P/L ACN 142 445 243 (Administrator Appointed) |
Medium Neutral Citation: | [2015] NSWSC 2143 |
Hearing Date(s): | 1 September 2015 |
Date of Orders: | 1 September 2015 |
Decision Date: | 1 September 2015 |
Jurisdiction: | Equity - Corporations List |
Before: | Brereton J |
Decision: | Orders given that the administrations of the respondents end. |
Catchwords: | CORPORATIONS – voluntary administration – administrators – appointment of administrators by secured party – (CTH) Corporations Act 2001, s 436C – where validity of appointment dubious – where no order sought declaring appointment invalid but parties seek order that administration end under s 447A – relevance of company’s solvency where appointment made by several creditors – application under s 447D for confirmation that administrator was justified in accepting appointment and bringing proceedings – s 447D not appropriate to approve past acts of administrators – lack of necessity for such direction – held, administrations to end. |
Legislation Cited: | (CTH) Corporations Act 2001, s 436C, s 447A, s 447A(2), s 447C, s 447D, s 511 |
Cases Cited: | In the matter of One.Tel Limited [2014] NSWSC 457 |
Category: | Principal judgment |
Parties: | Ronald John Dean-Willcocks in his capacity as administrator of Mandalong Projects Capital Pty Limited Can 164 003 589 (administrator appointed) and Mandalong Projects JV Pty Limited ACN 142 445 243 (administrator appointed) (applicant) |
Representation: | Counsel: |
File Number(s): | 2015/251176 |
JUDGMENT (EX TEMPORE)
HIS HONOUR: On 3 August 2015, the Winpress Consultancy Corporation (“WCC”), claiming to be a secured creditor of the companies Mandalong Projects Capital Pty Limited and Mandalong Projects JV Pty Limited, purported to appoint the applicant Ronald John Dean-Willcocks to be administrator of those companies, pursuant to (CTH) Corporations Act 2001, s 436C. Immediately upon informing the directors of those companies of his appointment, they took issue with the validity of the appointment. Correspondence ensued between solicitors, and although not immediately, on 18 August 2015 the solicitors acting for the directors drew attention to a provision of the principal instrument under which the liability of the companies and rights of WCC was said to arise – namely, a note issuance deed of 4 July 2015 – the apparent effect of which was that the secured liabilities were limited to trust assets and did not bind the security-giver personally.
As is explained in the administrator’s outline of submissions, that limited recourse clause apparently applied to Mandalong Projects, a related company not in administration, and to Mandalong Projects Capital, the first respondent, and though by its terms it did not apply to the second respondent Mandalong Projects JV, the obligation of Mandalong Projects JV was in respect of the “guaranteed obligations” which themselves were defined by reference to Mandalong Capital’s liability to WCC. On that analysis, the companies personally owed nothing to the secured creditor WCC, and s 436C was not enlivened in the sense that WCC could not be said to be a secured creditor of the companies.
The administrators submit that cl 19 is not immune to attack by WCC, and in particular, that a rectification suit might be brought to bring the transaction documents into line with what are said to be the original intentions of the parties. However, no such suit has been brought. Taking the view that such an action would require extensive evidence of the antecedent negotiations, that it would encounter the difficulties that it might impose on parties who have given guarantees, liabilities that they had not prima facie guaranteed, and that the companies may have few if any assets, the administrator has determined that the pragmatic course is to seek to end the administration of the companies.
I have very grave doubts as to whether the administrators have been validly appointed. If a rectification suit were required to establish the validity of their appointment, then in the absence of such a suit it would seem to follow that they have not been validly appointed. However, neither party has asked me to declare, pursuant to s 447C, that the administrators have not been validly appointed; rather the administrators seek, and the companies do not oppose, an order under s 447A that the administration end. Such an order ordinarily imports that there is an administration validly on foot. In the circumstances of this case, because of the position adopted by the parties, I propose to make an order under s 447A, but on the basis that the order is made not assuming or accepting necessarily that there has been a valid appointment, but, for more abundant caution to the extent that it is necessary to bring to an end any administration that might be on foot.
Ordinarily, on an application for termination of an administration, the Court is concerned to be satisfied as to the solvency of the companies if they are to be returned to the control of their directors. The relatively short course of this administration and the limitations on what the administrator has been able to achieve in that period, mean that the administrator has not been able to put before the Court evidence plainly establishing the solvency of the companies. There is, however, some evidence that the companies are not trading. Moreover whether or not they are solvent, if, as I suspect, the administrator was not validly appointed in the first place, their financial status would not validate the appointment. As it seems to me, where s 447A is being invoked essentially as an alternative to declaring the administration invalid, the Court will be less concerned with questions of solvency than it otherwise might be. Any creditor or contributory that entertains concerns about the companies’ solvency will retain its remedies.
The administrator also sought a direction pursuant to Corporations Act, s 447D, to the effect that he was justified in accepting the appointment in conducting the administration and in bringing the present application. As I explained in connection with Corporations Act, s 511 in In the matter of One.Tel Limited [2014] NSWSC 457, provisions such as s 447D are not used retrospectively to give advice in respect of acts that have already taken place. They provide a facility for an administrator, deed administrator or liquidator to approach the Court for directions and advice as to how the administrator, etc, should act and, in particular, whether the administrator would be justified in embarking on a particular course. It is not a means for retrospectively sprinkling holy water, so to speak, on courses of action on which the administrator has already embarked without such advice. In particular, if the administrator had sought advice before accepting the appointment, the Court, being apprised of all the material, might have concluded that he was not (in light of the limited recourse clause) or, if that clause had not been put before the Court, then the extent to which the administrator was entitled to rely on it in the absence of critical evidence on the question might have been questionable. In any event, there seems to me no reason why a direction in respect of the administrators’ past acts should be given, even if there were jurisdiction to give it, which I doubt.
Section 447A is expressed in terms of authorising the Court to make such order as it thinks appropriate “about how this part is to operate in relation to a particular company”. Ordinarily, that involves the Court making an order expressed in terms of how the part is to operate in a particular case, but s 447A(2) expressly provides that the Court may order that an administration is to end for various reasons, including “for some other reason”.
I am satisfied that if there is an administration of these companies on foot, it should end because there is grave doubt as to the validity of the appointment and the resolution of that doubt is not justified by the expense involved, and, it may be assumed from the concurrence of representation of the secured creditor appointor and the administrators that the secured creditor no longer wishes to pursue the appointment. As I have said, despite the lack of evidence on the question of solvency in the particular circumstances of this case, where the appointment has been by a secured creditor, I do not see that as a critical objection, especially as creditors have other remedies in the case of insolvency.
The Court therefore orders, pursuant to Corporations Act, s 447A, that the administrations of each of the respondents end.
Costs
In circumstances where objection was taken to the validity of the appointment at the outset and the objectors have effectively achieved the position they sought to achieve by raising those objections, it seems to me that this case falls in the territory of a risk assumed by the secured creditor who indemnified the administrators, and it is there that the costs should fall.
I decline to make an order that the costs of the application be costs in the administration.
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