Re GBS Gold Australia Pty Ltd
[2009] WASC 25
•16 DECEMBER 2008
RE GBS GOLD AUSTRALIA PTY LTD; EX PARTE SAKER [2009] WASC 25
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2009] WASC 25 | |
| 11/02/2009 | |||
| Case No: | COR:147/2008 | 16 DECEMBER 2008 | |
| Coram: | MASTER SANDERSON | 15/12/08 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Directions given allowing for payment | ||
| A | |||
| PDF Version |
| Parties: | ANDREW JOHN SAKER AND DARREN GORDON WEAVER AND MARTIN BRUCE JONES AS JOINT AND SEVERAL ADMINISTRATORS OF GBS GOLD AUSTRALIA PTY LTD (ACN 115 384 319) (ADMINISTRATORS APPOINTED), GBS GOLD AUSTRALIA (TOM'S GULLY) PTY LTD (ACN 124 581 862) (ADMINISTRATORS APPOINTED), NORTHERN GOLD PTY LTD (ACN 009 620 937) (ADMINISTRATORS APPOINTED), CAMELOT NORTHERN TERRITORY PTY LTD (ACN 062 734 178) (ADMINISTRATORS APPOINTED), TERRITORY GOLDFIELDS PTY LTD (ACN 066 581 075) (ADMINISTRATORS APPOINTED), BURNSIDE OPERATIONS PTY LTD (ACN 097 922 444) (ADMINISTRATORS APPOINTED), BUFFALO CREEK MINES PTY LTD (ACN 097 907 625) (ADMINISTRATORS APPOINTED), GBS GOLD HOLDINGS PTY LTD (ACN 126 471 136) (ADMINISTRATORS APPOINTED), TERRA GOLD MINING PTY LTD (ACN 071 444 061) (ADMINISTRATORS APPOINTED), TERRA METALS PTY LTD (ACN 092 922 097) (ADMINISTRATORS APPOINTED), GBS GOLD AUSTRALIA (LAND HOLDINGS) PTY LTD (ACN 119 987 518) (ADMINISTRATORS APPOINTED), EXCOR RESOURCES PTY LTD (ACN 095 987 518) (ADMINISTRATORS APPOINTED) AND E-AUCTION AUSTRALASIA PTY LTD (ACN 078 168 886) (ADMINISTRATORS APPOINTED) |
Catchwords: | Corporations Act 2001 (Cth) Application by administrators for leave to make payment of employee entitlements in course of administration Entitlement to rely on books and records of company |
Legislation: | Nil |
Case References: | Blundell v Macrocom Pty Ltd (2004) 50 ACSR 549 Deputy Commissioner of Taxation v Best & Less (Wollongong) Pty Ltd (1992) 10 ACLC 520 Re Ansett Australia Ltd and Korda (2002) 20 ACLC 1,187 Re Eisa Ltd (2000) 18 ACLC 810 Re O'Dessa Promotions Pty Ltd; Pescod v Harrison (1979) CLC 40-523 Re One.Tel Networks Holdings Pty Ltd (2002) 20 ACLC 326 Re William Felton & Co Pty Ltd (1998) 16 ACLC 1294 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
GBS Gold Australia (Tom's Gully) Pty Ltd (ACN 124 581 862)
Northern Gold Pty Ltd (ACN 009 620 937)
Camelot Northern Territory Pty Ltd (ACN 062 734 178)
Territory Goldfields Pty Ltd (ACN 066 581 075)
Burnside Operations Pty Ltd (ACN 097 922 444)
Buffalo Creek Mines Pty Ltd (ACN 097 907 625)
GBS Gold Holdings Pty Ltd (ACN 126 471 136)
Terra Gold Mining Pty Ltd (ACN 071 444 061)
Terra Metals Pty Ltd (ACN 092 922 097)
GBS Gold Australia (Land Holdings) Pty Ltd (ACN 119 987 518)
- Excor Resources Pty Ltd (ACN 095 987 518)
E-Auction Australasia Pty Ltd (ACN 078 168 886)
ANDREW JOHN SAKER AND DARREN GORDON WEAVER AND MARTIN BRUCE JONES AS JOINT AND SEVERAL ADMINISTRATORS OF GBS GOLD AUSTRALIA PTY LTD (ACN 115 384 319) (ADMINISTRATORS APPOINTED), GBS GOLD AUSTRALIA (TOM'S GULLY) PTY LTD (ACN 124 581 862) (ADMINISTRATORS APPOINTED), NORTHERN GOLD PTY LTD (ACN 009 620 937) (ADMINISTRATORS APPOINTED), CAMELOT NORTHERN TERRITORY PTY LTD (ACN 062 734 178) (ADMINISTRATORS APPOINTED), TERRITORY GOLDFIELDS PTY LTD (ACN 066 581 075) (ADMINISTRATORS APPOINTED), BURNSIDE OPERATIONS PTY LTD (ACN 097 922 444) (ADMINISTRATORS APPOINTED), BUFFALO CREEK MINES PTY LTD (ACN 097 907 625) (ADMINISTRATORS APPOINTED), GBS GOLD HOLDINGS PTY LTD (ACN 126 471 136) (ADMINISTRATORS APPOINTED), TERRA GOLD MINING PTY LTD (ACN 071 444 061) (ADMINISTRATORS APPOINTED), TERRA METALS PTY LTD (ACN 092 922 097) (ADMINISTRATORS APPOINTED), GBS GOLD AUSTRALIA (LAND HOLDINGS) PTY LTD (ACN 119 987 518) (ADMINISTRATORS APPOINTED), EXCOR RESOURCES PTY LTD (ACN 095 987 518) (ADMINISTRATORS APPOINTED) AND E-AUCTION AUSTRALASIA PTY LTD (ACN 078 168 886) (ADMINISTRATORS APPOINTED)
Plaintiffs
(Page 3)
Catchwords:
Corporations Act 2001 (Cth) - Application by administrators for leave to make payment of employee entitlements in course of administration - Entitlement to rely on books and records of company
Legislation:
Nil
Result:
Directions given allowing for payment
Category: A
Representation:
Counsel:
Plaintiffs : Mr M J Deleuil
Solicitors:
Plaintiffs : Mallesons Stephen Jaques
Case(s) referred to in judgment(s):
Blundell v Macrocom Pty Ltd (2004) 50 ACSR 549
Deputy Commissioner of Taxation v Best & Less (Wollongong) Pty Ltd (1992) 10 ACLC 520
Re Ansett Australia Ltd and Korda (2002) 20 ACLC 1,187
Re Eisa Ltd (2000) 18 ACLC 810
Re O'Dessa Promotions Pty Ltd; Pescod v Harrison (1979) CLC 40-523
Re One.Tel Networks Holdings Pty Ltd (2002) 20 ACLC 326
Re William Felton & Co Pty Ltd (1998) 16 ACLC 1294
(Page 4)
1 MASTER SANDERSON: By interlocutory process filed 8 December 2008, the plaintiffs applied for the following relief:
1. Orders or directions to determine the following question in the administration of the Group, namely whether the administrators are empowered to pay, during the administration period, the employee creditors of the Group their entitlements as at 4 December 2008.
2. If the answer to question 1 is 'yes' an order pursuant to section 447A of the Act that the administrators are entitled to rely on the books and records of the Group in calculating the employee entitlements as at 4 December 2008 and that this order is to extend to, and have retrospective effect for, any prior payments made by the administrators to employee creditors.
3. If the answer to question 1 is 'no' an order pursuant to section 447A of the Act, that the administrators are empowered to pay, during the administration period, the employee creditors of the Group their entitlements as at 4 December 2008 and that this order is to extend to, and to have retrospective effect, for any prior payments made by the administrators to the employee creditors.
4. An order that the costs and expenses of this application be costs and expenses in the administration of the Group.
2 When the matter came on for hearing on 16 December, I made orders in terms of pars 1, 2 and 4 of the interlocutory process. I indicated that I would publish reasons for doing so in due course. These are those reasons.
3 The application was supported by an affidavit of Andrew John Saker affirmed 5 December 2008. Mr Saker confirms that he is a registered liquidator and has been so registered for 13 years. He says that he has acted as administrator in numerous voluntary administrations and in numerous receiverships. On 15 September 2008, Mr Saker, along with Martin Jones and Darren Weaver, all of accountants Ferrier Hodgson, were appointed as joint and several administrators of the companies in the Group.
4 On 10 October 2008, this court extended the convening period of the second meeting of creditors of the Group from 21 October 2008 to 23 December 2008. An affidavit was affirmed in support of the administrators' applications to extend the convening period for that second meeting. In determining this application, I have had reference to that affidavit insofar as it is relevant to this application.
(Page 5)
5 In his affidavit affirmed 5 December 2008 Mr Saker says that as at the date of the appointment of administrators, GBS Gold employed approximately 169 people under permanent contracts in the Northern Territory. An additional 10 people were employed in its corporate office in Perth. On 30 September 2008, Mr Saker caused the operations of the Group to be shut down as the mines were not cash flow positive. He did not consider that continuing the operations of the Group was in the best interests of creditors. As a result, 149 of the 179 employees of GBS Gold were made redundant. Thirty employees were retained. These redundancies were put into effect between 23 September 2008 and 11 November 2008.
6 To ensure the operations were wound down in an orderly manner, the administrators paid notice of termination payments to employees at the time notice of redundancy was provided. As at the date of swearing his affidavit, Mr Saker says that an amount of $993,410.82 has been paid in respect of notices and a balance of $426,573.79 is due in relation to the remaining employees. Mr Saker says that in his view, given the current economic environment, he has doubts as to whether many of the employees who were made redundant will be able to find alternative employment in the short to medium term. That being so, he wished to take steps which are legally and commercially practicable to address the position of the employees as priority creditors of GBS Gold.
7 Mr Saker says that as at the date that he and his fellow administrators took control of the Group, they reviewed the books and records detailing employee entitlements. Importantly, Mr Saker says that the review determined that the books and records maintained by GBS Gold in relation to employee entitlements were well maintained and reliable.
8 Nonetheless, in order to verify the position, in the period between 26 September 2008 and 30 September 2008, Mr Saker corresponded with each of the employees identified in GBS Gold's books and records to confirm the amount of entitlements owed was equivalent to the amount set out in GBS Gold's books and records. In all but one case, the employees confirmed by their lack of response that the amount stated in GBS Gold's books and records were accurate. There was one instance where an employee disputed the amount of his entitlements. That claim is currently being assessed by Mr Saker's staff.
9 Based on his investigations and information, and after taking into account the retrenchments and redundancies already made, Mr Saker has calculated that the current employee entitlements are $3,548,508.41.
(Page 6)
- These amounts are made up of unpaid notice, superannuation payments, annual leave entitlements, redundancy entitlements, ERT bonus payments and an amount of $62,881.09 claimed by the lone employee disputing his entitlements.
10 Mr Saker says that as at 4 December 2008, the administrators held an amount of $11,814,820.03. Mr Saker says this amount was more than sufficient to meet all of the employee entitlements, the current and likely future costs of the administration and any subsequent form of administration. He says that he considers it to be in the interests of creditors (particularly the preferred employee creditors) that a relevant portion of the funds held by the administrators be applied to pay the employee entitlements. He further says that he does not believe the secured creditors and other unsecured creditors will be prejudiced by the payment of the employee entitlements.
11 The alternative course open to the administrators is to wait until the end of the sale process and the execution of a deed of company arrangement or the transition of GBS Gold into liquidation. After assessing the proofs of debt, the administrators could then pay the employee entitlements. In Mr Saker's view, this approach would not result in any payments being made by the administrators to the employees before 45 business days after 23 December 2008. Mr Saker says that it is the administrators' intention to recommend to the creditors that the second creditors meeting be adjourned to 2 March 2009.
12 The administrators have conferred with the two secured creditors in relation to the proposed course of action. These two secured creditors are Macquarie Bank Ltd (Macquarie) and Computershare Trust Co of Canada (Trust). Trust is a secured creditor of GBS Gold and the other companies in the Group. Macquarie is not a secured creditor of GBS Gold. However, the funds held by GBS Gold derive from the operation of its subsidiaries. Macquarie is a secured creditor of certain of the subsidiaries of GBS Gold and therefore effectively is a secured creditor.
13 Mr Saker has communicated with representatives of both Trust and Macquarie. Both have expressed support for Mr Saker's proposed course of action. Further, the committee of creditors has approved the payment of employee entitlements during the administration. This is confirmed by the minutes of the committee of creditors meeting which is annexure AS3 to Mr Saker's affidavit.
(Page 7)
14 The administrator of a company under administration may apply to the court for directions about any matter arising in connection with the performance or exercising of any of the functions or powers of the administrator: s 447D(a). In Re William Felton & Co Pty Ltd (1998) 16 ACLC 1294, Bryson J said:
The Corporations Law [as it was then] by s 447D empowers administrators to apply to the Court for directions and impliedly empowers the Court to give them; but the Law does not specify any legal consequences or any protection for administrators arising out of directions. The effect appears to be that an administrator who acts on directions which he has obtained on proper disclosure will be thereby assisted in showing that his conduct was reasonable for any purpose for which that may be relevant (1294).
15 The right given to administrators to approach the court 'is designed to facilitate (their work) by giving them direct access to the court … and it should be interpreted as widely as possible to give effect to that intention': see Re O'Dessa Promotions Pty Ltd; Pescod v Harrison (1979) CLC 40-523, 32-106. This statement of principle was confirmed in Re One.Tel Networks Holdings Pty Ltd (2002) 20 ACLC 326. In that case, Austin J referred with approval to the view of Lockhart J in Deputy Commissioner of Taxation v Best & Less (Wollongong) Pty Ltd (1992) 10 ACLC 520 where his Honour said that the power of the court to give directions to a controller must be interpreted liberally. Austin J went on to say that the power given by s 424 is akin to the power to give directions under the Trustee Act 1925 (NSW). There are, then, some limitations on the court's power. His Honour said:
[T]he procedure is appropriate where the question involves the nature and extent of the trustee's powers or duties of management or administration (332).
16 Two other matters should be mentioned. A court will give directions where there is an issue calling for the exercise of legal judgment, which might be a legal issue of substance or procedure or an issue of power, propriety or reasonableness: see Re Ansett Australia Ltd and Korda (2002) 20 ACLC 1,187. Second, the power of an administrator to seek directions may be useful in circumstances where the administrator has to act quickly in order to achieve the objectives of pt 5.3A of the Corporations Act 2001 (Cth): see Re Eisa Ltd (2000) 18 ACLC 810.
17 On behalf of the administrators it was submitted that the circumstances which justify the court giving directions under s 447D in relation to the question set out in par 1(a) of the interlocutory process were that:
(Page 8)
- (a) the direction sought relates to a legal issue, namely as to the powers of an administrator in the circumstances in which those powers may be exercised; and
(b) the direction is required as the administrator wishes to make payment of the entitlements prior to the second meeting of creditors, prior to Christmas, and without invoking a formal proof of debt process.
18 As to the question in par 1(b), the administrators sought a direction that, in circumstances where no formal proof process has been or could be affected, it is appropriate for them to rely on the company's books and records to the extent verified by them in making the payments.
19 The powers of administrators are set out in s 437A and s 442A of the Corporations Act. Under s 437A, the administrator (among other things):
(c) may terminate or dispose of all or part of that business, and may dispose of any of that property;
(d) may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration.
20 Under s 442A(d), the administrator has power to 'do whatever else is necessary for the purposes of [pt 5.3A]'. Prima facie, then, it appears that the administrators are empowered under the Act to pay employee entitlements during the administration period. However, one limitation on the administrators' powers is that they can only be exercised for the purpose of carrying pt 5.3A into effect. Section 435A makes this plain. In Blundell v Macrocom Pty Ltd (2004) 50 ACSR 549, Barrett J said:
[A]ll powers of an administrator, broadly expressed as they are, exist only for the purpose of carrying Pt 5.3A into effect, with the result that a particular exercise of power will be sustainable only if it can be seen to be referable to some aspect of the proper discharge of the functions of a Pt 5.3A administrator [10].
21 It follows, then, that the administrators' powers under s 437A and s 442A should be exercised by reference to the objects of pt 5.3A as set out in s 435A. That is, the powers are to be exercised towards maximising the chances of the company, or as much as possible of its business, continuing in existence; or if this is not possible, results in a better return to the company's creditors and members than would result from an immediate winding up of the company.
(Page 9)
22 In this case, the payment of employee entitlements will have no impact on the chances of the company, or as much as possible of its business, continuing in existence. Further, the employees will receive no better return than would result from the immediate winding up of the company. However, if the payment is not made now, the employees, at least in a temporal sense, will be worse off compared to the position that would result from an immediate winding up of the company. It was submitted, then, on behalf of the company that allowing payment now will achieve a better result than would be the case if the administrators simply followed the usual course of deferring payment of the winding up of the company, or of achieving an alternative outcome.
23 I am satisfied that it was proper to allow the administrators to exercise their powers and pay the employee creditors their entitlements as at 4 December 2008. I have reached that conclusion for a number of reasons. First, experienced administrators consider that it is in the best interests of the creditors (particularly preferred employee creditors) that a relevant portion of the funds held by the administrators now be applied to pay all the creditors' entitlements. Second, the interests of secured creditors and other unsecured creditors are unlikely to be prejudiced by the payment of the employee entitlements during the administration period. Third, the secured creditors and the committee of creditors are supportive of payments of the employee entitlements being made during the administration period. Fourth and finally, the administrators currently hold more than sufficient funds to meet all of the employee entitlements and provide a significant buffer for future requirements.
24 It is for these reasons that I was satisfied that the administrators are empowered to pay, during the administration period, the employee creditors their group entitlements as at 4 December 2008.
25 Further, I am satisfied that the administrators are entitled to rely on the books and records of the group in calculating the employee entitlements. The administrators are experienced accountants who have undertaken both an investigation of the records themselves and have corresponded with the employees. There is no reason to doubt the accuracy of the records, nor is there any reason to believe that waiting for proofs of debt will assist anyone. Accordingly, I am satisfied that the order sought in par 2 of the interlocutory process ought be made.
26 As an aside, it is worthy of note that the action taken by the administrators in this case exhibits a degree of compassion which is not always present in an administration or liquidation. It was the express
(Page 10)
- desire of the administrators to pay to the redundant employees funds to which they were entitled as soon as possible and prior to Christmas. The administrators were not compelled to take that step. Nor were the secured creditors or the committee of creditors obliged to support the administrators' actions. It is very much to the credit of all concerned that they have seen fit to make this application.
27 For these reasons, I made the orders sought in the interlocutory process.
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