Re Aerison Group Ltd (Administrators Appointed) - [2023] WASC 274

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE AERISON GROUP LTD (ADMINISTRATORS APPOINTED) [2023] WASC 274
CORAM:   STRK J
HEARD:   13 JUNE 2023 & 15 JUNE 2023
DELIVERED          :   13 JUNE 2023 & 15 JUNE 2023
PUBLISHED           :   26 JULY 2023
FILE NO/S:   COR 92 of 2023
MATTER:   IN THE MATTER OF RE AERISON GROUP LTD (ADMINISTRATORS APPOINTED) & ORS

EX PARTE
RICHARD SCOTT TUCKER, CRAIG PETER SHEPARD AND JOHN ALLAN BUMBAK IN THEIR CAPACITIES AS JOINT AND SEVERAL ADMINISTRATORS OF AERISON GROUP LTD (ACN 614 735 474) (ADMINISTRATORS APPOINTED), AERISON PTY LTD (ACN 060 786 656) (ADMINISTRATORS APPOINTED), AERISON ENERGY SERVICES PTY LTD (ACN 665 237 392) (ADMINISTRATORS APPOINTED), AERISON EPC PTY LTD (ACN 640 499 387) (ADMINISTRATORS APPOINTED), AERISON HOLDINGS PTY LTD (ACN 149 198 176) (ADMINISTRATORS APPOINTED), AERISON MECHANICAL AND ELECTRICAL TECHNOLOGY PTY LTD (ACN 620 639 974) (ADMINISTRATORS APPOINTED) AND AERISON SERVICES PTY LTD (ACN 617 466 529) (ADMINISTRATORS APPOINTED)
First Plaintiffs
AERISON GROUP LTD (ACN 614 735 474) (ADMINISTRATORS APPOINTED)
Second Plaintiff
AERISON PTY LTD (ACN 060 786 656) (ADMINISTRATORS APPOINTED)
Third Plaintiff
AERISON ENERGY SERVICES PTY LTD (ACN 665 237 392) (ADMINISTRATORS APPOINTED)
Fourth Plaintiff
AERISON EPC PTY LTD (ACN 640 499 387) (ADMINISTRATORS APPOINTED)
Fifth Plaintiff
AERISON HOLDINGS PTY LTD (ACN 149 198 176) (ADMINISTRATORS APPOINTED)
Sixth Plaintiff
AERISON MECHANICAL AND ELECTRICAL TECHNOLOGY PTY LTD (ACN 620 639 974) (ADMINISTRATORS APPOINTED)
Seventh Plaintiff
AERISON SERVICES PTY LTD (ACN 617 466 529) (ADMINISTRATORS APPOINTED)
Eighth Plaintiff

Catchwords:

Corporations - External administration - Application by joint and several administrators for orders pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) concerning entry into a funding agreement - Application pursuant to the Corporations Act 2001 (Cth) s 447A seeking orders as to how pt 5.3A is to operate - Debts and liabilities incurred under a loan agreement - Conduct of arbitrations and adjudications - Application pursuant to s 65-45 of the Insolvency Practice Schedule (Corporations) concerning use of a special bank account to perform a treasury function

Corporations - External administration - Application by joint and several administrators pursuant to the Corporations Act s 447A seeking orders as to how pt 5.3A is to operate - Existing and future agreements - Orders made subject to conditions

Legislation:

Corporations Act 2001 (Cth) s 440D, s 443A, s 443D, s 447A
Insolvency Practice Schedule (Corporations) s 65-45, s 90-15
Rules of the Supreme Court 1971 (WA) O 67B r 11

Result:

Applications granted

Category: B

Representation:

Counsel:

First Plaintiffs	:	P Edgar
Second Plaintiff	:	P Edgar
Third Plaintiff	:	P Edgar
Fourth Plaintiff	:	P Edgar
Fifth Plaintiff	:	P Edgar
Sixth Plaintiff	:	P Edgar
Seventh Plaintiff	:	P Edgar
Eighth Plaintiff	:	P Edgar

Solicitors:

First Plaintiffs	:	Clayton Utz
Second Plaintiff	:	Clayton Utz
Third Plaintiff	:	Clayton Utz
Fourth Plaintiff	:	Clayton Utz
Fifth Plaintiff	:	Clayton Utz
Sixth Plaintiff	:	Clayton Utz
Seventh Plaintiff	:	Clayton Utz
Eighth Plaintiff	:	Clayton Utz

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

Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270
Australian Gypsum Industries Pty Ltd v Dalesun Holdings Pty Ltd [2015] WASCA 95
Brash Holdings Ltd (Administrator Appointed) v Katile Pty Ltd [1996] 1 VR 24
Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524
Correa v Whittingham [2013] NSWCA 263; (2013) 278 FLR 310
Deputy Commissioner of Taxation v Portinex Pty Ltd [2000] NSWSC 99; (2000) 156 FLR 453
FAI General Insurance Co Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268
GDK Projects Pty Ltd; Re Umberto Pty Ltd (In Liq) v Umberto Pty Ltd (In Liq) [2018] FCA 541
Glenfyne International Holding Ltd v Glenfyne Farms International AU Pty Ltd (in Liq); Glenfyne International Ltd v GI Commercial Pty Ltd (in Liq) [2019] NSWCA 304
Hill, in the matter of Autocare Services Pty Ltd (administrators appointed) [2021] FCA 167
Honest Remark Pty Ltd v Allstate Explorations NL [2006] NSWSC 735; (2006) 234 ALR 765
Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178
Modcol Pty Ltd v National Buildplan Group Pty Ltd [2013] NSWSC 380
Nipps (Admin) v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty Ltd (Admins Apptd) (No 4) [2021] FCA 644
Owners of the Ship 'Shin Kobe Maru' v Empire Shipping Co Inc [1994] HCA 54; (1994) 181 CLR 404
Park (Administrator), in the matter of Ellume Ltd (Administrators Appointed) v Evangayle Pty Ltd (Trustee) [2022] FCA 1102
R v Toohey; Ex parte Northern Land Council [1981] HCA 74; (1981) 151 CLR 170
Re Ansett Australia Ltd (No 3) [2002] FCA 90; (2002) 115 FCR 409
Re Arrium Ltd (Admin Apptd) [2016] FCA 972
Re AWA Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2014] NSWSC 249
Re Bosnjak Holdings Pty Ltd [2005] FCA 275; (2005) 53 ACSR 8
Re Broens Pty Ltd (in liq) [2018] NSWSC 1747
Re Community Work Pty Ltd (in liq) [2018] FCA 425
Re Cook Cove Pty Ltd (admins apptd) [2009] NSWSC 620
Re Estate Property Group Ltd (Administrators Appointed) [2007] FCA 1393
Re Frigger [2020] WASC 365
Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674
Re Geographe Workforce Pty Ltd (Administrators Appointed) [2022] WASC 250
Re GGA Lifestyle Pty Ltd (Administrators Appointed) [2019] WASC 167
Re Great Southern Infrastructure Pty Ltd [2009] WASC 161
Re Greg Sewell Forgings Pty Ltd (1995) 17 ACSR 602
Re Grocon Pty Ltd (Administrators Appointed) (No 1) [2020] VSC 833
Re Halifax Investment Services Pty Ltd (in liq) (No 8) [2020] FCA 533; (2020) 144 ACSR 292
Re Hawden Property Group Pty Ltd (In Liq) [2018] NSWSC 481; (2018) 125 ACSR 355
Re Khaled El‑Sheikh Pty Ltd (Administrators Appointed) [2022] FCA 703
Re Malanos [2007] NSWSC 865
Re Mentha (in their capacities as joint and several administrators of the Griffin Coal Mining Company Pty Ltd (admins apptd) (ACN 008 667 285) (2010) 82 ACSR 142
Re New Tel Ltd (in liq) [2004] FCA 1154; (2004) 210 ALR 270
Re Nexus Energy Ltd [2014] NSWSC 1041
Re ONE.Tel Ltd [2014] NSWSC 457; (2014) 99 ACSR 247
Re Pindan Group Pty Ltd (Administrators Appointed) [No 2] [2021] WASC 358
Re Pindan Group Pty Ltd (Administrators Appointed) [No 5] [2022] WASC 469
Re Poles & Underground Pty Ltd (Administrators Appointed) [2017] FCA 486
Re RCR Tomlinson Ltd (administrators appointed) [2018] NSWSC 1859
Re SFM Australasia Pty Ltd (Administrators Appointed) [2009] FCA 360
Re Spyglass Management Group Pty Ltd (admin apptd) [2004] FCA 1469; (2004) 51 ACSR 432
Re Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 1144
Re THO Services Ltd [2016] NSWSC 509
Re Union Standard International Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 1111
Re View Gold Pty Ltd [2008] WASC 241
Re Virgin Australia Holdings Ltd (Admins Apptd) (No 2) [2020] FCA 717; (2020) 144 ACSR 347
Re Vision (Brisbane) Pty Ltd (Administrators Appointed) [2010] FCA 186

Table of Contents

Introduction

First application

Evidence - the first application

Applicable principles

Disposition - the first application

Conclusion and orders - the first application

Second application

Evidence - the second application

Applicable principles

Disposition - the second application

Conclusion and orders - the second application

Sch A - Orders made on 13 June 2023

Sch B - Orders made on 15 June 2023

STRK J:

Introduction

Richard Scott Tucker, Craig Peter Shepard and John Allan Bumbak are the joint and several administrators of Aerison Group Ltd (administrators appointed), Aerison Pty Ltd (administrators appointed), Aerison Energy Services Pty Ltd (administrators appointed), Aerison EPC Pty Ltd (administrators appointed), Aerison Holdings Pty Ltd (administrators appointed), Aerison Mechanical and Electrical Technology Pty Ltd (administrators appointed), and Aerison Services Pty Ltd (administrators appointed) (together the Group Companies). They were appointed on 6 June 2023 pursuant to s 436A of the Corporations Act 2001 (Cth) and written resolutions of the boards of the Group Companies dated 6 June 2023.[1]
[1] First Tucker affidavit par 2.
I understand that the Group Companies provide multi‑disciplinary industrial services to the minerals and mining, oil and gas, non‑process infrastructure and utilities sectors.
Mr Tucker described the group as being a broad based multi‑disciplinary engineering and construction group that self‑performs engineering procurement and construction, design, and maintenance services to various industries and clients across Australia. Further, he deposed that the Group Companies have specialist expertise in environmental services, including emission mitigation performance studies, compliance testing and custom designed and built solutions engineered to reduce the impact of industry on the environment.[2]
[2] First Tucker affidavit par 10.
On 13 June 2023 and 15 June 2023 the court heard urgent applications made on behalf of the administrators. Orders were made at the conclusion of each hearing, which are reproduced at sch A and sch B to these reasons. Given the urgency of the applications, at the conclusion of each hearing I indicated that I was prepared to grant the relief sought and would publish my reasons for decision, which are set out below.

First application

By an application filed and heard on 13 June 2023, urgent relief was sought under s 447A of the Corporations Act, and s 90‑15(1) and s 65‑45 of the Insolvency Practice Schedule (Corporations), which schedule forms sch 2 to the Corporations Act. The administrators sought:
(1)an order pursuant to s 90‑15(1) of the Insolvency Practice Schedule (Corporations) that the administrators are justified in entering into and performing a funding agreement the subject of consent given under s 443E(5) by Commonwealth Bank of Australia (CBA), secured lender, to support the working capital needs of the Group Companies and administration costs (Loan Agreement);
(2)an order pursuant to s 447A of the Corporations Act that 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 Loan Agreement (including but not limited to monies borrowed, interest in respect of monies borrowed and borrowing costs) are in the nature of debts incurred by the administrators in performance and exercise of their functions and powers as joint and several voluntary administrators of the second to eighth plaintiffs (that is, the Group Companies);
(3)an order pursuant to s 447A of the Corporations Act that 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 the Group Companies) pursuant to the Loan Agreement, so that if the indemnity of the administrators under s 443D of the Corporations Act from the Group Companies is insufficient to meet any amount for which the administrators might be liable arising out of or in connection with the Loan Agreement, then the administrators will not be personally liable to repay any such amount to the extent of the insufficiency;
(4)an order pursuant to s 65‑45 of the Insolvency Practice Schedule (Corporations) that, up to and including 24 July 2023:
(a)the external administration account for the third plaintiff, Aerison Pty Ltd (administrators appointed), may be used as the special bank account for the Group Companies;
(b)the administrators may transfer any funds received into the administration accounts for the second and fourth to eighth plaintiffs to the administration account for the third plaintiff; and
(c)the administrators may make payments in relation to the Group Companies from the administration account for the third plaintiff (being the special bank account in accordance with the proposed order above) and are not required to comply with s 65‑25 of the Insolvency Practice Schedule (Corporations) in relation to the Group Companies; and
(5)an order pursuant to s 447A of the Corporations Act that the operation of s 440D is modified so that the words 'including any arbitration or adjudication' are inserted in place of 'in a court' so that s 440D reads 'During the administration of a company, a proceeding ~~in a court~~ including any arbitration or adjudication against the company or in relation to any of its property cannot be begun or proceeded with, except with the administrator's written consent or with the leave of the Court.'
The administrators sought these orders to facilitate the businesses of the Group Companies trading on while the administrators undertake a sale process.
By the application filed and heard on 13 June 2023, the administrators also sought an order that any application for access pursuant to O 67B r 11 of the Rules of the Supreme Court 1971 (WA) (RSC) to inspect the confidential affidavit of Richard Scott Tucker sworn 13 June 2023 and filed in this proceeding on 13 June 2023, and the annexures referred to therein:
(a)be referred to the court; and
(b)not be determined until notice of the application is given to the deponent, by his solicitor, and the deponent has reasonable opportunity to be heard in opposition to the application for inspection.
Further, the administrators sought an order that the costs of the first application be treated as costs in the administration of the Group Companies.

Evidence - the first application

Two affidavits were read at the hearing of the first application, both made by Mr Tucker, one described as 'open' and the other described as 'confidential'. The confidential affidavit was the subject of application for restriction pursuant to the RSC O 67B r 11. References to the 'first Tucker affidavit' in these reasons are references to the 'open' affidavit sworn by Mr Tucker on 13 June 2023 described at [11] to [28] below.
A written outline of submissions was also filed shortly before the hearing of the first application.

First Tucker affidavit

In his first affidavit, among other things, Mr Tucker deposed to the appointment of the administrators to the Group Companies on 6 June 2023; the circumstances which gave rise to the urgency of the first application; the businesses undertaken by the Group Companies; the financial position of the Group Companies; the funding proposals received; the claims on foot against the third plaintiff, Aerison Pty Ltd (administrators appointed), which were not then subject to the moratorium pursuant to s 440D of the Corporations Act; the distribution of a circular to creditors and suppliers of the Group Companies and notice of meeting stating that the first meeting of creditors would be held on 15 June 2023; those to whom notice of the first application was intended to be given, being creditors, the Australian Securities and Investments Commission (ASIC), the Department of Employment and Workplace Relations as manager of the Fair Entitlement Guarantee (FEG), and the Australian Taxation Office (ATO); and to Mr Tucker's belief that obtaining the funding described in his first affidavit would enable him to continue the businesses of the Group Companies in accordance with his statutory duty under s 435A(a) of the Corporations Act. Mr Tucker further deposed that on the information then available to him, he did not consider creditors were likely to suffer detriment or prejudice. In this regard, he noted that the assets of the Group Companies were fully secured, and in light of the liabilities that had then been identified, it appeared unlikely that creditors would receive any return in the event of a liquidation.
The first Tucker affidavit was 633 pages. The voluminous attachments included copies of various appointment documents; current and historical ASIC extracts; Personal Property Security Register reports; a redacted activity statement for the sale data room; a statement of assets and liabilities for the Group Companies dated 31 May 2023; various adjudication and purchase order documents related to the claims on foot or foreshadowed as against the third plaintiff, Aerison Pty Ltd (administrators appointed) (described at [17] to [24] below); and a copy of the circular which was distributed by the administrators to creditors and suppliers on 7 June 2023.

Financial position and businesses of the Group Companies

Mr Tucker deposed that the administrators' review of the financial position of the Group Companies was ongoing, but as at the date of his first affidavit, the administrators had been able to discern as follows:
(a)as to the purpose and businesses of each of the Group Companies:
(i)the second plaintiff, Aerison Group Ltd (administrators appointed), is an Australian Securities Exchange entity and employs the executive and senior leadership team;
(ii)the sixth plaintiff, Aerison Holdings Pty Ltd (administrators appointed), is a holding entity;
(iii)the third plaintiff, Aerison Pty Ltd (administrators appointed), is the primary trading entity of the group, holding all key contracts and employing the management, or 'white collar', employees;
(iv)the eighth plaintiff, Aerison Services Pty Ltd (administrators appointed), employ the operational, or 'blue collar' employees located at the Forrestfield warehouse;
(v)the fifth plaintiff, Aerison EPC Pty Ltd (administrators appointed), employs 'blue collar' employees on project sites;
(vi)the seventh plaintiff, Aerison Mechanical and Electrical Technology Pty Ltd (administrators appointed), is a dormant entity; and
(vii)the fourth plaintiff, Aerison Energy Services Pty Ltd (administrators appointed), is a dormant entity;
(b)approximately 200 employees were employed by the Group Companies, comprising executive and 'white collar' staff employed by Aerison Group Ltd (administrators appointed) and Aerison Pty Ltd (administrators appointed), and 'blue collar' staff employed by Aerison Services Pty Ltd (administrators appointed) and Aerison EPC Pty Ltd (administrators appointed). In this regard, Mr Tucker noted that the 'blue collar' head count varied significantly week on week depending on the timing of shutdown works;
(c)the weekly payroll average net outgoings come to approximately $500,000 (excluding superannuation, PAYG and payroll tax), and the employee entitlements owed by the Group Companies as at the date of his first affidavit was approximately $600,000 (excluding superannuation, PAYG and payroll tax);
(d)as at the date of their appointment, the administrators did not have access to any funds of the Group Companies. As at the date of his first affidavit, the administrators had received $379,162.39 in the administration accounts;
(e)the indebtedness of the Group Companies as at the date of Mr Tucker's first affidavit was about $79,700,000, of which the primary creditors were:
(i)CBA in the amount of approximately $19,000,000;
(ii)Asset Insure in the amount of approximately $10,100,000;
(iii)Octet in the amount of approximately $8,400,000;
(iv)the ATO in the amount of approximately $8,300,000;
(v)Monument Premium Funding in the amount of approximately $2,800,000;
(vi)trade creditors in the amount of approximately $28,700,000; and
(vii)employee entitlements in the amount of approximately $2,400,000.

Sale process

Mr Tucker deposed that the administrators were undertaking a sales process in relation to the Group Companies and there were (as at the date of the first Tucker affidavit) 25 entities in the data room.

Accounts

Mr Tucker further deposed:
(a)that administration accounts had been opened for each of the Group Companies;
(b)that due to the complexity of the group structure and the volume of transactions, the administrators could not, at least at the stage of the administration process (as at the date of the first Tucker affidavit), ensure that there would be compliance with s 65‑15 and s 65‑25 of the Insolvency Practice Schedule (Corporations);
(c)that the administrators were acutely aware that these requirements attract strict liability criminal sanction in the event of breach;
(d)that the administrators would keep a full and complete record of all transactions in the Group Companies;
(e)that absent the arrangements sought, the costs of managing the finances of each individual company in the Group Companies would, in Mr Tucker's view, create significant and unnecessary costs that would divert resources of the administrations from tasks required to further the objects of pt 5.3A;
(f)that at least in the short term, and in order to minimise the cost of transactions in the administration and due to the way in which funds had been receipted into the group, the administrators intended to receive money into the administration account for the third plaintiff, Aerison Pty Ltd (administrators appointed), and to use it as a 'treasury' entity;
(g)to his belief that the administrators would be required to transfer funds from the administration account for the third plaintiff, Aerison Pty Ltd (administrators appointed), to the following administration accounts for the reasons outlined respectively below:
(i)payments to the administration account of the second plaintiff, Aerison Group Pty Ltd (administrators appointed), to satisfy employee entitlements and associated tax debts incurred by the administrators in respect of the employment of the executive group and senior leadership team of the Group Companies who are employed by the second plaintiff;
(ii)payments to the administration account of the fourth plaintiff, Aerison Energy Services Pty Ltd (administrators appointed), to satisfy employee entitlements and associated tax debts incurred by the administrators in respect of the employment of blue collar employees primarily located at the Forrestfield warehouse who are employed by the fourth plaintiff;
(iii)payments to the administration account of the fifth plaintiff, Aerison EPC Pty Ltd (administrators appointed), to satisfy employee entitlements and associated tax debts incurred by the administrators in respect of the employment of field based blue collar employees primarily located on project sites of the Group Companies who are employed by the fifth plaintiff; and
(iv)funds retained in the administration account of the third plaintiff, Aerison Pty Ltd (administrators appointed), to be utilised to pay all other expected costs of the administration.

Funding proposals

Mr Tucker deposed that in the four business days since their appointment, the administrators had approached nine parties and received four term sheets for funding proposals. He also deposed that:
(a)the administrators had undertaken detailed reviews of the term sheets;
(b)having regard to the funding proposals received, Mr Tucker considered that each contained similar interest and fees for an unsecured lending facility in similar circumstances;
(c)a loan agreement had been finalised with a counter party, details of which Mr Tucker noted would be set out in his confidential affidavit, together with correspondence evidencing the consent of the first ranking secured creditor, CBA; and
(d)the information surrounding these arrangements were commercially sensitive.

Claims and proceedings not presently subject to the moratorium

Mr Tucker deposed that he was aware that there were proceedings on foot and potential future adjudications which would not fall within the scope of the statutory moratorium.
The first concerned an adjudication application made by Maintain Industrial Access Pty Ltd (MIA) against the third plaintiff, Aerison Pty Ltd (administrators appointed), on or about 6 June 2023 with respect to claims in the value of $672,044.03 for the supply of scaffolding works and associated materials for the purpose of constructing a Saline Water Reverse Osmosis Desalination Plant at the Roy Hill Iron Ore mine.
Among other things, Mr Tucker deposed that by the first application, pursuant to s 440D of the Corporations Act, an order was sought for the court to apply a moratorium to the determination of the adjudication application, to prevent MIA, the third plaintiff and Scott Ellis (the adjudicator) from having to comply with the applicable time frames under the Building and Construction Industry (Security of Payment) Act 2021 (WA) until the completion of the administration of the third plaintiff.
The second concerned claims that Westforce Construction Pty Ltd may have as against the third plaintiff, Aerison Pty Ltd (administrators appointed), with respect to civil and earthwork components on the Roy Hill Saline Water Reserve Osmosis project under Subcontract No. 5122-AER-CONT-0004.
Among other things, Mr Tucker deposed that by the first application, an order was sought for the court to extend the application of the moratorium under s 440D of the Corporations Act to prevent the third plaintiff or Westforce Construction from taking any legal action with respect to any claims Westforce Construction or the third plaintiff may have (as the case may be) in connection with Subcontract No. 5122‑AER‑CONT‑0004.
The third concerned claims that Tasman Tanks Pty Ltd trading as The Tasman Tank Co. may have against the third plaintiff, Aerison Pty Ltd (administrators appointed), with respect to the design, manufacture, supply and install of water tanks for the Roy Hill Saline Water Reverse Osmosis project, that Tasman Tanks was engaged to perform under Subcontract No. AER‑A_COA-SP-21033.
Among other things, Mr Tucker deposed that by the first application, an order was sought for the court to extend the application of the moratorium under s 440D of the Corporations Act to prevent the third plaintiff or Tasman Tanks from taking any legal action with respect to any claims Tasman Tanks or the third plaintiff may have (as the case may be) in connection with the Subcontract No. AER‑A_COA-SP-21033.
The fourth concerned the dispute as between the third plaintiff, Aerison Pty Ltd (administrators appointed), and Roy Hill Iron Ore Pty Ltd regarding, inter alia, claims made by the third plaintiff against Roy Hill Iron Ore in connection with a contract dated 21 October 2021 for the design and construction of the Roy Hill Desalination Plant. Mr Tucker also noted that as the administrators were assessing the dispute, they may require further orders regarding the progress or moratorium in relation to the proceeding concerning Roy Hill Iron Ore.

Urgency

Mr Tucker deposed to the circumstances which gave rise to the urgency of the first application. He deposed that in the four business days that the administrators had been appointed, the administrators had attended to the following key urgent work streams:
(a)identification of potential funding options for the administration so that the Group Companies could continue to trade on;
(b)identification of the key assets, contracts and bank accounts of the Group Companies;
(c)identification of employee entitlements due for payment, noting that the next payroll was 14 June 2023; and
(d)identification of the various claims which had been made or proceedings which had been commenced against the Group Companies to identify which claims were not covered by the statutory moratorium in s 440D of the Corporations Act.
Mr Tucker deposed that the first application was made on an urgent basis in light of the payroll deadline of 12.00 pm on Wednesday, 14 June 2023. Further, he deposed that the administrators considered that there was a good chance that the businesses, and likely the majority of current employee roles, could be preserved if the businesses continued to trade and a deed of company arrangement or sale of the businesses was completed. In this regard, he deposed that as at the date of his first affidavit, there were 25 parties in the sale data room which had opened on 7 June 2023.
Without the orders sought with respect to funding, Mr Tucker deposed to his belief that the administrators would most likely be required to close down the businesses and terminate the employment of all employees in the Group Companies. He further deposed that funding would enable the administrators to continue the business of the Group Companies in accordance with his statutory duty under s 435A(a) of the Corporations Act.
Finally, he deposed that on the information then available to him, he did not consider creditors would likely suffer detriment or prejudice, noting that the assets of the Group Companies were fully secured and in light of the liabilities identified (summarised at [13(e)] above), it was unlikely that creditors would receive any return in the event of a liquidation at that point in time.

First confidential Tucker affidavit

A further affidavit deposed by Mr Tucker on 13 June 2023 was also read in support of the first application. In the first confidential Tucker affidavit, Mr Tucker deposed to a commercially sensitive funding arrangement entered into by the administrators to assist in funding the payment of the expenses incurred by the administrators in continuing to operate the businesses of the Group Companies during the administration.
These reasons have been prepared so as to not disclose the substance of the confidential information which was before the court and which was weighed in the balance in the determination of the first application.

Applicable principles

Section 447A

Relief is 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.[3]
[3] 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].
Counsel submitted and I accepted that 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. Austin J further noted 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; and
(c)the section is not confined to filling in the gaps in the legislative scheme of pt 5.3A.
Counsel for the administrators noted that in Brash Holdings Ltd (Administrator Appointed) v Katile Pty Ltd, s 447A was described as an unusual section that was available to fill gaps in pt 5.3A 'by the exercise by the court of wide powers to make such orders as it thinks appropriate about how the Part is to operate in relation to a particular company.'[4]
[4] Submissions filed 13 June 2023 par 14; Brash Holdings Ltd (Administrator Appointed) v Katile Pty Ltd, 26; cited by the Court of Appeal in Australian Gypsum Industries Pty Ltd v Dalesun Holdings Pty Ltd [2015] WASCA 95.
Accordingly, the power of the court to make orders under s 447A may be useful in circumstances where an administrator has to act quickly, and there exists a gap in pt 5.3A which could otherwise be filled by such orders, in order to achieve the overriding objectives of pt 5.3A.[5]
[5] Submissions filed 13 June 2023 par 15; Brash Holdings Ltd (Administrator Appointed) v Katile Pty Ltd, 26.
However, while I accepted that the power is broad, I proceeded on the basis that it is not unlimited.[6] 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.[7] 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.
[6] Correa v Whittingham [2013] NSWCA 263; (2013) 278 FLR 310 [2] ‑ [8], [97] ‑ [105], [304], 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 [3].
[7] R v Toohey; Ex parte Northern Land Council [1981] HCA 74; (1981) 151 CLR 170, cited in Correa v Whittingham [4].
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.[8]

Directions pursuant to s 90‑15 of the Insolvency Practice Schedule (Corporations)

[8] Australasian Memory Pty Ltd v Brien; Re Greg Sewell Forgings Pty Ltd (1995) 17 ACSR 602; Correa v Whittingham [4].

Division 90 of the Insolvency Practice Schedule (Corporations) concerns the review of an external administration of a company, which may be undertaken by the court (div 90 subdiv B), or by another registered liquidator (div 90 subdiv C).
The court is afforded wide powers to inquire into the external administration of a company and s 90‑15(1) of the Insolvency Practice Schedule (Corporations) provides a source of power for the court to make orders.
The court's power under s 90‑15(1) of the Insolvency Practice Schedule (Corporations) is 'very broad'.[9] The court may make 'such orders as it thinks fit' in relation to the external administration of a company,[10] and s 90‑15(3) gives examples of the types of orders that the court may make under s 90‑15(1). This includes an order determining any question arising in the external administration of the company.[11] The scope of the power to give directions and advice contained in s 90‑15 of the Insolvency Practice Schedule (Corporations) is arguably the same as, or likely wider than the scope of s 90‑15 predecessors.[12]
[9] Re Halifax Investment Services Pty Ltd (in liq) (No 8) [2020] FCA 533; (2020) 144 ACSR 292 [51], cited by Stewart J in Re Union Standard International Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 1111 [7].
[10] Section 90‑15(1) of the Insolvency Practice Schedule (Corporations).
[11] Section 90‑15(3)(a) of the Insolvency Practice Schedule (Corporations), see Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524 [166] (Gordon J).
[12] Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [166] (Gordon J); Re Halifax Investment Services Pty Ltd (in liq) (No 8) [17] (Gleeson J).
In GDK Projects Pty Ltd; Re Umberto Pty Ltd (In Liq) v Umberto Pty Ltd (In Liq) [2018] FCA 541 at [33], Farrell J recognised the power in s 90‑15(1) to be 'in its terms, unconstrained', but held that 'despite the breadth of the power … it is difficult to envisage circumstances where the power could be exercised if the court could not be satisfied that it would be just and unless the applicant had demonstrated sufficient utility to the external administration'.
Banks-Smith J observed in Nipps (Admin) v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty Ltd (Admins Apptd) (No 4) [2021] FCA 644 at [23], while the power is very broad, when orders under s 90‑15 are sought in the context of an administration, such orders must be made in pursuit of the objects of pt 5.3A as set out in s 435A of the Corporations Act:
435AObject of Part
The object of this Part, and Schedule 2 to the extent that it relates to this Part, is to provide for the business, property and affairs of an insolvent company to be administered in a way that:
(a)maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b)if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company.
When orders under s 90‑15 are sought, regard should also be had to the objects of the Insolvency Practice Schedule (Corporations) set out at s 1‑1, reproduced below:[13]
[13] Nipps (admin) v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty Ltd (No 4) [24] (Banks‑Smith J).
1-1 OBJECT OF THIS SCHEDULE
1-1(1) The object of this Schedule is to ensure that any person registered as a liquidator:
(a)has an appropriate level of expertise; and
(b)behaves ethically; and
(c)maintains sufficient insurance to cover his or her liabilities in practising as a registered liquidator.
1-1(2) The object of this Schedule is also:
(a)to regulate the external administration of companies consistently, unless there is a clear reason to treat a matter that arises in relation to a particular kind of external administration differently; and
(b)to regulate the external administration of companies to give greater control to creditors.
As also observed by Banks-Smith J in Nipps (Admin) v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty Ltd (Admins Apptd) (No 4) at [37]:
Where judicial advice is sought in the context of an administration, the only statutory constraint on the exercise of that power is the need to consider whether or not the provision of that advice advances the objects of Part 5.3A set out in s 435A of the Corporations Act and is not inconsistent with the objects of the IPS. Section 90‑15(3)(a) accommodates the determination of substantive rights, provided appropriate notice has been afforded to potentially affected parties: Hill, in the matter of Autocare Services at [44].
Section 90‑15(4) contains a non‑exhaustive list of matters that the court may take into account in exercising the discretion under s 90‑15.
Section 90‑15 confers power on the court to give directions to administrators that was previously conferred by the now repealed s 477D(1) of the Corporations Act, and to liquidators that was previously conferred by the now repealed s 479(3) of the Corporations Act. As observed by Stewart J in Re Union Standard International Group Pty Ltd (admins apptd) (No 2) at [8]:
The court's power under s 90‑15(1) includes a power to give directions about a matter arising in connection with the performance or exercise of an administrator's functions or powers: Reidy, in the matter of eChoice Ltd (Administrators Appointed) [2017] FCA 1582 at [26] - [27] (Yates J). In this respect, s 90‑15(1) confers a power to give directions that was previously conferred by ss 447D(1) and 479(3) of the Act concerning administrators and liquidators, respectively: see Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; 93 ALJR 807 at [166] (Gordon J); Reidy at [27] (Yates J); and Kelly (liquidator), in the matter of Australian Institute of Professional Education Pty Ltd (in liq) [2018] FCA 780 at [30] (Gleeson J). The principles governing directions to administrators and those governing directions to liquidators are relevantly analogous: Re Ansett Australia Ltd (No 3) [2002] FCA 90; 115 FCR 409 at [43] (Goldberg J).

As to the function of and scope of s 90‑15 of the Insolvency Practice Schedule (Corporations), I adopted the observation made by Stewart J in Re Union Standard International Group Pty Ltd (admins apptd) (No 2) at [9], which follows the decision of Goldberg J in Re Ansett Australia Ltd (No 3) [2002] FCA 90; (2002) 115 FCR 409 at [44]:
The function of a judicial direction of this kind is not to determine rights and liabilities arising out of a particular transaction, but to confer a level of protection on the administrator. An administrator who acts in accordance with a judicial direction, having made full and fair disclosure to the court of the material facts, has 'protection against claims that they have acted unreasonably or inappropriately or in breach of their duty in making the decision or undertaking the conduct' proposed.
Whether to exercise the power under s 90‑15 will often be informed by the principles that applied on such an application to the court for directions.[14] The approach of the court on an application for directions by an external administrator are well‑established. The court will not give an administrator or a liquidator a direction if the direction relates to the making of a business or commercial decision. There must be something more before the court will give a direction. The 'something more' may be a legal issue of substance or procedure or an issue of power, propriety or reasonableness. Put differently, there must exist some issue calling for the exercise of legal judgment.[15]
[14] Re GGA Lifestyle Pty Ltd (Administrators Appointed) [2019] WASC 167 [18] (Vaughan J), citing Re Broens Pty Ltd(in liq) [2018] NSWSC 1747 [39] (Gleeson J). See also Re Poles & Underground Pty Ltd (Administrators Appointed) [2017] FCA 486 [41] (Gleeson J); and Re Community Work Pty Ltd (in liq) [2018] FCA 425 [45] ‑ [47] (Gleeson J).
[15] Re Ansett Australia Ltd (No 3) [65] (Goldberg J); adopted in Re Nexus Energy Ltd [2014] NSWSC 1041 [12] ‑ [13] (Black J); Nipps (admin) v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty Ltd (No 4) [38] (Banks‑Smith J); and in Re GGA Lifestyle Pty Ltd (Administrators Appointed) [19] ‑ [20]. See also Re ONE.Tel Ltd [2014] NSWSC 457; (2014) 99 ACSR 247 [33] (Brereton J).
In Re Union Standard International Group Pty Ltd (admins apptd) (No 2), Stewart J further noted:
[10]… As Black J observed in In the matter of RCR Tomlinson Ltd (administrators appointed) [2018] NSWSC 1859, a decision may have a 'commercial character' but nonetheless be amendable to judicial direction. His Honour said (at [41]) of the application before him (which sought a direction as to whether a company should borrow loan funds): The Court has been prepared to give directions of this kind, where the decision is a complex one, and where it has to be made, as here, under circumstances of time pressure, in respect of a very large corporate group, and by balancing different interests. The Court's preparedness to grant such a direction in those circumstances reflects the intrinsic unfairness of leaving a voluntary administrator to be at risk of liability, in respect of a complex decision of that kind, where any decision that is made, including making no decision, will have inevitable risks for some or all of the affected constituencies.
[11]Because the effect of a direction under s 90-15 is to exonerate the liquidator or administrator if full disclosure is made, it will usually necessitate consideration by the court of the liquidator's or administrator's reasons and decision making process: see Re ONE.TEL Ltd [2014] NSWSC 457; 99 ACSR 247 at [36] per Brereton J (referring to former s 511 of the Act).
The value of a direction is to protect the administrator from liability for breach of duty or unreasonable behaviour provided full disclosure has been made to the court.[16]
[16] Re Ansett Australia Ltd (No 3) [65] (Goldberg J); Re Nexus Energy Ltd [12] - [13]; Nipps (admin) v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty Ltd (No 4) [38]; and Re GGA Lifestyle Pty Ltd (Administrators Appointed) [21], citing Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674, 679 ‑ 680 (McLelland J).
The ambit of s 90‑15 has not yet been fully considered by the authorities.[17] However, I accepted that the court's power under s 90‑15(1) to make orders extends, in appropriate circumstances, to giving directions of the kind sought by the administrators in the first application. That is, in the context of an administrator entering into a funding arrangement.[18]
[17] Re Broens Pty Ltd [39] (Gleeson J); see also Re Hawden Property Group Pty Ltd (In Liq) [2018] NSWSC 481; (2018) 125 ACSR 355 [7] ‑ [8] (Gleeson JA), cited in Re Frigger [2020] WASC 365 [12] (Allanson J). See also Re Pindan Group Pty Ltd (Administrators Appointed) [No 5] [2022] WASC 469 [64].
[18] See for example Re Khaled El‑Sheikh Pty Ltd (Administrators Appointed) [2022] FCA 703 (Anderson J); and Re AWA Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2014] NSWSC 249 (Brereton J); Re Nexus Energy Ltd (Black J); Re RCR Tomlinson Ltd (administrators appointed) [2018] NSWSC 1859 [114] (Black J); Nipps (admin) v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty Ltd (No 4) [36] ‑ [42]; cited in Re Pindan Group Pty Ltd (Administrators Appointed) [No 2] [2021] WASC 358 [43]. See also Re Geographe Workforce Pty Ltd (Administrators Appointed) [2022] WASC 250 [69] ‑ [72].
In Nipps (Admin) v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty Ltd (Admins Apptd) (No 4), the administrators sought a direction pursuant to s 90‑15 of the Insolvency Practice Schedule (Corporations) that they were justified in entering the group into a funding deed, and in doing so, protected the administrators from any potential personal liability claims. The court held the administrators would not be held personally liable for debts arising out of the funding deed for four reasons:[19]
(a)the funding deed was in the interests of the group as a whole;
(b)the funding deed allowed the group to continue trading which would likely result in a better return for creditors, including employees, than if the companies were wound up;
(c)there was no prejudice to the creditors by limiting the personal liability of the administrators; and
(d)the administrators had given full and frank disclosure as well as adequate notice to all the affected parties despite the urgency of the application.
[19] Nipps (admin) v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty Ltd (No 4) [32] - [35].
The court was satisfied that the actions of the administrators entering into the funding deed were both reasonable and justified in all the circumstances, and within the objectives of the Insolvency Practice Schedule (Corporations).
The court has exercised the power pursuant to s 90‑15 on the basis that administrators had pursued and met the objectives of the Corporations Act and the Insolvency Practice Schedule (Corporations) in Hill, in the matter of Autocare Services Pty Ltd (administrators appointed) [2021] FCA 167, and Re Virgin Australia Holdings Ltd (Admins Apptd) (No 2) [2020] FCA 717; (2020) 144 ACSR 347, among others.

Directions pursuant to s 65-45(1)

Section 65-45 sits within div 65 of the Insolvency Practice Schedule (Corporations) which concerns 'funds handling'.
At s 65‑1, a simplified outline of div 65 provides as follows:
The external administrator of a company has duties to:
(a)promptly pay all company money into an account (called an administration account); and
(b)promptly deposit instruments such as securities with a bank; and
(c)keep the account separate and not pay any money that is not company money into the account; and
(d)only pay money out of the account if it is for a legitimate purpose.
The external administrator of a company may keep a single account for a group of related companies (called a pooled group).
People with a financial interest in the external administration of a company (such as creditors) may ask the Court to give directions to the external administrator about the way money and other property of the company is to be handled.
If the external administrator of a company does not comply with this Division, the external administrator may have to pay penalties, be paid less remuneration or be removed as external administrator.
As observed by counsel, s 65‑25 establishes that an administrator must not pay out any money out of the administration account of a company unless it is for purposes related to the administration of that company. Failing to abide by these provisions exposes the external administrators to strict liability criminal offences. However, s 65‑45(1) of the Insolvency Practice Schedule (Corporations) gives the court the power to, on application, give directions regarding the payment, deposit or custody of:
(a)money; and
(b)negotiable instruments and other securities,
that are payable to, or held by, an external administrator of a company.[20]
[20] Submissions filed 13 June 2023 pars 27 - 28.
I accepted that without limiting the operation of s 65‑45(1), the court may give directions allowing the external administrators to make payments into and out of a special bank account pursuant to s 65‑45(2), and may authorise payments from time to time on the terms it thinks fit and if it thinks the account is no longer required, order it to be closed pursuant to s 65‑45(3).[21]
[21] Submissions filed 13 June 2023 par 30.
Counsel submitted and I accepted that the court will have reference to the following factors when determining applications under s 65‑45:[22]
[22] Re Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 1144 [91]; Re Grocon Pty Ltd (Administrators Appointed) (No 1) [2020] VSC 833 [42].
(a)that the directions must be made in the interests of the company's creditors (for example, by reducing additional costs incurred and increasing efficiency);
(b)that the directions made are consistent with the objectives of div 65, including:
(i)the maintenance of proper standards of funds handling and record keeping in relation to the company's affairs while under external administration; and
(ii)the reduction of unnecessary costs and inefficiencies in the conduct of the external administration;
(c)that the creditors of the company should not be prejudiced or disadvantaged by any directions that are sought;
(d)the time period for which the relief would have to operate;[23] and
(e)whether it is necessary to give notice to those who may be affected by the proposed directions.
[23] Re Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [95].

Disposition - the first application

Proposed order 1

As noted above, the administrators sought an order pursuant to s 90‑15(1) of the Insolvency Practice Schedule (Corporations) that they were justified in entering into and performing the Loan Agreement to support the working capital needs of the Group Companies and administration costs, in circumstances where they had secured the consent of CBA pursuant to s 443E(5) of the Corporations Act.

Standing

An administrator of a company has, among others, standing to apply for orders pursuant to s 90‑15,[24] and I was satisfied that the administrators had standing to seek proposed order 1.

Power

[24] Section 90-20(1)(d) of the Insolvency Practice Schedule (Corporations), read with s 9 of the Corporations Act (par (d) of the definition of 'officer').

On the evidence before me, I was satisfied that the Loan Agreement promoted the administration of the affairs of the Group Companies in a way that would maximise the chances of the Group Companies continuing in existence. I particularly had regard to Mr Tucker's evidence of 13 June 2023 that:
(a)the administrators considered there was a good chance that the businesses of the Group Companies, and likely the majority of employee roles, could be preserved if the businesses continued to trade and a deed of company arrangement or sale of the businesses was completed;
(b)the Loan Agreement would enable the administrators to continue the businesses of the Group Companies in accordance with their statutory duty under s 435A(a) of the Corporations Act;
(c)as at the date of their appointment the administrators did not have access to any funds of the Group Companies, and as at 13 June 2023, the administrators had received $379,162.39 in the administration account; and
(d)without funding via the Loan Agreement, the administrators would most likely be required to close down the businesses and terminate the employment of all employees of the Group Companies.[25]
[25] See [13(d)] and [26] and [27] above.
I understood that without the Loan Agreement, the Group Companies did not (and would not) have sufficient working capital (or certainty of working capital) to continue trading the businesses of the Group Companies during the administration period, notwithstanding the administrators' view that it was in the interests of the creditors of the Group Companies that the businesses continue to trade.
The direction sought by the administrators advanced the object of pt 5.3A and was not inconsistent with the object of the Insolvency Practice Schedule (Corporations) set out in s 1‑1(2). In these circumstances, I was satisfied that I had the power to make proposed order 1.

Relief in relation to past conduct

I was cognisant that as at the hearing of the first application, the administrators had already entered into the Loan Agreement. Attached to the first confidential Tucker affidavit was a copy of the Loan Agreement dated 12 June 2023.
In this regard, counsel observed that directions pursuant to s 90‑15 were not usually sought with respect to past actions, and by proposed order 1, the administrators sought relief in relation to having entered into the Loan Agreement on 12 June 2023.
As to the court's power to make an order pursuant to s 90‑15(1) in relation to a past action, counsel for the administrators referred to the decision of Downes J in Park (Administrator), in the matter of Ellume Ltd (Administrators Appointed) v Evangayle Pty Ltd (Trustee) [2022] FCA 1102, where the joint and several administrators sought, among other things, an order that pursuant to s 90‑15, the administrators were justified in, and would otherwise be acting reasonably, in entering into, and performing, a funding agreement which had been entered into five days prior to the hearing. At [21] it was observed that:
On 8 September 2022, the administrators entered into the Funding Agreement with the Funder. Relevantly, the Funding Agreement:
(1) states on its face that the administrators' personal liability to the Funder is limited to the extent of their indemnity and lien against the assets of the Company; and
(2)is subject to, and conditional upon, the administrators obtaining the relief they seek by the application.
Downes J noted that there were issues of both propriety and reasonableness raised by the administrators' decision to enter into the funding agreement; and the circumstances leading to the entry into the funding agreement were such that, had it not been entered into, the business would have ceased to trade almost immediately, and this would likely have resulted in the termination of the employment of the vast majority of, or all, employees, a dividend to priority creditors, at best a nominal dividend to general unsecured creditors and no return of monies to shareholders.[26] In the circumstances, her Honour was satisfied that entry into the funding agreement was in the creditors' interest as a whole because it would allow the business to trade on and enable the administrators to pursue certain steps, with obvious benefits to creditors, shareholders and employees.[27] On balance, her Honour was satisfied that the direction sought by the administrators advanced the object of pt 5.3A and was not inconsistent with the object of the Insolvency Practice Schedule (Corporations) set out in s 1‑1(2).[28]
[26] Park (Administrator), in the matter of Ellume Ltd (Administrators Appointed) v Evangayle Pty Ltd (Trustee) [25] ‑ [26].
[27] Park (Administrator), in the matter of Ellume Ltd (Administrators Appointed) v Evangayle Pty Ltd (Trustee) [27].
[28] Park (Administrator), in the matter of Ellume Ltd (Administrators Appointed) v Evangayle Pty Ltd (Trustee) [28].
An order was thus made pursuant to s 90‑15 in relation to a funding agreement that had been executed prior to the hearing of the application. That said, as was noted at [21(2)] of her Honour's decision, the relevant funding deed was subject to, and conditional upon, the administrators obtaining the relief they sought by the application (which included relief under s 90‑15). While her Honour does not otherwise address the appropriateness of making a direction in relation to past conduct, her Honour may have been informed by the condition described at [21(2)].
While the terms of the Loan Agreement which ground the first application are commercially sensitive and will not be described in detail in these reasons, they did include a condition subsequent for the benefit of the administrators which I understood had not been satisfied or waived as at the hearing of the first application.
In any event, the court's power under s 90‑15 is very broad, and in this case, the administrators sought that the power be exercised in a manner consistent with the objects of pt 5.3A as set out in s 435A of the Corporations Act. The court's power under s 90‑15(1) includes a power to give directions about a matter arising in connection with the performance or exercise of an administrator's functions or powers, and it was not necessary that there in fact be a current attack on the proprietary or reasonableness of the administrators' decision to enter into the Loan Agreement for the court to make the order sought. In this case the administrators sought that the power be exercised in circumstances which appeared just and where there was demonstrated sufficient utility to the external administration.
In such circumstances, I was satisfied that I had the power to make proposed order 1. To conclude otherwise, because relief was sought with respect to a past act, would be to inappropriately read a provision which grants powers to a court by making implications or imposing limitations which are not found in the express words.[29]

Discretion

[29] Consistent with the approach adopted in Glenfyne International Holding Ltd v Glenfyne Farms International AU Pty Ltd (in Liq); Glenfyne International Ltd v GI Commercial Pty Ltd (in Liq) [2019] NSWCA 304 [58] ‑ [61] (Bell P), referring to Owners of the Ship 'Shin Kobe Maru' v Empire Shipping Co Inc [1994] HCA 54; (1994) 181 CLR 404, 421; and also FAI General Insurance Co Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268 , 283 ‑ 284, 290; Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178, 185, 202 ‑ 203, 205.

After undertaking a thorough analysis, the administrators considered it to be in the interests of creditors as a whole to enter into, and cause the Group Companies to enter into the Loan Agreement. The administrators' reasons and decision making process are compressively detailed in the first Tucker affidavit.
In particular, I had regard to Mr Tucker's evidence that without the funding relief sought in this application, Mr Tucker believed that the administrators will most likely be required to close down the businesses and terminate the employment of all employees in the Group Companies, whereas that funding would enable the administrators to continue the businesses of the Group Companies in accordance with their statutory duty under s 435A(a) of the Corporations Act.[30] I also weighed in the balance Mr Tucker's evidence that on the information then available to him, he did not consider creditors would likely suffer detriment or prejudice, noting the assets of the Group Companies are fully secured and in light of the liabilities identified in his affidavit (summarised at [13(e)] above), it was unlikely that creditors would receive any return in the event of a liquidation at that point in time.[31]
[30] See [27] above.
[31] See [28] above.

I was satisfied that the plaintiffs had adduced evidence of circumstances in which the court could be satisfied that it would be just to grant the relief sought, and had by that evidence also demonstrated sufficient utility to the external administration.
I considered the propriety and reasonableness of the administrators having entered into the Loan Agreement, and particularly weighed in the balance the commercial terms and the fact that relief was sought with respect to a past act. I was cognisant of the employee entitlements due and the timing of the next payroll.[32] I was satisfied that the direction was necessary to address the issue of reasonableness, which called for the exercise of legal judgment which related to more than the making of a commercial decision.
[32] See [25] above.
Further, I was satisfied on the evidence that the administrators had given full and frank disclosure as well as (albeit very short) notice to all the affected parties despite the urgency of the application. The inclusion of an express 'liberty to apply' provision in the form of order 8 also gave me comfort.
In all of the circumstances, I was satisfied that there was a proper evidentiary basis to conclude that the administrators were justified in entering into, and would be justified in performing the Loan Agreement. The grant of relief in the form sought on behalf of the administrators was appropriate, in circumstances in which the grant appeared just and where there had been demonstrated sufficient utility to the external administration.

Proposed orders 2, 3 and 5

It is convenient to deal with proposed orders 2, 3 and 5 together, as the administrators sought all pursuant to s 447A of the Corporations Act.

Standing

By operation of s 447A(4)(c), the administrators had standing to apply for an order pursuant to s 447A(1).

Power

In proposed orders 2 and 3, the provision in pt 5.3A the operation of which was sought to be modified was s 443A of the Corporations Act. Section 443A(1) 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) of the Corporations Act cannot be excluded by any agreement; and s 443A(1) of the Corporations Act does not otherwise prejudice an administrator's rights to bring an action or make a claim as against the company or anyone else.
By proposed order 2, pursuant to s 447A of the Corporations Act the administrators sought that pt 5.3A of the Corporations Act operate as if s 443A(1) provides that any debts or liabilities of the administrators incurred under the Loan Agreement (including but not limited to monies borrowed, interest in respect of monies borrowed and borrowing costs) are in the nature of debts incurred by the administrators in performance and exercise of their functions and powers as joint and several voluntary administrators of the Group Companies.
By proposed order 3, pursuant to s 447A of the Corporations Act the administrators sought that the operation of s 443A(1) of the Corporations Act be modified, insofar as it applies to any liability of the administrators pursuant to the Loan Agreement, so that if the indemnity of the administrators under s 443D of the Corporations Act from the Group Companies is insufficient to meet any amount for which the administrators might be liable arising out of or in connection with the Loan Agreement, then the administrators will not be personally liable to repay any such amount to the extent of the insufficiency.
The courts have been willing to grant orders similar to those sought in this application in circumstances where the court has been satisfied that the administrator entered into the loan agreement or other arrangement to enable the company's business to continue to trade for the benefit of the creditors of the company.[33] I accepted that the court had the power to make proposed orders 2 and 3 promoted on behalf of the administrators, which had a clear nexus with how pt 5.3A was to operate in relation to the Group Companies.
[33] By way of example, see Re Spyglass Management Group Pty Ltd (admin apptd) [2004] FCA 1469; (2004) 51 ACSR 432 [3]; Re Malanos [2007] NSWSC 865; Re Estate Property Group Ltd (Administrators Appointed) [2007] FCA 1393; Re View Gold Pty Ltd [2008] WASC 241; Re Great Southern Infrastructure Pty Ltd [2009] WASC 161; Re SFM Australasia Pty Ltd (Administrators Appointed) [2009] FCA 360; Re Vision (Brisbane) Pty Ltd (Administrators Appointed) [2010] FCA 186; as referenced in Re Geographe Workforce Pty Ltd (Administrators Appointed) [42] ‑ [43].
Further, I accepted that the orders were designed to achieve in relation to the Group Companies the objects of pt 5.3A as stated in s 435A of the Corporations Act. I was satisfied that the Loan Agreement and proposed second and third orders promoted the administration of the affairs of the Group Companies in a way that maximised the chances of them continuing in existence.[34]
[34] Corporations Act s 435A(a).
In proposed order 5, the provision in pt 5.3A the operation of which was sought to be modified was s 440D of the Corporations Act. Section 440D provides that during the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, subject to express statutory exceptions, of administrator's written consent or of leave of the court (on terms if appropriate).
By proposed order 5, pursuant to s 447A of the Corporations Act the administrators sought that s 440D be modified so that the words 'including any arbitration or adjudication' were inserted in place of 'in a court' so that s 440D would read 'During the administration of a company, a proceeding ~~in a court~~ including any arbitration or adjudication against the company or in relation to any of its property cannot be begun or proceeded with, except with the administrator's written consent or with the leave of the Court.'
Consistent with the reasons of Brereton J in Re THO Services Ltd [2016] NSWSC 509 at [22] ‑ [35], I accepted that the court had the power to make proposed order 5 as promoted on behalf of the administrators, which had a clear nexus with how pt 5.3A was to operate in relation to the Group Companies.
Further, I accepted that proposed order 5 was designed to promote in relation to the Group Companies the objects of pt 5.3A as stated in s 435A of the Corporations Act. The order enables the administrators to focus on their statutory duties, and not divert funds to payment of legal costs, promoting the objects of pt 5.3A as stated in s 435A of the Corporations Act.

Discretion

There did not appear to be any significant discretionary factors which counted against making an order under s 447A of the Corporations Act in relation to proposed orders 2, 3 or 5.
As to proposed orders 2 and 3, they were sought for the administrators' benefit. The orders would have the effect of converting the loan advanced under the Loan Agreement into a 'non‑recourse' loan. They would enable the businesses of the Group Companies to continue to trade for the benefit of creditors. As the lenders had agreed to a loan of this kind, and CBA had consented to the same, there was no reason why the order ought not to have been made.
There was no evidence of any prejudice to the creditors of the Group Companies by the orders sought, and Mr Tucker deposed that on the information then available to him, he did not consider creditors would likely suffer detriment or prejudice given that the assets of the Group Companies were fully secured as at 13 June 2013, and it was considered unlikely that creditors would receive any return in the event of a liquidation. Further, notice of the application (albeit brief) had been given to creditors.
As was the case in Re Spyglass Management Group Pty Ltd (admin apptd), practically speaking, the creditors of the Group Companies had no interest in orders 2 and 3 because they could not be disadvantaged by them. On the other hand, they stood to benefit from the funds advanced. That was a sufficient reason to make the order.[35]
[35] Re Spyglass Management Group Pty Ltd (admin apptd) [6].
As to proposed order 5, counsel for the administrators submitted that when considering whether to exercise power under s 447A to extend the operation of s 440D, the court ought consider whether the extension:[36]
(a)would allow the administrators to perform their functions and duties;
(b)would prevent unnecessary expenditure of an insolvent company's limited resources;
(c)would not unnecessarily jeopardise another party's right to recover;
(d)would not subvert the objectives of the Corporations Act;
(e)would not interrupt the orderly management of the company's affairs; and
(f)would not unfairly give an unpaid person an advantage over other creditors.
[36] Submissions filed 13 June 2023 par 36 (a) - (f), referring to Re THO Services Ltd [37], [39] and [42], and Modcol Pty Ltd v National Buildplan Group Pty Ltd [2013] NSWSC 380 [41], [32] and [26] (McDougall J) (which decision concerned the grant of leave pursuant to s 440D of the Corporations Act).
I weighed these matters in the balance in the determination of the first application with respect to proposed order 5. I was satisfied that proposed order 5 was consistent with the objects of the Corporations Act having regard to the following factors, as submitted on behalf of the administrators:[37]
(a) it would ensure the administrators were able to focus on performing their functions and duties instead of dealing with defending claims made against the Group Companies, in circumstances where the adjudication made by MIA required an adjudication response to be filed iminently;[38]
(b) it would avoid unnecessary expenditure of the Group Companies' very limited resources, which might otherwise be spent maintaining the Group Companies' business and ensuring the best outcome for creditors; and
(c) it would ensure that the interests of the majority of creditors were protected by ensuring that neither MIA nor Westforce Construction received an advantage or priority over other creditors.
[37] Submissions filed 13 June 2023 par 40(a) - (c).
[38] First Tucker affidavit par 26.
While I considered it appropriate to extend the operation of s 440D to proceedings which included arbitration and adjudications against the Group Companies or in relation to any of the Group Companies' property, I did so with comfort that any impacted party might seek to vary or discharge order 5 (which was made plain to those impacted by the express inclusion of liberty to apply in order 8), or apply for leave pursuant to s 440D.

Proposed order 4

As noted above, by proposed order 4 the administrators sought directions pursuant to s 65-45 of the Insolvency Practice Schedule (Corporations).

Standing

An administrator of a company has, among others, standing to apply for directions pursuant to s 65‑45 of the Insolvency Practice Schedule (Corporations).[39]

Power

[39] Section 65-45(5)(b) of the Insolvency Practice Schedule (Corporations), read with s 9 of the Corporations Act (par (d) of the definition of 'officer').

As noted above, s 65‑45(1) of the Insolvency Practice Schedule (Corporations) gives the court the power to, on application, give directions regarding the payment, deposit or custody of:
(a)money; and
(b)negotiable instruments and other securities,
that are payable to, or held by, an external administrator of a company.
I was satisfied that I had power to grant the relief sought.

Discretion

I accepted that the court ought have reference to the following factors when determining applications under s 65‑45, and had regard to the same in the disposition of this part of the first application:[40]
[40] Re Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [91], [95]; Re Grocon Pty Ltd (Administrators Appointed) (No 1) [42].
(a)that the directions must be made in the interests of the company's creditors (for example, by reducing additional costs incurred and increasing efficiency);
(b)that the directions made are consistent with the objectives of div 65, including:
(i)the maintenance of proper standards of funds handling and record keeping in relation to the company's affairs while under external administration; and
(ii)the reduction of unnecessary costs and inefficiencies in the conduct of the external administration;
(c)that the creditors of the company should not be prejudiced or disadvantaged by any directions that are sought;
(d)the time period for which the relief would have to operate; and
(e)whether it is necessary to give notice to those who may be affected by the proposed directions.
I understood that administration accounts had been opened by the administrators for each of the Group Companies. However, the administrators proposed to use the bank account of the third plaintiff, Aerison Pty Ltd (administrators appointed), as a 'treasury' account in order to efficiently manage and record the financial affairs of the Group Companies. They sought orders authorising them to use the 'treasury' account as a special bank account as contemplated under s 65‑45(2) of the Insolvency Practice Schedule (Corporations).
I accepted the submission made on behalf of the administrators that due to the size and complexity of the Group Companies, it was not possible for the administrators to be sure that s 65‑15 and s 65‑25 of the Insolvency Practice Schedule (Corporations) was strictly complied with. Further, the opinion expressed by Mr Tucker that it was in the interests of the Group Companies' creditors to operate the bank account of the third plaintiff as a special bank account to fulfill a treasury function for the Group Companies weighed heavily in the balance.
The administrators expressed the view that use of the 'treasury' account would minimise the costs of transactions in the administration in a manner consistent with the way that funds had previously been receipted into the Group Companies.[41] It was also submitted that such an approach was the most efficient approach to be adopted now,[42] and the administrators proposed that the arrangement would be in place only until 24 July 2023. Further, counsel confirmed during the course of the first hearing that if necessary, the movements of monies could be disaggregated after the event for each entity.[43]
[41] Submissions filed 13 June 2023 par 32, referring to the first Tucker affidavit par 16.
[42] ts 10 (13 June 2021).
[43] ts 10 (13 June 2023).
Further, there was no suggestion that the proposed course would prejudice or disadvantage any creditors or class of creditors, and notice of the application (albeit brief) had been given to creditors.
In all of the circumstances, I was satisfied that the temporary measure proposed by the administrators would meet the needs of the Group Companies and its creditors and was consistent with the objectives of pt 5.3A. It was appropriate to order that the administrators not be required to comply with s 65‑25 of the Insolvency Practice Schedule (Corporations) in relation to the Group Companies, as was promoted in proposed order 4.

Confidentiality

I was satisfied that the second affidavit deposed to by Mr Tucker in support of the first application contained confidential information, and the application for a confidentiality order was appropriately made. In all of the circumstances, I was satisfied that it was appropriate to restrict access to the first confidential Tucker affidavit pursuant to the RSC O 67B r 5(b), which shall be treated as confidential and not be published or disclosed except pursuant to an order of the court on notice to the administrators.

Costs

It was appropriate that the administrators' costs of an incidental to the first application be costs and expenses in the external administration of Group Companies, and I ordered that such costs and expenses be paid out of the assets of the Group Companies.

Conclusion and orders - the first application

In all of the circumstances, I determined it appropriate that the court grant to the administrators the relief sought, with minor variations to the orders promoted on their behalf. The orders made on 13 June 2023 are reproduced at sch A to these reasons.

Second application

By the second application, the administrators sought to limit their personal liability as they traded on the businesses of the Group Companies prior to the second meeting of creditors.
By an amended application filed and heard on 15 June 2023, the administrators sought urgent relief under s 447A and s 443A of the Corporations Act. They sought:
(1)an order pursuant to s 447A of the Corporations Act that pt 5.3A of the Corporations Act is to operate as if s 443A(1) of the Corporations Act provides that:
(a)any debts or liabilities of the administrators incurred with respect to any obligations arising out of or in connection with the 'Water Corporation Project' as defined in the second affidavit of Mr Tucker filed in this proceeding on 15 June 2023;
(b)any debts or liabilities of the administrators incurred with respect to any obligations arising out of, or in connection with, any future agreements:
(i)which the administrators cause any of the Group Companies to issue or enter into:
A.with a third party;
(ii)that contain within their terms:
A.a limited recourse provision substantially the same as the limited recourse provision referred to in the second affidavit of Mr Tucker filed in this proceeding on 15 June 2023;
B.notice of these orders; and
(iii)where the limited recourse provision referred to in paragraph 30 of the second affidavit of Mr Tucker filed in this proceeding on 15 June 2023 has been accepted by the third party as forming part of the terms of the future agreement,
(Future Agreements) are in the nature of debts incurred by the administrators in performance and exercise of their functions and powers as joint and several voluntary administrators of the Group Companies;
(2)an order pursuant to s 447A of the Corporations Act that the operation of s 443A(1) of the Corporations Act is modified, insofar as it applies to any liability of the administrators pursuant to the Water Corporation Project and Future Agreements, so that if the indemnity of the administrators under s 443D of the Corporations Act from the Group Companies is insufficient to meet any amount for which the administrators might be liable arising out of or in connection with the Water Corporation Project or the Future Agreements, then the administrators will not be personally liable to repay any such amount to the extent of the insufficiency;
(3)pursuant to s 447A of the Corporations Act, the administrators are to provide notice, in the Future Agreement or otherwise, to any counterparty to a Future Agreement of order 1 above, prior to that counterparty entering into a Future Agreement;
(4)pursuant to s 447A of the Corporations Act, the administrators are to:
(a)keep a schedule noting each Future Agreement entered into by them on behalf of the Group Companies; and either:
(i)provide an update to any committees of inspection formed in relation to the Group Companies (Committee), at each meeting of those Committee, as to the nature of the Future Agreements that they have entered into or proposed to be entered into, together with estimated total debts that may be incurred in respect of the Future Agreements, on behalf of the Group Companies; or
(ii)if no committees of inspection are formed, to provide an update in the report produced for the second creditors meeting;
(5)an order that the costs of the second application be treated as costs in the administration of the Group Companies; and
(6)an order that any person who can demonstrate a sufficient interest to vary or discharge orders 1 ‑ 5 above (including any creditor of the Group Companies) has liberty to apply to the court on three business days' written notice to the administrators.

The first meeting of creditors of the Group Companies was scheduled to take place at 10.00 am on 15 June 2023, that is, shortly after the second application was filed on 15 June 2023 but before it was heard at 3.00 pm. At the hearing of the second application, the court was informed that a committee of inspection had been nominated and elected for the third plaintiff, Aerison Pty Ltd (administrators appointed), and consequently, counsel for the administrators did not seek an order in terms of proposed order 4(a)(ii) of the administrator's second application (reproduced above), but sought:
(4)pursuant to s 447A of the Corporations Act, an order that the first plaintiffs keep a schedule noting each Future Agreement entered into by them on behalf of the Group Companies and provide an update to any committees of inspection formed in relation to the Group Companies (Committee), at each meeting of the Committee, as to the nature of the Future Agreements that they have entered into or proposed to be entered into, together with estimated total debts that may be incurred in respect of the Future Agreements, on behalf of the Group Companies.

Evidence - the second application

Three new affidavits were read at the hearing of the second application.
Mr Tucker made two affidavits in support of the second application, again one 'open' and one described as a 'confidential' affidavit the subject of an application for restriction pursuant to the RSC O 67B r 11. References to the 'second Tucker affidavit' in these reasons are references to the 'open' affidavit sworn by Mr Tucker on 15 June 2023 described at [118] to [134] below.
Alistair Ronald Fleming, a partner of Clayton Utz, also made an affidavit in support of the second application. Mr Fleming's affidavit was sworn on 15 June 2023 and was also the subject of an application for restriction pursuant to the RSC O 67B r 11.
The circumstances giving rise to the first application made on 13 June 2023 set out in the first Tucker affidavit were also relevant to the disposition of the second application and regard was had to the same.
A written outline of submissions was also filed shortly before the hearing of the second application.

Second Tucker affidavit

In the second Tucker affidavit, among other things, Mr Tucker deposed to the urgency of the second application; to the administrators' continuing review and assessment of the key projects and contracts of the Group Companies; to the benefit of the orders sought with respect to the Water Corporation Project and Future Agreements (as defined in the proposed orders reproduced at [111(1)(a) and (b)] above); the impact of exposure to unfettered liability under the contractual arrangements; the administrators intention to give notice of the orders limiting their liability to any counterparty as contemplated in the proposed orders (reproduced at [111(3)] above); the timing of the first meeting of creditors, being 10.00 am on 15 June 2022; the proposed giving of notice of the second application to stakeholders; and Mr Tucker's opinion as to the potential for creditors to suffer detriment or prejudice should the second application be granted. Annexed to Mr Tucker's second affidavit and marked RST-33 was a proposed purchase order with amended terms and conditions which contained a limited recourse provision.

Circumstances which gave rise to urgency

As noted above, the second application was filed and heard on 15 June 2023, and in the second Tucker affidavit, Mr Tucker deposed to the circumstances which gave rise to urgency. Among other things, Mr Tucker deposed that:
(a)in the six business days that the administrators had been appointed, they had reviewed the cash flow forecasts of each project and associated purchase orders of the Group Companies;
(b)at the date of their appointment, the Group Companies had purchase orders in place with approximately 300 suppliers;
(c)given some projects were then cash flow negative, the administrators had sought to negotiate with contractual counterparties with a view to improving the contractual payment regime to improve cash flow to the Group Companies;
(d)in the administrators' view, continuing works would likely lead to cash flow into the Group Companies arising from the provision of services under contract, lower costs incurred by the counterparties than would be the case if works were immediately ceased under the contracts, and the continuation of the employment of many indirect and direct staff of the Group Companies; and
(e)due to the nature of the businesses run by the Group Companies, it was not possible for the administrators to continue to trade without continuing a number of significant contracts.
Mr Tucker further deposed that the administrators had been undertaking a sale process and described the steps undertaken and proposed, which included the opening of a data room and making available an information memorandum on 8 June 2023; presentation of non‑binding indicative offers by 19 June 2023; the selection of preferred parties on 20 June 2023; and the presentation of a deed of company arrangement proposal for vote on 11 July 2023 (11 July 2023 described as the intended date).
Mr Tucker deposed that the administrators' had engaged in the sale process with a view to selling the businesses of the Group Companies for maximum benefit to creditors. Further, he deposed that to maximise the outcome of the sale process for the benefit of creditors, the administrators considered it was necessary that they be able to renegotiate and execute significant contracts to 'sure up' the assets of the Group Companies and maintain the businesses as a going concern, particularly with a view to the deadline for offers of 19 June 2023.

Projects

In the second Tucker affidavit, Mr Tucker explained that the administrators were continuing to review and assess the key projects and contracts of the Group Companies. Among other things, he listed the projects upon which the Group companies were engaged as at 15 June 2023, and briefly described their respective scope and scale.

Efficiency

Mr Tucker deposed that he was of the view that the proposed orders concerning the debts or liabilities of the administrators to be incurred with respect to obligations arising out of or in connection with agreements were the most efficient and cost-effective way for the administrators to retain, and continue to provide services with a view to maintaining, the businesses of the Group Companies as a going concern.
In this regard, Mr Tucker observed that if the orders sought by the second application were not made, then it would be necessary to apply to the court separately, in respect of each agreement that the administrators sought to renegotiate, or for each Future Agreement sought to be entered into on behalf of the Group Companies, for an order pursuant to s 447A of the Corporations Act, limiting the administrators' liability under s 443A in respect of that particular agreement. He deposed to his concern that adoption of such an approach would result in significant costs to the administrations and would likely result in delays given the time needed to prepare for, apply for and then obtain such orders.
For these reasons, Mr Tucker deposed that it was his view that the proposed orders were in the best interests of the creditors of the Group Companies.

Impact of exposure to unfettered liability

Mr Tucker also deposed to his belief that without relief in the form sought by the second application, the administrators would face uncertain and potentially considerable personal liability under existing agreements (which by the time of the hearing of the second application was limited to the Water Corporation Project), and Future Agreements.
Given the scope and size of the projects, he deposed that the administrators were not willing to permit the Group Companies to enter new or renegotiated agreements without the benefit of the proposed orders.
Further, absent the grant of partial releases, and in order to mitigate the personal risk the administrators would face, he deposed that the administrators would most likely decide to significantly curtail the contracting arrangements of the Group Companies. In this regard, among other things, he deposed that given that the contracting arrangements for the projects were the only significant cash flow income for the Group Companies, if the administrators had to mitigate personal risk by curtailing activities, the following entities would be adversely impacted:
(a) the Group Companies, as it was unlikely that a recapitalisation or sale would occur if the businesses of the Group Companies were not maintained as going concerns;
(b) customers (being the counterparties to the Group Companies contracting arrangements), as they would have to source alternative services and would likely to experience delay and additional costs in the completion of their projects;
(c) creditors, as it would be unlikely that they would obtain a return if no recapitalisation or sale occurred; and
(d) the Group Company employees, as it was likely that all or most employees would be terminated if the businesses did not continue to operate as a going concern.
He further deposed to the potential consequences under the projects should the Group Companies cease work, and that, more widely, it was also likely that the suppliers to the Group Companies, of which there were approximately 300, would also be detrimentally impacted by the curtailment of operations of the Group Companies.

Notice of orders

Mr Tucker deposed to the intention of the administrators to give notice of the orders limiting their liability to any counterparty to a potential agreement prior to the execution of that agreement as contemplated in proposed order 3 (reproduced at [111(3)] above.
Mr Tucker further deposed that to ensure that the process was complied with, amendments had been drafted to purchase order agreements which would notify counterparties of the administrators' limited liability. Attached to the second Tucker affidavit marked RST‑33 was a purchase order with amendments shown in tracking. Further, the terms of a proposed limited recourse provision was set out at par 30 of the second Tucker affidavit.[44]

Notice of this application

[44] The language is reproduced at sch A to the orders made on 15 June 2023, which orders are reproduced at sch B to these reasons.

Given the urgency in which the second application was made, Mr Tucker acknowledged that it had not been possible to canvass the attitudes of all creditors to the orders sought. However, he deposed that the administrators would take steps to cause notice of the second application to be given to creditors by publication on the KordaMentha website and by emailing creditors; by the amended terms and conditions as set out in RST-33; to ASIC by email; to the Department of Employment and Workplace Relations that manages FEG by email; and to the ATO by lodgment on its portal.
Further, he noted that the application contemplated the court making an order in terms of proposed order 6 (reproduced at [111(6)], by which any person who could demonstrate a sufficient interest to vary or discharge the substantive orders would have liberty to apply.

Prejudice

Mr Tucker deposed to his belief that in the circumstances deposed to, orders sought in the second application were necessary in order for the administrators to further the objects of pt 5.3A of the Corporations Act, as stated in s 435A. Further, he deposed that on the information then available to him and as set out in the first Tucker affidavit, he did not consider that creditors would likely suffer detriment or prejudice from the making of the orders promoted, as it appeared unlikely that creditors would receive any return in the event of a liquidation.

Second confidential Tucker affidavit

A further affidavit deposed by Mr Tucker on 15 June 2023 was read in support of the first application. In the second confidential Tucker affidavit, Mr Tucker annexed a project summary regarding the top ten projects of the Group Companies; and based on the review undertaken by the administrators of the same, deposed to the administrators' expectation as to the inflow of funds to the Group Companies over a described period.

Confidential Fleming affidavit

Alistair Ronald Fleming is a partner of Clayton Utz, the solicitors for the plaintiffs. In his affidavit, among other things, Mr Fleming deposed to notice of the second application having been given to the Water Corporation; and to the appointment of a committee of inspection having been nominated and elected at the first meeting of creditors for the third plaintiff, Aerison Pty Ltd (administrators appointed).
Again, these reasons have been prepared so as to not disclose the substance of any confidential information which was before the court and which was weighed in the balance in the determination of the second application.

Applicable principles

The principles applicable to the disposition of the second application were the same as informed the first application to the extent that s 447A was invoked. In the disposition of the second application, I applied the principles as set out at [31] ‑ [36] above.

Disposition - the second application

Standing

Again, by operation of s 447A(4)(c), the administrators had standing to apply for an order pursuant to s 447A(1).

Power

I had regard to the language and effect of s 443A, described at [80] and [81] above.

Again, the courts have been willing to grant orders similar to those sought by the second application in circumstances where the court has been satisfied that the arrangements by which liability might arise was to enable the company's business to continue to trade for the benefit of the creditors of the company.[45] I accepted that the court had the power to make proposed orders 1 and 2, which had a clear nexus with how pt 5.3A was to operate in relation to the Group Companies.
[45] Re Arrium Ltd (Admin Apptd) [2016] FCA 972 [10], [17] ‑ [19] (Davies J), citing Re Mentha (in their capacities as joint and several administrators of the Griffin Coal Mining Company Pty Ltd (admins apptd) (ACN 008 667 285) (2010) 82 ACSR 142 [28] ‑ [34] (Gilmour J), referring to Re Cook Cove Pty Ltd (admins apptd) [2009] NSWSC 620 [37] and [40] (Austin J).
Section 447A(3) provides that an order under sub‑section (1) may be made subject to conditions. Proposed orders 3 and 4 operate as conditions upon the relief sought by proposed orders 1 and 2 and I was satisfied that I had power to make such orders.

Discretion

In the disposition of the second application, having regard to the evidence before me, I accepted that proposed orders 1 and 2 were in the interests of the Group Companies' creditors, and were consistent with the objectives of pt 5.3A as stated in s 435A of the Corporations Act.
There did not appear to be any significant discretionary factors which counted against the making of proposed orders 1 and 2.
With respect to Future Agreements, contracting counterparties to be affected by proposed orders 1 and 2 would have clear notice of the orders and liberty to apply. The Water Corporation had notice of the second application, and would also have liberty to apply. Proposed orders 3 and 4 operate to further protect contracting counterparties, promote transparency and ensure the accountability of the administrators.
Having regard to the comprehensive evidence before me, I was satisfied that the proposed orders allowed the businesses of the Group Companies to continue, maximising the possibility of preserving the businesses, and likely most current employee roles, with a view to the administrators entering a deed of company arrangement or selling the businesses, for the benefit of employees and creditors.[46]
[46] Submissions filed 15 June 2023 par 26, referring to the second Tucker affidavit par 8.
I also accepted that without the relief sought, the administrators would face the risk of a significant potential liability (given the nature of the businesses of the Group Companies) which I understood they were not willing to assume. That is, absent the relief sought, it was most likely that contracting arrangements would be significantly curtailed, putting at risk cash‑flow during the administration of the Group Companies. These matters deposed to by Mr Tucker, summarised at [126] to [129] above weighed heavily in favour of the grant of relief. I was in the end satisfied that it was appropriate for the court's discretion to be exercised to make proposed orders 1 ‑ 4 of the second application.

Confidentiality

I was satisfied that the second confidential Tucker affidavit and the confidential Fleming affidavit contained confidential information, and it was appropriate to restrict access to them pursuant to the RSC O 67B r 5(b). I considered it appropriate to make an order in similar terms to that which was made with respect to the first confidential Tucker affidavit. The content of the confidential affidavits may not be published or disclosed except pursuant to an order of the court on notice to the administrators.

Costs

Finally, I was satisfied that the second application was properly made by the administrators in their role as administrators of the Group Companies, and therefore the costs of the second application should be treated as costs and expenses in the administration of the Group Companies.

Conclusion and orders - the second application

For these reasons, I determined it was appropriate for the court to grant to the administrators the relief sought by the second application, with minor variations to the orders promoted on their behalf. The orders made on 15 June 2023 are reproduced at sch B to these reasons.

Sch A - Orders made on 13 June 2023

Sch B - Orders made on 15 June 2023

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LP
Associate to the Honourable Justice Strk
26 JULY 2023