Re Geographe Workforce Pty Ltd (Administrators Appointed) - [2022] WASC 250

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE GEOGRAPHE WORKFORCE PTY LTD (ADMINISTRATORS APPOINTED) [2022] WASC 250
CORAM:   STRK J
HEARD:   3 AUGUST 2022
DELIVERED          :   3 AUGUST 2022
PUBLISHED           :   5 AUGUST 2022
FILE NO/S:   COR 139 of 2022
MATTER:   IN THE MATTER OF GEOGRAPHE WORKFORCE PTY LTD (ADMINISTRATORS APPOINTED)

EX PARTE
ROBERT MICHAEL KIRMAN as joint and several administrator of GEOGRAPHE WORKFORCE PTY LTD (ADMINISTRATORS APPOINTED) ACN 630 339 758 AND SJ TRAFFIC MANAGEMENT PTY LTD (ADMINISTRATORS APPOINTED) ACN 613 399 163
First Plaintiff
ROBERT CONRY BRAUER as joint and several administrator of GEOGRAPHE WORKFORCE PTY LTD (ADMINISTRATORS APPOINTED) ACN 630 339 758 AND SJ TRAFFIC MANAGEMENT PTY LTD (ADMINISTRATORS APPOINTED) ACN 613 399 163
Second Plaintiff

Catchwords:

Corporations law - External administration - Application by the administrators pursuant to the Corporations Act 2001 (Cth) s 447A seeking an order as to how Pt 5.3A is to operate in relation to a particular company in administration - Funding deed and liability under the Corporations Act 2001 (Cth) s 443A - Application for directions pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) that the plaintiffs as administrators are and were justified in causing the company in external administration to enter into a funding deed

Legislation:

Corporations Act 2001 (Cth), s 447A
Insolvency Practice Schedule (Corporations), s 90-15

Result:

Application granted

Category: B

Representation:

Counsel:

First Plaintiff	:	L Bone
Second Plaintiff	:	L Bone

Solicitors:

First Plaintiff	:	HWL Ebsworth Lawyers
Second Plaintiff	:	HWL Ebsworth Lawyers

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

Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270
Brash Holdings Ltd 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
GDK Projects Pty Ltd; Re Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541
Honest Remark Pty Ltd v Allstate Explorations NL [2006] NSWSC 735; (2006) 234 ALR 765
Nipps v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty (No 4) [2021] FCA 644
R v Toohey; Ex parte Northern Land Council [1981] HCA 74; (1981) 151 CLR 170
Re Ansett Australia Ltd (No 3) [2002] FCA 90; 115 FCR 409
Re Autocare Services Pty Ltd [2021] FCA 167
Re Bosnjak Holding Pty Ltd (2005) 53 ACSR 8; [2005] FCA 275 [9]
Re Broens Pty Ltd [2018] NSWSC 1747
Re Community Work Pty Ltd (in liq) [2018] FCA 425
Re Estate Property Group Ltd [2007] FCA 1393
Re Frigger [2020] WASC 365
Re Fund Options (Australia) Pty Ltd [2020] FCA 1256
Re GB Nathan & Co Pty Ltd (1991) 24 NSWLR 674
Re GGA Lifestyle Pty Ltd [2019] WASC 167
Re Great Southern Infrastructure Pty Ltd [2009] WASC 161
Re Greg Sewell Forgings Pty Ltd (1995) 17 ACSR 602
Re Griffin Coal Mining Co Pty Ltd [2010] FCA 1469; (2010) 82 ACSR 142
Re Halifax Investment Services Pty Ltd (No 8) [2020] FCA 533; 144 ACSR 292
Re Hawden Property Group Pty Ltd (2018) 125 ACSR 355; [2018] NSWSC 481
Re Malanos [2007] NSWSC 865
Re New Tel Ltd [2004] FCA 1154; (2004) 210 ALR 270
Re ONE.Tel Ltd [2014] NSWSC 457; (2014) 99 ACSR 247
Re Poles & Underground Pty Ltd [2017] FCA 486
Re SFM Australasia Pty Ltd [2009] FCA 360
Re Spyglass Management Group Pty Ltd (2004) 51 ACSR 432; [2004] FCA 1469
Re Union Standard International Group Pty Ltd (No 2) [2020] FCA 1111
Re View Gold Pty Ltd [2008] WASC 241
Re Virgin Australia Holdings Ltd (No 2) [2020] FCA 717; (2020) 144 ACRS 347
Re Vision (Brisbane) Pty Ltd [2010] FCA 186

TABLE OF CONTENTS

Introduction

The relief sought

Evidence

Affidavit of Mr Brauer sworn on 26 July 2022

Affidavit of Ms Vincent sworn on 2 August 2022

Urgency

Application pursuant to s 447A

Applicable principles

Disposition

Directions pursuant to s 90‑15(1) of the Insolvency Practice Schedule (Corporations)

Applicable principles

Disposition

Confidentiality

Costs

Conclusion and orders

Sch A – Minute of proposed orders filed on 2 August 2022

Sch B – Orders made on 3 August 2022

STRK J:

Introduction

On 4 July 2022, Robert Conry Brauer and Robert Michael Kirman (together the plaintiffs) were appointed as joint and several administrators of Geographe Workforce Pty Ltd (administrators appointed) ACN 630 339 758 and SJ Traffic Management Pty Ltd (administrators appointed) ACN 613 399 163.
Geographe Workforce is an entity within the 'BCP Group', a related group of companies that ultimately fall under the control and ownership of Kyle Jackson. The BCP Group operates a civil contracting business in the southwest of Western Australia.
Geographe Workforce was incorporated in 2018 and has since (and continues) to operate as an 'internal' labour hire company within the BCP Group. Pursuant to a contract of engagement dated 1 December 2018 as between Geographe Workforce and Busselton Civil Pty Ltd ACN 601 554 956, Geographe Workforce provides labour hire services exclusively to Busselton Civil, an entity within the BCP Group.
As at the date of the plaintiffs' appointment, Geographe Workforce employed approximately 50 staff with an annual payroll of approximately $5 million. In performing its obligations under the contract of engagement, Geographe Workforce incurs daily liabilities of about $30,000. As at the time of the plaintiffs' appointment, Geographe Workforce did not have sufficient working capital to continue to perform its obligations under the contract of engagement.
For the purpose of funding the continued trade of the Geographe Workforce business, on or about 5 July 2022 the plaintiffs caused Geographe Workforce to enter into a funding deed (Funding Deed). The parties to the Funding Deed are BCP Contractors Pty Ltd ACN 602 859 405, and Busselton Civil (together the Funders), and Geographe Workforce.

The relief sought

By an originating process filed on 27 July 2022, the plaintiffs sought orders pursuant to s 447A of the Corporations Act2001 (Cth) and s 90‑15 of the Insolvency Practice Schedule (Corporations) 2016, sch 2 of the Corporations Act. While the originating process has a broader ambit, at the hearing on 3 August 2022, the plaintiffs' pressed only for orders in terms of the minute of proposed orders filed on 2 August 2022, a copy of which is reproduced at sch A to these reasons.
In summary, the plaintiffs sought first to obtain protection from the personal liability that would otherwise arise by reason of s 443A of the Corporations Act. That protection is sought in relation to past and future conduct of the plaintiffs in causing Geographe Workforce to enter into the Funding Deed on or about 5 July 2022.[1] Secondly, the plaintiffs sought advice that they are and were justified in causing Geographe Workforce to enter into the Funding Deed. Further, the plaintiffs moved for a confidentiality order in relation to certain affidavit evidence filed in the proceeding.
[1] Plaintiffs' submissions par 4.

Evidence

At the hearing of the application, counsel read two affidavits.

Affidavit of Mr Brauer sworn on 26 July 2022

The first was the affidavit of Mr Brauer sworn on 26 July 2022, to which was attached 11 documents. Among other things, in his first affidavit, Mr Brauer deposed to his and Mr Kirman's appointment as joint and several voluntary administrators of Geographe Workforce and SJ Traffic Management; and the incorporation of Geographe Workforce and its relationship with other entities within the BCP Group.
Mr Brauer also deposed to the role undertaken by Geographe Workforce within the BCP Group; the work undertaken by the plaintiffs since their appointment; the financial position of Geographe Workforce; the Funders' support to make this application; and to his view as to the impact of this application on creditors of Geographe Workforce.

The proposed DOCA

At par 17 of Mr Brauer's affidavit, he deposed that shortly following the appointment of the plaintiffs, Mr Jackson informed the plaintiffs (directly as well as via his solicitors) that he or another entity within the BCP Group intended to make a proposal for a deed of company arrangement (DOCA) with respect to each of Geographe Workforce and SJ Traffic Management. Mr Brauer deposed that while no specific details of that intended proposal were provided at that time, Mr Jackson indicated that any proposal would include the continuation of the Geographe Workforce business and the SJ Traffic Management business and the continued employment of the employees presently employed by Geographe Workforce and SJ Traffic Management.
In relation to Geographe Workforce, Mr Brauer further deposed that after being informed of Mr Jackson's intention, the plaintiffs formed the view that:
(a)the continued trade of the Geographe Workforce business during the administration period would facilitate the preservation of the value of the Geographe Workforce business, making it more attractive for the presentation of a proposal for a DOCA, by Mr Jackson but also by any other person that might be interested in making such a proposal;[2]
(b)given Mr Jackson's indication that he (or an entity within the BCP Group) intended to submit a proposal for a DOCA for Geographe Workforce on terms that would see the continued employment of the employees of each of those entities, this will likely represent a better return to creditors of Geographe Workforce as it would:
(i)avoid the incurrence of certain employee entitlements (such as annual leave and long service leave entitlements and those entitlements that crystallise upon on termination such as redundancy and payments in lieu of notice); and
(ii)provide a more certain and/or timely return to creditors on their admitted claims;[3] and
(c)in light of the matters referred to above, it is in the best interests of Geographe Workforce's creditors for the Geographe Workforce business to continue to trade during the voluntary administration period, and potentially beyond1 with a view to securing a proposal for a DOCA (including a proposal made by Mr Jackson or another entity within the BCP Group).[4]
[2] First affidavit of RC Brauer par 18(a).
[3] First affidavit of RC Brauer par 18(b).
[4] First affidavit of RC Brauer par 18(c).
A draft DOCA proposal was received by the plaintiffs on 11 July 2022, which contemplates the continued employment of the employees of Geographe Workforce; the full payment of outstanding superannuation contributions; and the preservation of all other accrued employee entitlements of those employees for payment by Geographe Workforce in the ordinary course of business post-completion of the DOCA.[5]
[5] First affidavit of RC Brauer pars 19, 20(a).
Mr Brauer deposed at par 20(b) of his affidavit that the plaintiffs estimate that by virtue of the matters summarised at [13] above, creditor claims in Geographe Workforce will be reduced by approximately $720,000 (being the plaintiffs' current estimate of the annual leave, long service leave and retirement entitlements of the employees of Geographe Workforce, which are proposed to be preserved post‑DOCA and which would otherwise be payable in a liquidation of Geographe Workforce).
While the plaintiffs have not yet formed a view as to whether they will recommend that creditors accept any formal DOCA proposal made by Busselton Civil on the terms of, or similar to, the draft DOCA proposal, Mr Brauer says that the plaintiffs consider that the draft DOCA proposal is worthy of further consideration; and it remains the case that it is in the interests of the creditors of Geographe Workforce that the plaintiffs continue to trade the Geographe Workforce business to enable the draft DOCA proposal to be further considered and developed with a view to being formally submitted.[6]

The Funding Deed

[6] First affidavit of RC Brauer par 21.

As noted above, Mr Brauer deposed that in performing its obligations under the contract of engagement, Geographe Workforce incurs daily liabilities of about $30,000; and as at the date of the plaintiffs' appointment, Geographe Workforce did not have sufficient working capital to continue to perform its obligations under the contract.[7]
[7] First affidavit of RC Brauer pars 32 - 33.
Mr Brauer deposed that notwithstanding the plaintiffs' view that it is in the interests of the creditors of Geographe Workforce that the Geographe Workforce business continue to trade during the administration period, in the absence of the financial accommodation to be provided to Geographe Workforce pursuant to the Funding Deed, Geographe Workforce did not (and will not) have sufficient working capital (or certainty of working capital) to continue trading the Geographe Workforce business during the administration period.[8] Mr Brauer confirmed that it was for the purposes of funding the continued trade of Geographe Workforce in this context that the plaintiffs entered into the Funding Deed.[9]
[8] First affidavit of RC Brauer par 34.
[9] First affidavit of RC Brauer par 35.
Mr Brauer further deposed that without the funding made available by the Funding Deed, Geographe Workforce was operating with limited working capital. The limitations that exist in this regard, and the resulting uncertainty and risk, would have limited the plaintiffs' ability to continue to trade the Geographe Workforce business as a going concern and, ultimately, to procure the presentation of a proposal for a DOCA.[10]
[10] First affidavit of RC Brauer par 36.
Mr Brauer deposed to the plaintiffs having formed the view that the benefit to Geographe Workforce's creditors of obtaining funding is manifest. This is because funding will allow the Geographe Workforce business to be traded in the short term (and for so long as the plaintiffs consider it to be in the interests of the creditors to do so), and also make it more attractive for the presentation of a proposal for a DOCA.[11] Mr Brauer further noted that Geographe Workforce continuing as a going concern will be beneficial for its creditors.[12]
[11] First affidavit of RC Brauer par 37.
[12] First affidavit of RC Brauer par 38.
Finally, Mr Brauer deposed that if the funding had not been obtained:[13]
(a) the Geographe Workforce business would have been unable to continue operating as a going concern;
(b) there would have been a deleterious effect on Geographe Workforce's asset values, in particular, the recoverability of debts due to Geographe Workforce and the ability for Geographe Workforce to complete its obligations pursuant to the contract of engagement;
(c) Geographe Workforce's secured creditors may have elected to appoint receivers to Geographe Workforce;
(d) Geographe Workforce's workforce would have been made redundant and material termination entitlements would have crystallised; and
(e) further claims from unsecured creditors would likely have arisen by virtue of Geographe Workforce being unable to comply with its obligations as a result of it having no working capital.

Limitation of liability

[13] First affidavit of RC Brauer par 39.

Mr Brauer attached a copy of the funding deed to his first affidavit as RCB1. As Mr Brauer deposed at par 40 of his affidavit, the funding deed states that (among other things):
(a)liability arising pursuant to, or in connection with, the Funding Deed can only be enforced against the Administrators to the extent detailed in the Funding Deed (clauses (a) to (j));
(b)[Geographe Workforce] will use its reasonable endeavours to keep its employees employed to the extent the Funding allows, but the availability of the Funding will not fetter the Administrators' discretion to terminate employees during the administration (clause (h)); and
(c)the Administrators reserve the right to apply to the Supreme Court of Western Australia for orders pursuant to section 447A and 447D of the Act and/or section 90‑15 of schedule 2 of the Act, and should the Administrators make that application, the Funding Deed may be relied on as evidence of the Funders' consent to that application (clause (i)).

Impact on creditors

With respect to the impact on creditors, Mr Brauer deposed that the plaintiffs were not aware, nor could they conceive, of any prejudice or injustice that would ensue for any party in the event that orders were made by the court in the terms of this application, especially given the likely benefit to creditors as a result of the funding.[14]
[14] First affidavit of RC Brauer par 58.
Mr Brauer also noted an intention on behalf of the plaintiffs to provide the creditors of Geographe Workforce with notice of this application.[15]

Matters concerning SJ Traffic Management

[15] First affidavit of RC Brauer par 59.

In his first affidavit, Mr Brauer also deposed to invoice financing facilities that were entered into by SJ Traffic Management and BCP Materials Pty Ltd ACN 602 859 496 with Cashflow Finance Australia Pty Ltd ACN 093 756 524 (CFA) prior to the plaintiffs' appointment, and to the security provided in relation to the same.
In his second affidavit sworn on 26 July 2022, Mr Brauer attached a copy of the various facility and security documents that relate to the invoice finance facility, together with a deed of priority. Mr Brauer's second affidavit is the subject of the application by the plaintiffs for a confidentiality order.
By the originating process filed on 27 July 2022, the plaintiffs also seek relief in respect of a proposed invoice finance facility between SJ Traffic Management and CFA. However, I was informed by counsel that as discussions in respect of those documents and the proposed facility are ongoing, the plaintiffs were not presently in a position to advance that aspect of the application, and it was proposed that the relief sought in respect of the proposed facility be determined at a later time.
While I was prepared to make the confidentiality order in relation to the second affidavit of Mr Brauer, the second affidavit was not read at the hearing on 3 August 2022.

Affidavit of Ms Vincent sworn on 2 August 2022

The second affidavit read by counsel at the hearing of the application was the affidavit deposed by Julia Abbott Vincent, a solicitor employed by HWL Ebsworth Lawyers, on 2 August 2022. Ms Vincent among other things attached to her affidavit a copy of a circular dated 29 July 2022 that the plaintiffs caused to be issued to the known creditors of Geographe Workforce, giving notice of this application.
The circular included the following information:
The Administrators advise an application was made to the Supreme Court of Western Australia pursuant to section 447A of the Corporations Act 2001 (Cth) and section 90‑15 of the Insolvency Practice Schedule (Corporations) 2016 (Schedule 2). The application has been made to limit the liability of the Administrators' pursuant to the funding deed entered with BCP Contractors Pty Ltd and Busselton Civil Pty Ltd, and the invoice finance documents that may be entered into during the administration of SJ Traffic.
A copy of the originating process dated 27 July 2022 is attached for your reference.
The application has been listed for 9:45 am on Thursday, 4 August 2022.
If you require any further information, please contact Nic Hall on [telephone number provided].
The second meeting of Geographe Workforce creditors is scheduled to take place on Monday, 8 August 2022.[16] Ms Vincent also attached to her affidavit a copy of the plaintiffs' report to creditors pursuant to s 75‑225 of the Insolvency Practice Rules (Corporations) 2016 for each of SJ Traffic Management,[17] and Geographe Workforce.[18]
[16] Affidavit of JA Vincent, JAV-3 (page 152).
[17] Affidavit of JA Vincent, JAV-3 (pages 55 -144).
[18] Affidavit of JA Vincent, JAV-3 (pages 145 - 230).
At the hearing of the application, counsel for the plaintiffs also relied upon a written outline of submissions filed on 2 August 2022.

Urgency

A certificate of urgency was filed with the application, signed by Carmen Boothman, solicitor for the plaintiffs.
Ms Boothman certified that there is a need for the orders sought in the application to be made prior to the second meeting of the creditors of Geographe Workforce, and the last day for second meeting of creditors is 8 August 2022.
Given the urgency, I delivered brief ex tempore reasons at the conclusion of the hearing. My reasons are now set out in further detail below, which include references in the form of schedules and footnotes.

Application pursuant to s 447A

Applicable principles

This application was made 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.[19]
[19] Brash Holdings Ltd 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 Holding Pty Ltd (2005) 53 ACSR 8; [2005] FCA 275 [9]; plaintiffs' submissions pars 12 - 13.
Counsel submitted and I accept that the 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, counsel referred to the decision of Austin J in Deputy Commissioner of Taxation v Portinex Pty Ltd [2000] NSWSC 99; (2000) 156 FLR 453 [30], where it was 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 include the following:[20]
(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.
[20] Plaintiffs' submissions par 14.
However, while the power is broad, it is not unlimited.[21] 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.[22] As was noted by Brereton J in Honest Remark Pty Ltd v Allstate Explorations NL at [66], in reliance on Re New Tel Ltd 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'.
[21] 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 [2004] FCA 1154; (2004) 210 ALR 270 [3].
[22] R v Toohey; Ex parte Northern Land Council [1981] HCA 74; (1981) 151 CLR 170, cited in Correa v Whittingham [4].
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.
I accept 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.[23]
[23] Australasian Memory Pty Ltd v Brien; Re Greg Sewell Forgings Pty Ltd (1995) 17 ACSR 602. Section 435A of the Corporations Act is reproduced at [60].
Counsel for the plaintiffs noted that there is authority for the proposition that s 447A may be used as a basis for addressing concerns as to the potential for personal liability that would otherwise arise by reason of s 443A of the Corporations Act. By way of example, counsel noted that in circumstances where the indemnity that an administrator has under s 443D of the Corporations Act is insufficient to satisfy debts for which the administrator is personally liable pursuant to s 443A(1) of the Corporations Act, the court has the power to order that the administrator will not (notwithstanding s 443A(2) of the Corporations Act) be liable to the extent of the insufficiency: see Re Spyglass Management Group Pty Ltd (2004) 51 ACSR 432; [2004] FCA 1469 [3].[24]
[24] Plaintiffs' submissions par 15.
Counsel further submitted that 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.[25]
[25] Plaintiffs' submissions par 16.
In this regard, counsel referred to the decision of Hammerschlag J in Re Malanos [2007] NSWSC 865, which concerned an administrator who had formed the view that it was in the interests of the company's creditors that the administrator obtain funding to allow the company to complete and obtain the benefits of certain beneficial contracts (without which the contracts would not be completed, and would inevitably be terminated by the counterparties). The court was satisfied that the additional funding would permit the company to continue trading and ultimately provide a significant benefit to the creditors (and avoid a potential damages claim against the company in relation to a breach of those contracts). On this basis, the court indicated a willingness to use 'the unusual power' under s 447A of the Corporations Act to grant orders that (amongst other things) the administrator would not be personally liable under s 443A of the Corporations Act to the extent of any insufficiency (or residual debt) following the exercise of the administrator's rights of indemnity of lien in respect of the debt.
Counsel also noted that further instances in which the court has exercised the power under s 447A of the Corporations Act to make orders to limit an administrator's personal liability under s 443A of the Corporations Act include the circumstances described in Re Estate Property Group Ltd [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 [2009] FCA 360; and Re Vision (Brisbane) Pty Ltd [2010] FCA 186.
Counsel submitted and I accept that the principles governing the grant of an application for orders under s 447A of the Corporations Act to vary the liability of an administrator under s 443A can be summarised as follows:[26]
(a)the proposed arrangements are in the interests of the company's creditors and consistent with the objectives of pt 5.3A of the Corporations Act;[27]
(b)typically the arrangements proposed are to enable the company's business to continue to trade for the benefit of the company's creditors;[28]
(c)the creditors of the company are not prejudiced or disadvantaged by the types of orders sought and stand to benefit from the administrator entering into the proposed arrangement;[29] and
(d)notice has been given to those who may be affected by the order.[30]
[26] Plaintiffs' submissions par 19.
[27] Re Great Southern Infrastructure Pty Ltd [13].
[28] Re Malanos [9]; Re View Gold Pty Ltd [17].
[29] Re View Gold Pty Ltd [18].
[30] Re Great Southern Infrastructure Pty Ltd [12].
Counsel noted that the majority of the cases in which the Courts have exercised the power under s 447A of the Corporations Act to vary an administrator's personal liability under s 443A have involved administrators borrowing funds during the period of the administration. Further, the orders that are typically sought have the effect of limiting recourse of the counterparty to the administrator on a personal basis to the extent to which he or she is indemnified from the assets of the company.[31] However, the circumstances in which the court has been minded to exercise its power pursuant to s 447A of the Corporations Act to vary an administrator's personal liability under s 443A are not limited to those in which the administrator borrows funds during the period of the administration.[32]

Disposition

Standing

[31] Re Griffin Coal Mining Co Pty Ltd [2010] FCA 1469; (2010) 82 ACSR 142 [31].

[32] Plaintiffs' submissions par 21, referring by way of example to Re Griffin Coal Mining Co Pty Ltd.

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

Power

The provision in pt 5.3A the operation of which is sought to be modified by the application is 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; 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.
While the Funding Deed contains provisions directed at limiting the plaintiffs' personal liability and the Funders' recourse to the plaintiffs with respect to that liability,[33] since they cannot contract out of their personal liability under s 443A(1) of the Corporations Act, the plaintiffs remain exposed to the possibility that the quantum of their personal liability under the Funding Deed may exceed the extent to which their statutory lien over Geographe Workforce's assets secures their right of indemnity under s 444D.
[33] First affidavit of RC Brauer, RCB1 ('this deed provides' cl (g)).
I accepted that the court has the power to make the first order promoted on behalf of the plaintiffs, which has a clear nexus with how pt 5.3A was to operate in relation to Geographe Workforce.
Further, I accepted that the first order was designed to achieve in relation to Geographe Workforce the objects of pt 5.3A as stated in s 435A of the Corporations Act. Mr Brauer deposed that in the absence of the financial accommodation to be provided pursuant to the Funding Deed, Geographe Workforce did not (and will not) have sufficient working capital (or certainty of working capital) to continue trading the Geographe Workforce business during the administration period, notwithstanding the plaintiffs' view that it is in the interests of the creditors of Geographe Workforce that the Geographe Workforce business continue to trade during the administration period. I was satisfied that the Funding Deed and the first order promoted the administration of the affairs of Geographe Workforce in a way that maximised the chances of the company continuing in existence.[34]

Discretion

[34] Corporations Act s 435A(a).

Further, there did not appear to be any significant discretionary factors which counted against making an order under s 447A of the Corporations Act.
As was the case in Re Spyglass Management Group Pty Ltd, the order sought is for the plaintiffs' benefit. It will have the effect of converting the loan advanced under the Funding Deed into a 'non‑recourse' loan. As the lenders have agreed to a loan of this kind, there is no reason why the order should not be made.[35]
[35] Re Spyglass Management Group Pty Ltd [6].
Counsel noted that there was no evidence of any prejudice to the creditors of Geographe Workforce, and the plaintiffs do not consider that the making of the orders sought in the application cause prejudice or injustice to any party.[36] Further, as noted at [80] to [83], notice was given to those affected by the order. I bore this evidence in the balance.
[36] First affidavit of RC Brauer par 58; plaintiffs' submissions par 31.
Again, as was the case in Re Spyglass Management Group Pty Ltd, practically speaking, the creditors of Geographe Workforce have no interest in the order because they cannot be disadvantaged by it. On the other hand, they stand to benefit from the loan. That is a sufficient reason to make the order.[37]
[37] Re Spyglass Management Group Pty Ltd [6].

Directions pursuant to s 90‑15(1) of the Insolvency Practice Schedule (Corporations)

Applicable principles

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'.[38] The court may make 'such orders as it thinks fit' in relation to the external administration of a company,[39] 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.[40] As was observed by counsel for the plaintiffs, 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.[41]
[38] Re Halifax Investment Services Pty Ltd (No 8) [2020] FCA 533; 144 ACSR 292 [51], cited by Stewart J in Re Union Standard International Group Pty Ltd (No 2) [2020] FCA 1111 [7].
[39] Section 90‑15(1) of the Insolvency Practice Schedule (Corporations).
[40] 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).
[41] Plaintiffs' submissions par 23, citing Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [166] (Gordon J); Re Halifax Investment Services Pty Ltd (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'.
As Banks-Smith J observed in Nipps v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty (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:
435A Object 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:[42]
[42] Nipps v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty (No 4) [24] (Banks-Smith J).
1-1OBJECT 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 v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty (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 (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 adopt the observation made by Stewart J in Re Union Standard International Group Pty Ltd (No 2) at [9], which follows the decision of Goldberg J in Re Ansett Australia Ltd (No 3) [2002] FCA 90; 115 FCR 409 [44]:[43]
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.
[43] See also Re ONE.Tel Ltd [2014] NSWSC 457; (2014) 99 ACSR 247 [32] (Brereton J); followed in Re Fund Options (Australia) Pty Ltd [2020] FCA 1256 (Farrell J).

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.[44] 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.[45]
[44] Re GGA Lifestyle Pty Ltd [2019] WASC 167 [18] (Vaughan J), citing Re Broens Pty Ltd (in liq) [39] (Gleeson J). See also Re Poles & Underground Pty Ltd [2017] FCA 486 [41] (Gleeson J); and Re Community Work Pty Ltd (in liq) [2018] FCA 425 [45] - [47] (Gleeson J).
[45] Re Ansett Australia Ltd (No 3) [65] (Goldberg J); adopted in Re Nexus Energy Ltd [2014] NSWSC 1041 [12] - [13] (Black J); Nipps v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty (No 4) [38] (Banks‑Smith J); and in Re GGA Lifestyle Pty Ltd [19] - [20]. See also Re ONE.Tel Ltd [33] (Brereton J).
In Re Union Standard International Group Pty Ltd (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.[46]
[46] Re Ansett Australia Ltd (No 3) [65] (Goldberg J); Re Nexus Energy Ltd [12] - [13]; Nipps v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty (No 4) [38]; and Re GGA Lifestyle Pty Ltd [21], citing Re GB Nathan & Co Pty Ltd (1991) 24 NSWLR 674, 679 - 680 (McLelland J).
The ambit of s 90‑15 has not yet been fully considered by the authorities.[47] However, I accept 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 plaintiffs by this application. That is, in the context of an administrator entering into a funding arrangement.
[47] Re Broens Pty Ltd [2018] NSWSC 1747 [39] (Gleeson J); see also Re Hawden Property Group Pty Ltd (2018) 125 ACSR 355; [2018] NSWSC 481 [7] - [8] (Gleeson JA), cited in Re Frigger [2020] WASC 365 [12] (Allanson J).
As was noted by counsel for the plaintiffs, in Nipps v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty (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:[48]
(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.
[48] Nipps v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty (No 4) [40] - [41]; plaintiffs' submissions par 26.
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).[49]
[49] Nipps v Remagen Lend ADA Pty Ltd; Re Adaman Resources Pty (No 4) [42]; plaintiffs' submissions par 27.
Counsel for the plaintiffs further noted that 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 Re Autocare Services Pty Ltd [2021] FCA 167, and Re Virgin Australia Holdings Ltd (No 2) [2020] FCA 717; (2020) 144 ACRS 347, amongst others.[50]

Disposition

Standing

[50] Plaintiffs' submissions par 28.

An administrator of a company has, among others, standing to apply for orders pursuant to s 90‑15.[51]

Power

[51] Section 90-20(1)(d) of the Insolvency Practice Schedule (Corporations), read with s 9 of the Corporations Act (pars (e) and (f)) of the definition of 'officer').

Again, I had regard to Mr Brauer's evidence that in the absence of the financial accommodation, Geographe Workforce did not (and will not) have sufficient working capital (or certainty of working capital) to continue trading the Geographe Workforce business during the administration period, notwithstanding the plaintiffs' view that it is in the interests of the creditors of Geographe Workforce that the Geographe Workforce business continue to trade during the administration period. I was satisfied that the Funding Deed promotes the administration of the affairs of Geographe Workforce in a way that maximises the chances of the company continuing in existence.

Discretion

After undertaking a thorough analysis, the plaintiffs considered it to be in the interests of creditors as a whole to enter into, and cause Geographe Workforce to enter into the Funding Deed.[52]
[52] First affidavit of RC Brauer par 37.
The plaintiffs' reasons and decision making process are compressively detailed in Mr Brauer's first affidavit. I accepted the submission made by counsel for the plaintiffs that the evidence established that the plaintiffs arrived at that view on the basis that had the plaintiffs not entered into and obtained funding pursuant to the Funding Deed:[53]
(a) Geographe Workforce would not have had sufficient working capital to continue to trade;
(b) Geographe Workforce would have been unable to trade as a going concern;
(c) there would have been a deleterious effect on Geographe Workforce's asset values and recoverability of Geographe Workforce's assets;
(d) Geographe Workforce's secured creditors may have elected to appoint receivers to Geographe Workforce;
(e) Geographe Workforce's workforce would have been made redundant and material termination entitlements would have crystallised; and
(f) further claims from unsecured creditors would likely have arisen by virtue of Geographe Workforce being unable to comply with its obligations including under the contract of engagement as a result of Geographe Workforce having no working capital.
[53] Plaintiffs' submissions par 29.
The plaintiffs considered that the continued trading of Geographe Workforce was required in order to preserve the possibility that a proposal for a DOCA would be formally submitted, including one that may result from further development of the draft DOCA proposal.[54]
[54] Plaintiffs' submissions par 29.
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 was satisfied that the direction was necessary so as 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.
Finally, I note that the plaintiffs through a circular to creditors issued on 29 July 2022 had given notice of this application to all creditors of Geographe Workforce.[55] I was satisfied on the evidence that the plaintiffs had given full and frank disclosure as well as adequate notice to all the affected parties despite the urgency of the application.
[55] Affidavit of JA Vincent par 3(a), JAV-1.
In so finding, I was cognisant that the circular issued to creditors did not refer to the correct date of the hearing, through no fault of the plaintiffs. The date and time first allocated was changed by the court after the circular had issued. However, I was informed that the plaintiffs were not aware of any person who wished to be heard in relation to the relief sought.
In the circumstances, orders 5 and 6 were amended to afford creditors additional time to apply to be heard before orders 1 and 2 took effect. On behalf of the plaintiffs, it was submitted that in the circumstances, the extended stay together with the notification already provided, would be the most efficient and cost-effective approach to allow any aggrieved persons sufficient opportunity to raise any objection. With the addition of an order to ensure the prompt dispatch of the orders to creditors and to afford the creditors additional time to apply to the court, I was satisfied that this was an appropriate course and made orders in the terms proposed on behalf of the plaintiffs.
Counsel for the plaintiffs further noted that by entering into the Funding Deed, the Funders were aware of the plaintiffs' intention to bring this application;[56] nevertheless, prior to filing the application with the court, the plaintiffs, by their solicitors HWL Ebsworth Lawyers, informed the Funders of this application and the relief sought;[57] and the Funders have confirmed that they support the application and the relief sought insofar as it relates to the Funding Deed.[58]
[56] First affidavit of RC Brauer, RCB1 ('this deed provides' cl (i)(viii)); plaintiffs' submissions par 32.
[57] First affidavit of RC Brauer par 41(a); plaintiffs' submissions par 32.
[58] First affidavit of RC Brauer par 41(b); plaintiffs' submissions par 32.
In all of the circumstances, I was satisfied that there was a proper evidentiary basis to conclude that the plaintiffs would be justified in entering into, and causing Geographe Workforce to enter into the Funding Deed. Further, that the grant of relief in the form sought on behalf of the plaintiffs was appropriate.

Confidentiality

I was satisfied that the second affidavit deposed to by Mr Brauer 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 second affidavit pursuant to O 67B r 5(b) of the Rules of the Supreme Court 1971 (WA), which shall be treated as confidential and not be published or disclosed except pursuant to an order of the court.

Costs

It was appropriate that the plaintiffs' costs of an incidental to this application be costs and expenses in the external administration of Geographe Workforce, and I ordered that such costs and expenses be paid out of the assets of that company.

Conclusion and orders

For these reasons, I determined it was appropriate for the court to grant to the plaintiffs the relief sought, with minor variations to the orders promoted on behalf of the plaintiffs. The final form of the orders made are reproduced at sch B to these reasons.

Sch A – Minute of proposed orders filed on 2 August 2022

Sch B – Orders made on 3 August 2022

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AI
Associate to the Honourable Justice Strk
5 AUGUST 2022