Kirk v Westlink Pty Ltd
[2025] QSC 152
•14 April 2025 (ex tempore)
SUPREME COURT OF QUEENSLAND
CITATION:
Kirk v Westlink Pty Ltd [2025] QSC 152
PARTIES:
DARRYL EDWARD KIRK AS RECEIVER AND MANAGER OF WESTLINK PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ACN 133 049 948
First applicant
and
STEPHEN PHILLIP EAREL AS RECEIVER AND MANAGER OF WESTLINK PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ACN 133 049 948
Second applicant
v
WESTLINK PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ACN 133 049 948
Respondent
FILE NO:
BS 16645/24
DIVISION:
Trial Division
PROCEEDING:
Application
ORIGINATING COURT:
Supreme Court at Brisbane
DELIVERED ON:
14 April 2025 (ex tempore)
DELIVERED AT:
Brisbane
HEARING DATE:
14 April 2025
JUDGE:
Hindman J
ORDER:
Pursuant to Corporations Act 2001 (Cth), s. 424(1), the applicants would be justified in performing their obligations, and in causing the respondent to perform its obligations, under the Deed of Settlement dated 19 December 2024 between the respondent, the applicants, Quinbrook Asset Management Pty Ltd and Perpetual Corporate Trust Ltd.
The applicants’ costs of the application (which are not met by Quinbrook Asset Management Pty Ltd) are their costs in the receivership of the respondent and are to be paid on the indemnity basis, including reserved costs.
CATCHWORDS:
CORPORATIONS – RECEIVERS, CONTROLLERS AND MANAGERS – POWERS – TO APPLY TO COURT FOR DIRECTIONS – where the applicants are the receivers of a company – where the applicants seek judicial advice concerning the receivership of the company, namely that they would be justified in performing certain obligations and in causing the company to perform certain obligations under a deed of settlement – whether this case is one in which the giving of judicial advice is appropriate – whether the judicial advice sought by the applicants ought be given
Corporations Act 2001 (Cth), s. 424
GGPG Pty Ltd v Golden Eagle Property Group Pty Ltd [2024] FCA 1188, cited
Heenan v Ralan Paradise No 1 Pty Ltd (No 2) (2021) 156 ACSR 86, cited
Marley v The Mutual Security Merchant Bank and Trust Co Limited [1991] All ER 3, distinguished
Merchant Banking Company of London v The London and Hanseatic Bank [1886] 55 LJ Ch 479, cited
One T Development Pty Ltd v Peter Krejci(in his capacity as liquidator of ENA Development Pty Ltd) [2023] NSWCA 120, cited
Palk v Mortgage Services Funding PLC [1993] Ch 330, cited
RCR Tomlinson Ltd [2018] NSWSC 1859, cited
Re ACN 004 410 833 Ltd [2021] NSWSC 799, cited
Re Ansett Australia Ltd and Korda (No 3) (2002) 115 FCR 409, cited
Re Banksia Securities Ltd (2022) 371 FLR 133, cited
Re G B Nathan & Co Pty Ltd (1991) 24 NSWLR 674, cited
Re IG Energy Holdings (Australia) Pty Ltd (2023) 168 ACSR 104, cited
Re Mirabela Nickel [2018] WASC 335, cited
Re Octaviar Administration Pty Ltd [2017] NSWSC 1556, cited
Re Octaviar Ltd [2016] NSWSC 16, citedRe One.Tel Network Holdings Pty Ltd (2001) 40 ACSR 83, cited
COUNSEL:
C A Wilkins KC and A G Psaltis for the first and second applicants
D Farrands KC for Quinbrook Asset Management Pty Ltd ACN 608 876 286, an interested partyS K Long for Mark Doyle and Doyle Family Farms Pty Ltd ACN 616 538 419 as trustee for the Doyle Farms Family Trust, interested parties
SOLICITORS:
Colin Biggers & Paisley for the first and second applicants
Johnson Winter Slattery for Quinbrook Asset Management Pty Ltd ACN 608 876 286
Thynne + Macartney for Mark Doyle and Doyle Family Farms Pty Ltd ACN 616 538 419 as trustee for the Doyle Farms Family Trust
Introduction
This is an application for judicial advice concerning the receivership of a company who I will refer to as Westlink. Its proper name is Westlink Pty Ltd (Receivers and Managers Appointed).
The applicants (Receivers) are seeking judicial advice from the court pursuant to section 424 of the Corporations Act 2001 (Cth) (CA) that they would be justified in performing obligations and in causing Westlink to perform obligations under a deed of settlement dated 19 December 2024 (Deed of Settlement) with Quinbrook Asset Management Pty Ltd (Quinbrook), who is an interested party appearing on the application.
The other interested persons who have appeared on the application, are Mr Mark Doyle and an associated company, Doyle Family Farms Pty Ltd ACN 616 538 419 (DFF) as trustee for the Doyle Farms Family Trust (DFF Trust). Mr Mark Doyle is the director of DFF.
In terms of the material that the parties have relied upon, the Receivers have filed an originating application, which is court document 1, and then there are a number of affidavits, including certain affidavits which are already the subject of confidentiality orders, and a further affidavit that I will make the subject of confidentiality orders. For the record, the court documents relied upon by the Receivers are court documents 2 to 3, 4, 5 to 6, 14, 23, and a further confidential affidavit of Kirk, which I have given leave to file and read today. There is also an outline of submissions for the Receivers that has been filed in compliance with earlier orders of Justice Burns.
Quinbrook, in the proceeding as an interested party, supports the Receivers’ application, and it has relied on one affidavit, an affidavit of Mr Connor, which is court document 17.
The interests of the other interested parties, who I will just refer to together as the Doyle Interests, will become obvious when I set out the background to the proceeding. Despite the fact that the Doyle Interests have, earlier in the proceeding, filed affidavits and a set of submissions, which at least in part deal with some of the issues that arise in this application, they do not rely upon any of those affidavits in this application, nor those earlier written submissions. No material is relied upon by the Doyle Interests in respect of the present application.
However, there is contained within the Receivers’ court documents relied upon correspondence from or on behalf of the Doyle Interests, which expresses, in strong terms, some of their apparent objections to the course of conduct in which the Receivers have engaged, and this application for the giving of judicial advice. There is no material from the Doyle Interests, despite the fact they do not rely upon any of their own material in this application, to swear that they do not maintain the concerns that are raised in that correspondence. Formally their position in respect of the application is that they do not oppose the application, and neither do they support the application, but are here as an interested party to assist the court as best as they are able to.
I think then the way that I ought approach it, and as I would approach it if no interested party had attended, is to look at what the potential concerns might be with both the giving of judicial advice in a general way, and the content of the advice that is sought, so that the court, even if the interested parties do not play devil’s advocate, can at least consider the possible competing positions. I think that is an appropriate way to proceed. And so, in that respect, it is certainly not that I have no regard to the Doyle Interests’ correspondence, which outlines some of the issues which might tell against the application.
Having said that, there has been no cross-examination of any witnesses during this hearing either, and that is an important matter to bear in mind, given the Receivers have sworn significant evidence as to the steps that they have taken in the receivership, and how they have reached the position that they put before the court today.
It seems to me that, in an application of this nature, there are two main issues that need to be addressed. The first is whether it is the type of case where judicial advice should be given at all. That looms large in a case such as this where the content of the judicial advice, in a general way, might be described as providing commercial-type advice, as distinct from strict legal-type advice which the court is ordinarily very willing to give. The second is then, if advice is to be given, what that advice should be, which effectively, although not precisely, is like the court putting itself in the position of the Receivers, to see if the steps that the Receivers wish to get advice about are reasonable steps for the court to endorse. Those two main issues do overlap to some extent.
Factual background
There is no dispute between any of the parties that have appeared today about the background to the proceeding or the principles that are to be applied.
Westlink and the appointment of the Receivers
Westlink was incorporated on 2 September 2008, and was appointed as the trustee of the Westlink Industrial Trust (the WIT) on 4 September 2008. It had Mr Craig Doyle as its sole director from incorporation until October 2023, when he was replaced as a director by his brother Mr Mark Doyle.
On 25 May 2022, the Receivers were appointed to all the assets of Westlink and the WIT by Starkorp Pty Ltd as trustee for the Swedish Style Family Trust (Starkorp) pursuant to a deed dated that day.
Starkorp is the second ranking secured creditor of Westlink and the WIT pursuant to a loan agreement between Starkorp and Mr Craig Doyle dated 24 June 2019, a deed of guarantee between Starkorp and Westlink dated 24 June 2019 and a general security deed between Westlink and Starkorp dated June 2019. As at 31 August 2024, Starkorp was owed approximately $5 million on its loan. Since then, the debt owed to Starkorp has grown with interest (being simple interest at 20% per annum) and enforcement costs to more than $5.5 million.
Starkorp’s security is registered on the Personal Property Securities Register as an “all present and after acquired property” (All PAP) security. There is one security interest registered on the PPSR in priority to Starkorp’s interest, being an All PAP interest dated 14 July 2017 in favour of McInnes Wilson Lawyers Pty Ltd which has since been transferred to DFF as the trustee for the DFF Trust.
The allegation in the material is that the debt that is owed to DFF is in the order of $1.9 million, which debt, as between DFF and Starcorp, has priority, I understand is subject to dispute, and is not for me to resolve in this application. I have been informed by Ms Long for the Doyle Interests, though I am not sure it is actually in the material, that there are no other substantial creditors of Westlink that need to be considered.
Westlink and the Lockyer Energy Project
On or about 5 January 2009, Westlink as trustee of the WIT acquired a parcel of land at Lot 191 Rangers Road, Adare, Queensland (the Land). It obtained a development approval for the purpose of constructing an open-cycle gas turbine peaking power station on the Land (the Development Application). The project to develop the Land has become known as the Lockyer Energy Project (the Project).
In March 2017 Westlink as trustee of the WIT (as seller) entered into a contract (the Land Sale Agreement) with Capital Partners Australia Pty Ltd (Capital Partners) as trustee for the Australian Clean Power Trust (the Trust) (as buyer) to sell the Land. By Special Condition 13.1(a) of the Land Sale Agreement, Capital Partners agreed to grant a mortgage of the Land in favour of Westlink as trustee of the WIT.
On 20 April 2017, the Land Sale Agreement completed and Capital Partners granted Westlink, as trustee of the WIT, the mortgage contemplated by Special Condition 13.1(a) of that agreement (the Mortgage). The Mortgage was registered on 20 April 2017.
The Land Sale Agreement (and the Mortgage) committed Capital Partners as trustee of the Trust to make payments to Westlink upon the attaining of certain milestones in respect of the development of the “Project”, which was defined in Special Condition 1 as meaning “the development and construction of a gas fired power station on the Land in stages after obtaining all Approvals (including the Development Approval) and Project Agreements”. It thereby bound Westlink and Capital Partners as trustee of the Trust to a contractual relationship post completion of the sale.
Special Condition 14.1 is the critical provision by which those obligations were created. It provided:
Subject to settlement occurring, and in consideration of the transfer of the Other Assets, [Capital Partners] must make the following payments to [Westlink]:
(a) $2.5 million when it enters into a Tolling Agreement;
(b) $3.1 million on achievement of Stage 1 FID [i.e. a financial investment decision to proceed with Stage 1 of the Project];
(c) $70,000.00 per megawatt for any electricity generation capacity exceeding 100 megawatts in Stage 1 (if applicable) on achievement of Stage 1 FID;
(d) $70,000.00 per megawatt for any electricity generation capacity exceeding the megawatt capacity of Stage 1 but capped at 200 megawatts on achievement of Stage 2 FID; and
(e) an annual amount for every Financial Year based on [Capital Partner’s] Final Accounts equal to 10% of cash returns earned by [Capital Partners] or a successor in title on an ongoing basis over and above a 12% unlevered post tax internal rate of return hurdle for electricity generation capacity exceeding 200 megawatts.
It follows from Special Condition 14.1 that pursuit of the Project was necessary for Westlink to have the benefit of any payments under that condition.
First and foremost, Capital Partners was to make a “Tolling Agreement” which, for the purposes of that condition, was defined as “a tolling or offtake agreement between [Capital Partners] and an offtaker to manage the offtake from the Project on terms satisfactory to [Capital Partners]” (a Tolling Agreement).
Before the making of a Tolling Agreement, Capital Partners had no present monetary obligation to pay Westlink under Special Condition 14.1; its obligations to pay Westlink under that special condition were prospective or contingent. Those prospective or contingent monetary liabilities were “Secured Moneys” as defined in the Mortgage.
By clause 6 of the Mortgage, Capital Partners as trustee of the Trust covenanted to “ensure that the Secured Moneys are paid … as required by the Transaction Document” (which was defined to mean, inter alia, the Land Sale Agreement). Clause 6 thus required Capital Partners to do all things necessary to enable Westlink to have the benefit of Special Condition 14.1. Pursuit of the Project was one of those things. If the Project was not pursued, then Capital Partners’ obligation to pay Westlink under Special Condition 14.1 would never mature into a present monetary obligation.
Westlink and Capital Partners also entered into a Tripartite Deed with another company, Solstice Development Services (SDS) Pty Ltd (Solstice), a consultant to Westlink, concerning the development of the Project.
On 18 December 2017, Westlink (by Mr Craig Doyle) and Capital Partners agreed, by letter, to vary the Land Sale Agreement to alter the payments Capital Partners was required to make under Special Condition 14.1 (the First Variation) - relevantly:
(a)to provide for an immediate payment of $250,000 by Capital Partners to Westlink;
(b)to reduce the amount payable under Special Condition 14.1(a) from $2.5 million to $2.1 million.
On 2 November 2018 Capital Partners ceased to be the owner of the Land and the trustee of the Trust. It was replaced by:
(a)Quinbrook as the trustee of the Trust by way of a Deed of Retirement and Appointment of Trustee dated 2 November 2018;
(b)Perpetual Corporate Trust Limited (Perpetual) as owner of the Land (subject to existing encumbrances, including the Mortgage) as custodian trustee for Quinbrook.
Also on 2 November 2018, the rights and obligations under the Land Sale Agreement and Mortgage were novated. Westlink, Capital Partners and Perpetual (as custodian) entered into a document called a Deed of Covenant (the DoC), by clause 2 of which:
(a)Perpetual agreed to perform Capital Partners’ obligations under the Land Sale Agreement and the Mortgage as if it had originally executed them;
(b)Westlink agreed to perform the Land Sale Agreement on the basis that Perpetual had replaced Capital Partners;
(c)Capital Partners’ obligations were released.
Westlink, Quinbrook, Solstice and Perpetual also entered into a Deed of Transfer of Tripartite Deed dated 2 November 2018 by which Perpetual (as custodian trustee) assumed Capital Partners’ obligations under the Tripartite Deed.
On or about 8 April 2020, Westlink (by Mr Craig Doyle) and Quinbrook agreed, by letter, to further to vary Special Condition 14.1 (the Second Variation):
(a)to provide for payments of $400,000 by Quinbrook to Westlink in instalments payable:
(i)as to $100,000 within 24 hours of countersigning the letter;
(ii)as to $100,000 within 72 hours of receiving a countersigned term sheet from the Commonwealth;
(iii)$200,000 within 72 hours of receiving a binding agreement with the Commonwealth,
(b)to provide for the further reduction of the payment in Special Condition 14.1(a):
(i)from $2.1 million to $1.88 million, upon the first $100,000 instalment being paid;
(ii)from $1.88 million to $1.66 million, upon the second $100,000 instalment being paid;
(iii)from $1.66 million to $1.34 million, upon the $200,000 instalment being paid.
On or about 11 February 2021, Westlink (by Mr Craig Doyle) and Quinbrook agreed, by letter, again to further vary Special Condition 14.1 (the Third Variation):
(a)by reducing the amount payable under Special Condition 14.1(a) from $1.88 million to $1.44 million;
(b)by deleting Special Condition 14.1(e) entirely;
(c)by rendering no longer applicable, null and void, the second $100,000 instalment and the $200,000 instalment under the Second Variation,
in return for a payment to Westlink of $200,000.
After the Third Variation, Special Condition 14.1 therefore provided:
Subject to settlement occurring, and in consideration of the transfer of the Other Assets, [Perpetual] must make the following payments to [Westlink]:
(a) $1.44 million when it enters into a Tolling Agreement;
(b) $3.1 million on achievement of Stage 1 FID [i.e. a financial investment decision to proceed with Stage 1 of the Project];
(c) $70,000.00 per megawatt for any electricity generation capacity exceeding 100 megawatts in Stage 1 (if applicable) on achievement of Stage 1 FID; and
(d) $70,000.00 per megawatt for any electricity generation capacity exceeding the megawatt capacity of Stage 1 but capped at 200 megawatts on achievement of Stage 2 FID; and …
Enforcement of Starkorp’s security
As at the date of the Receivers’ appointment, Westlink had not been informed by Quinbrook that it had entered into a Tolling Agreement, nor did it appear to the Receivers, either initially or subsequently, that a Tolling Agreement was imminent.
Upon their appointment, the Receivers took steps to understand Westlink’s asset and liability position, and to understand from Quinbrook the steps it had taken to perform the Land Sale Agreement.
Westlink’s primary secured asset, as far the Receivers’ investigations have revealed, is its rights as trustee of the WIT under the Land Sale Agreement and DoC, as secured by the Mortgage. The rights created by that interest are contingent and prospective. It was these rights which the Receivers sought to investigate after they were appointed.
After their appointment, between July and August 2022, the Receivers wrote to Quinbrook seeking information about the Project.
On 22 August 2022, after having obtained some information and undertaking further investigations, the Receivers sent a draft claim and statement of claim to Quinbrook (the Westlink Claim).
The draft Westlink Claim set out a potential cause of action against Perpetual (as custodian) for declarations that Perpetual was obliged to, but had not, complied with clause 6 of the Mortgage, in that it had not progressed the Project; Westlink had suffered “Loss” as a result; Perpetual was required to indemnify, but had not indemnified, Westlink under clause 21.1; and that an “Event of Default” had thus occurred.
The draft Westlink Claim was incomplete in that there was an absence of information about the progression of the Project and attempts to enter into a Tolling Agreement. The Receivers wished to investigate these matters before the claim could be finalised and filed. The draft Westlink Claim did not refer to any cause of action under the DoC, as that document was not then in the possession of the Receivers. The inclusion of the reference in the draft statement of claim to the DoC would not change the general nature of the draft proceeding.
On 22 November 2022, the Receivers obtained ASIC’s authorisation to conduct examinations into the examinable affairs of Westlink as “eligible applicants”.
On 9 December 2022 the Receivers applied to the Federal Court for examination summonses and orders for production to Mr Craig Doyle, Quinbrook and two of its officers.
On 30 January 2023, a Federal Court registrar made orders granting the Receivers’ application and ordering the issuing of summonses and an order for production to Quinbrook.
Subsequently, the Receivers sought and obtained orders for production of documents by Vincents Chartered Accountants (14 March 2023) and DFF (27 August 2024).
Mr Craig Doyle (16 March 2023), Vincents (on or before 22 March 2023) and DFF (on or before 2 October 2024) produced documents in response to the summonses and orders for production issued to them. The documents were reviewed by the Receivers.
On 14 March 2023, Quinbrook and its officers applied to discharge the orders for production and the summonses and to review the Registrar’s decision to issue them. That application was not heard until 20 July 2023. On 10 August 2023, the Honourable Justice Sarah Derrington dismissed that application with costs.
Between late 2023 and October 2024, the Receivers:
(a)pursued production of further documents for the examinations;
(b)alongside progressing the examinations, engaged (together with their lawyers, Colin Biggers & Paisley) in periodic and intense without prejudice discussions and negotiations with Quinbrook (together with its lawyers, Johnson Winter Slattery) with a view to resolving the matters in issue concerning the Land Sale Agreement and the proposed claim.
Quinbrook has, by correspondence, made clear it disputes the proposed claim, and has set out in some detail the steps that it says it has been taking, consistent with its obligations owed to Westlink.
The negotiations between the Receivers and Quinbrook culminated on 19 December 2024 in the Deed of Settlement being executed. The Deed of Settlement has the effect that, if completed, the secured debt owed to Starkorp would be repaid in full (assuming it has priority), with a surplus of more than $1 million available to Westlink’s other creditors. The settlement amount is confidential. The assumption in the preceding sentences is an assumption made that Starcorp has priority. As I said, that is an unresolved issue for present purposes. If DFF has priority, it seems to me that Starcorp may not receive all of its debt in full.
On 23 December 2024, the Receivers filed this application.
Principles: judicial advice to a privately-appointed receiver
As I have said, there is no dispute about the principles concerning when it is appropriate for the court to give judicial advice to a privately appointed receiver.
Privately appointed receivers can seek judicial advice under CA, s. 424: see Re One.Tel Network Holdings Pty Ltd (2001) 40 ACSR 83 at [26]-[27] per Austin J (One.Tel); Re Mirabela Nickel [2018] WASC 335 at [84] per Vaughan J (Mirabela Nickel).
That section allows a receiver to obtain guidance from the court in the conduct of the receivership and thereby obtain protection against a claim for breach of duty or an allegation that they have acted improperly or unreasonably: Mirabela Nickel at [85]. In this sense, as Derrington J recently explained in GGPG Pty Ltd v Golden Eagle Property Group Pty Ltd [2024] FCA 1188 at [20], “the benefit of [an] application [for advice] inures solely for the receiver”.
The jurisdiction is appropriately invoked for questions about the nature and extent of a receiver’s powers or duties of management or administration: One.Tel at [29].
Section 424 CA is similar to provisions concerning liquidators and administrators: see One.Tel (at [28]). As McLelland J said in Re G B Nathan & Co Pty Ltd (1991) 24 NSWLR 674 at 677 (G B Nathan), such provisions “were a development from the practice of the Court of Chancery under the general law in giving advice to those entrusted with the administration of property under the control of the court.”
His Honour also said at 679 that “… the only proper subject of a liquidator’s application for directions is the manner in which the liquidator should act in carrying out his functions as such …” and “the only binding effect” of an application for advice is that if the applicant “has made full and fair disclosure to the court of the material facts” they “will be protected from liability for any alleged breach of duty as liquidator to a creditor or contributory in respect of anything done by him in accordance with the direction.”
The analysis of McLelland J was referred to with approval in the more recent New South Wales Court of Appeal decision of One T Development Pty Ltd v Peter Krejci(in his capacity as liquidator of ENA Development Pty Ltd) [2023] NSWCA 120 at [31] per the Court (Ward P, Leeming and Mitchelmore JJA). I note also the decision of that Court at [34], [35] and [40]-[44].
In Mirabela Nickel at [89], Vaughan J explained the following:
(a)advice under s. 424 articulates the approach a receiver is justified in taking having regard to known circumstances and relevant principles (at [89(1)]);
(b)the power is to be construed broadly (at [89(2)]); but receivers should not be unduly nervous and come to court where advice is not needed (at [89(3)]);
(c)for advice to be given, there must be an issue calling for the exercise of legal judgment such as a legal issue of substance or procedure or an issue of power, propriety or reasonableness which is more than a business or commercial decision (at [89(4)]);
(d)that is not to say that commercial decisions cannot be the subject of advice; they can be even where “a legal question may have significant commercial consequences” (at [89(4)]);
(e)the court has a discretion to give advice (at [89(5)]); and advice which is given is not an adjudication and will not determine parties’ rights (at [89(6)]);
(f)the fact that advice is sought in the context of an adversarial dispute does not make it inappropriate to give the advice. There is a need to consider the nature of the underlying dispute. Nevertheless, the existence of such a dispute, and the circumstance that the subject matter for advice is an issue in adversarial proceedings, may be relevant to whether the court is willing to give advice and in what terms (at [89(7)]).
Whether or not the question involves a commercial or business judgment by the receiver is not determinative of whether or not advice should be given. As Goldberg J explained in Re Ansett Australia Ltd and Korda (No 3) (2002) 115 FCR 409 at [65] (emphasis added):
This review of the authorities satisfies me that the prevailing principle adopted by the courts, when asked by liquidators and administrators to give directions, is to refrain from doing so where the direction sought relates to the making and implementation of a business or commercial decision, either committed specifically to the liquidator or administrator or well within his or her discretion, in circumstances where there is no particular legal issue raised for consideration or attack on the propriety or reasonableness of the decision in respect of which the directions are sought. There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised. It is insufficient to attract an order giving directions that the liquidator or administrator has a feeling of apprehension or unease about the business decision and wants reassurance. There must be some issue which arises in relation to the decision. A court should not give its imprimatur to a business decision simply to alleviate a liquidator’s or administrator’s unease. There must be an issue calling for the exercise of legal judgment.
More recently, in Re Octaviar Ltd [2016] NSWSC 16 at [24], Brereton J explained that, whilst receivers commonly seek advice about whether they are justified in entering into particular compromises, the court will usually not make commercial decisions. As such (emphasis added):
… the court will not generally give a direction where the matter relates to the making or implementation of a business or commercial decision, or where no legal issue is raised and there is no attack on the propriety or reasonableness of the liquidator’s decision, although it may do so in the context of a proposed compromise, and/or where the decision is likely to be contentious.
Contentious decisions are often the subject of judicial advice, for example, in Re Banksia Securities Ltd (2022) 371 FLR 133 at [39], Black J said that advice may be appropriately given despite a commercial decision being in play “where the insolvency practitioner is operating in an ‘acrimonious environment’, or the proposed decision risks being subject to criticism by a particular creditor, and there is a stronger reason for making such a direction where the view taken is likely to be contested, and that case is particularly strong where a decision may involve a balancing of interests, here of debenture holders, that are or may be opposed”. See also Re Octaviar Administration Pty Ltd [2017] NSWSC 1556 at [6] per Black J; and Re ACN 004 410 833 Ltd [2021] NSWSC 799 at [14]-[15] per Black J.
Relevantly, in Heenan v Ralan Paradise No 1 Pty Ltd (No 2) (2021) 156 ACSR 86 at [58]-[60], Downes J observed that what made the obtaining of judicial advice appropriate was the existence of a “real and practical threat that one or more of the defendants who were not parties to the Compromise could seek to challenge the receivers about the terms of the Compromise at a future date”; hence it was not “a case where privately appointed receivers are seeking directions concerning the commercial merits of a proposed settlement, which is a decision for the receivers alone to make.”
A court may give also advice despite a decision being of a commercial or business nature where the decision “is complex, made under time pressure and involves the balancing of competing interests in respect of a large corporate group” on the basis that there is an “‘intrinsic unfairness’ in exposing an administrator to risk of personal liability where the decision is complex and ‘where any decision that is made, including making no decision, will have inevitable risks for some or all of the affected constituencies’”: Re IG Energy Holdings (Australia) Pty Ltd (2023) 168 ACSR 104 at [22] per Halley J, citing RCR Tomlinson Ltd [2018] NSWSC 1859 at [14] per Black J.
Legal consideration
Turning then to the two issues that I identified as the main issues: first, whether this is the type of case where judicial advice should be given at all, and second, if the answer to the first issue is “yes”, what that judicial advice should be. Is this the type of case where judicial advice should be given?
Should judicial advice be given at all in this case?
It does seem uncontroversial between the parties that this is an appropriate case for judicial advice to be given. No party contended any reason to conclude to the contrary. It is, of course, ultimately a matter for the court to determine whether it is appropriate to give judicial advice.
I am satisfied that is an appropriate case in which judicial advice should be given. I note that, as I have already mentioned, the advice sought primarily concerns what I think is properly categorised as a commercial decision. There are, in the circumstances that exist, three options that appear reasonably open to the Receivers. They can be described as, first, a “wait and see” approach, which means that the Receivers just sit by, not seeking to convert any securities to cash to pay out the secured creditor, on the hope that, in due course, income will be received by Westlink pursuant to Special Condition 14.1.
The second option is litigation, in particular litigation in the nature of the proposed claim that has been prepared against Quinbrook, which in essence alleges that Quinbrook has not been taking the steps necessary to fulfil its obligations that are owed to Westlink that would see money start to be received under Special Condition 14.1.
And the third option that is on the table at the moment is settlement.
The option that the Receivers have chosen to pursue, which is settlement, is contentious. That can be seen in the correspondence in the material from the Doyle Interests. As I have already noted, those concerns have not been retracted, despite their alleged neutral position in relation to the application.
I think it is appropriate to give judicial advice in this case. I am satisfied that sufficient information has been gathered by the Receivers and placed before the court to allow the advice to be considered and given. I can readily accept that the commercial decision to be made is being made in circumstances where not all relevant information is known to the Receivers or the court.
That is not uncommon in matters involving litigation, and it is not uncommon because, like here, key pieces of knowledge concern future matters which need to be looked at as to the likelihood that certain things might happen in the future. For example, if one was trying to assess what the outcome of a “wait and see” approach is, that cannot be wholly known in circumstances where there is presently no tolling agreement in place despite the contractual arrangements having been in place for a number of years, and the material does not disclose any clear path to obtaining a tolling agreement. There is no precise information known about when construction of the facility to generate the power could in fact be carried out.
There is not known, with any certainty, what might ultimately be achieved after that construction, in terms of what the stage 1 power output might be. Certainly, in terms, the documents seem to contemplate that it could be under 100 megawatts. There is recent information that suggests that a capacity of something like 114 megawatts might be realistic, or it could be more. The same can be said, but with even less certainty, about stage 2 of the construction.
And of course, even identifying those matters which, on the face of it, might arise and have some uncertainty, there is also the risk of future unknown matters that could intervene. An example of that can be seen before the Receivers were appointed, where the contractual arrangements were altered by Mr Chris Doyle, assumedly for some good commercial reason. Things change, and matters can intervene both expectedly and unexpectedly.
The second option, litigation, has associated with it similar uncertainties. But with litigation, in a general way, what is known is that, although there is here a draft statement of claim which can be considered and there is material which allows some very preliminary assessment of prospects to be undertaken, it is just that – very preliminary. Only a broad assessment of prospects can be made at the moment, in circumstances where the material – as I have mentioned – from Quinbrook seems to strongly tell against the proposed litigation having good prospects of success. Litigation therefore can be described as uncertain. It is certainly not evidently a slam-dunk case. And there will be, of course, practical issues such as the need for any litigation to be funded.
It can also be readily accepted that the Receivers could of course spend more time and more money to pin down additional information, so that perhaps a better decision might be able to be made. A step which they have already taken in part, and is still ongoing, for example, is public examinations, although the scope of some of the future public examinations that would otherwise be held still is in dispute and yet to be determined in the Federal Court.
The Receivers could for example obtain valuation evidence. They could conduct an open market campaign for sale of the assets of Westlink, to see what the interest is from other potential purchasers. There is any number of steps that the Receivers could take, but they are steps that take time, and they are steps that take money and they might not result in further information of a sufficient clarity which allows any better assessment to be made than can presently be made on the evidence before them and the court.
I am satisfied, on balance, that despite what is necessarily incomplete information, that the Receivers do have enough information, have made sufficient inquiries to form the view that they have, and have put sufficient information before the court to allow the court to form a view in the judicial advice application.
It is not, in that respect, a case like the case I was referred to of Marley v The Mutual Security Merchant Bank and Trust Co Limited [1991] All ER 3, 198. Although in a different context, that was a case where it was plain, from the decision, that there was additional material that the trustee in that case should have been gathering before approaching the court for any type of advice.
My conclusion on the first issue is that it is an appropriate case for judicial advice.
What judicial advice should the Court give in the circumstances?
The next main issue then is what should that judicial advice be in the particular circumstances? I have identified the three options that are reasonably open to the Receivers at the present point in time. I am of the view that if there is a reasonable alternative available, then it is appropriate not to adopt the “wait and see” approach. That is because a “wait and see” approach is not consistent with the Receivers’ other duties that exist, and to accept a settlement now that has some regard to the current value of the possible future receipts is not unreasonable. A “wait and see” approach does not sit well with the fact that there is a secured debt in this case, increasing at a simple interest rate of 20 percent per annum, and that the debt currently is over $5 million. So whilst it is a bit of an estimation, with the debt increasing at about a million dollars a year, one can see that the balancing of delay needs to be borne in mind, given the increasing debt with time.
The Receivers have referred to two decisions, which I accept support the proposition that ordinarily a “wait and see” approach is not preferable where the secured debt continues to grow, and where the “wait and see” approach relies upon speculation as to what might happen and when. Those cases are the Merchant Banking Company of London v the London and Hanseatic Bank [1886] 55 LJ Ch 479 and Palk v Mortgage Services Funding PLC [1993] Ch 330. I think, in most cases, for a “wait and see” approach to be appropriate, there would have to be more certainty in the outcome, and that the outcome would favour the creditors at the end of the day.
Litigation in this case is the other alternative. To my mind it is appropriate for that option to be rejected. I have already noted that the outcome of the proposed litigation is uncertain. It is uncertain not only in terms of whether liability would be established, but even if liability is established, what would in fact be the financial outcome. It would be a costly process and time consuming.
Those two options are to be weighed against the settlement that is proposed. In that respect, I have paid particular attention to the following matters. First, the Receivers have given evidence about the arduous nature of the negotiations, and why they are of the view that they do not think that any better outcome can be achieved in those negotiations. That appears, on the basis of the material I have seen, to be a fair opinion to hold.
Secondly, underlying the settlement seems to be the possibility of a sale of the project, if I can put it in those neutral terms, to an entity referred to as Stanwell. There is, as I understand it, no actual certainty about that deal going through. There is evidence that that entity is not interested in a different arrangement, whereby it would take an interest in the project subject to the mortgage, which might be a way that Westlink’s interests under Special Condition 14.1 could be maintained. There is no evidence that any other entity is interested in the project.
Thirdly, there is nothing to suggest that insofar as the Receivers have acted on information provided by Quinbrook, that that information is in any way unreliable. Insofar as they have provided some underlying data to support their position, it is on its face reasonable and seems to accord with common sense. In that respect, further, I see nothing in the material to suggest that Quinbrook’s position in the negotiation has been unreasonable or uncommercial or might be regarded as opportunistic or as some form of gouging, which might otherwise lead me to not give the advice sought.
There is then the factor of the certainty that settlement gives, that it will allow for immediate funds to be obtained without further expense and without the secured debt further increasing. I am also satisfied that the settlement has at least benchmarked itself against what an appropriately discounted prepayment would look like, of the amount that would otherwise be received under Special Condition 14.1, and has appropriately taken into account the settlement of the proposed Westlink claim, insofar as it might have some monetary value assigned to it on a preliminary basis at the present time.
Another factor favouring the settlement is that it does appear to go a very long way to satisfying all of Westlink’s debts and that it does not look like any better outcome could be achieved at the moment. In that respect, finally, there seems to be nothing better on offer that is available in any reasonable short-term way.
In those circumstances, on the second issue, I am satisfied that it is appropriate for the court to give judicial advice that the applicants would be justified in performing their obligations and in causing the respondent to perform its obligations under the deed of settlement dated 19 December 2024, between the respondent, the applicants, Quinbrook Asset Management Pty Ltd and Perpetual Corporate Trust Ltd.
Orders
Accordingly, I propose to make orders in the form that have been provided to me by the Receivers.
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