Mentha, In the matter of Griffin Coal Mining Company Pty Ltd (administrators appointed)

The case involves administrators of Griffin Coal Mining Company Pty Ltd and other associated entities who applied to the Federal Court of Australia under section 447A of the Corporations Act 2001 (Cth) to alter the operation of Part 5.3A of the Act. The administrators sought relief from personal liability from a proposed financing arrangement to enable them to borrow funds necessary to inject into the companies' businesses in order to maximise the value of these companies’ assets for potential sale, without incurring personal liability for these borrowings. This would ensure the lender that the borrowed amounts are treated as administration expenses, which rank in priority to unsecured debts and in priority to debts secured by a floating charge, provided the chargee consents in writing.

The legal issues before the court centred on the interpretation and application of section 447A of the Corporations Act. The court needed to determine whether the proposed orders were in the best interests of the company and consistent with the objectives of Part 5.3A of the Act. These objectives include maximising the chances of the company, or as much as possible of its business, continuing in existence for the benefit of creditors or, if this is not possible, obtaining a better return for creditors than would result from an immediate winding up.

The court found that section 447A confers a wide power which was not intended only to cure defects or remedy the consequences of a departure from the scheme of the Act but also to permit the making of orders that would alter how section 439A is to apply. The court relied on various authorities that supported making orders similar to those sought in this case. The court gave weight to the administrators' opinion that the proposed orders were in the best interests of the company, and consistent with the operation of Part 5.3A of the Act. The administrators argued that the external funding was necessary to maximise the prospect of the sale or recapitalisation of the companies’ businesses as a going concern, which would benefit the creditors. Without the additional funding, it would be impossible for the companies to continue trading and pursue a deed of company arrangement or sale.

The court granted the application and made the following orders: allowed the filing of the Amended Originating Process, altered the operation of Part 5.3A of the Corporations Act to relieve the administrators of personal liability for certain debts incurred by the companies, and ensured the confidentiality of certain exhibits. The costs of the application were to be costs in the administrations.