Re Inspired Property Group Pty Ltd (Administrators Appointed)
[2025] WASC 163
•6 MAY 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE INSPIRED PROPERTY GROUP PTY LTD (ADMINISTRATORS APPOINTED); EX PARTE ROBERT MICHAEL KIRMAN as joint and several administrator of INSPIRED PROPERTY GROUP PTY LTD (ADMINISTRATORS APPOINTED) [2025] WASC 163
CORAM: HILL J
HEARD: 7 APRIL 2025
DELIVERED : 7 APRIL 2025
PUBLISHED : 6 MAY 2025
FILE NO/S: COR 49 of 2025
MATTER: IN THE MATTER OF INSPIRED PROPERTY GROUP PTY LTD (ADMINISTRATORS APPOINTED)
EX PARTE
ROBERT MICHAEL KIRMAN as joint and several administrator of INSPIRED PROPERTY GROUP PTY LTD
First Plaintiff
ROBERT CONRY BRAUER as joint and several administrator of INSPIRED PROPERTY GROUP PTY LTD
Second Plaintiff
Catchwords:
Corporations - External administration - Where funding agreement entered into by administrators - Application for order relieving administrators of personal liability - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 443A, s 443D, s 447A, sch 2 s 90-15
Result:
Application granted
Representation:
Counsel:
| First Plaintiff | : | J D Malone |
| Second Plaintiff | : | J D Malone |
Solicitors:
| First Plaintiff | : | Blackwall Legal LLP |
| Second Plaintiff | : | Blackwall Legal LLP |
Cases referred to in decision:
Mentha, Re Griffin Coal Mining Company Pty Ltd (Administrators Appointed) [2010] FCA 1469; (2010) 82 ACSR 142
Secatore, Re Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493
HILL J:
(This judgment was delivered extemporaneously and has been edited from the transcript to include references, headings and to correct matters of grammar and expression.)
By originating process filed on 4 April 2025, the plaintiffs, who are the joint and several administrators of Inspired Property Group Pty Ltd (Company), seek:
(a)orders for relief from personal liability for debts incurred in relation to a loan agreement (Loan Agreement) entered into with Incito Investments Pty Ltd (Lender); and
(b)directions that they were justified in causing the Company to enter into the Loan Agreement.
The originating process was listed on an urgent basis for the grounds set out in the certificate of urgency filed on 4 April 2025.
In support of their application, the plaintiffs relied on an affidavit of Robert Michael Kirman, the first plaintiff, filed on 4 April 2025, and an affidavit of Fraser Lewis Doling Dudfield, a solicitor employed by Blackwall Legal, filed 7 April 2025, confirming service of the application and relevant court documents on the Australian Securities and Investments Commission, and that notice of the application has been given to creditors.
In considering the application, I have also had the benefit of a written outline of submissions filed by the plaintiff.
Factual background
The factual background to the application is set out in the affidavit of Mr Kirman and can be summarised as follows.
On 1 April 2025, the plaintiffs were appointed as joint and several administrators of the Company. The Company operates a residential building services business which services both residential homeowners as well as developers.[1]
[1] Affidavit of Robert Michael Kirman filed 4 April 2025 [7] - [8].
The Company has two full-time employees, and at the time of the administrators' appointment, had contracts on foot for the construction of approximately 84 residential homes, as well as two townhouse projects. Since their appointment, the plaintiffs have suspended all work, apart from work on the two townhouse projects (Continuing Projects).[2]
[2] Affidavit of Robert Michael Kirman filed 4 April 2025 [9] - [19].
Based on their preliminary investigations, the plaintiffs believe that:
(a)the principal secured creditors of the Company are owed in excess of $3.5 million;
(b)the revenue that is likely to be earned during the period of administration for the Continuing Projects is likely to be more than $600,000; and
(c)the total estimated costs likely to be incurred during the administration (assuming the Company retains its employees and continues to work on the Continuing Projects) is in excess of $1 million.[3]
[3] Affidavit of Robert Michael Kirman filed 4 April 2025 [15], [22] - [23], 'RMK-6'.
As at 1 April 2025, the Company's cash at bank was less than $4,000, which is clearly insufficient to enable the Company to continue to operate in the absence of any funding.
The plaintiffs believe that it is in the best interests of the Company, its employees, and its stakeholders, for the plaintiffs to continue to operate the Company as a going concern, given the nature of the Company's asset base, being rights to milestone payments and the release of guaranteed funds under contracts for residential developments. These assets can only be realised if the Company has the ability to perform its contractual obligations. However, in order for this to occur, the plaintiffs require immediate funding.[4]
[4] Affidavit of Robert Michael Kirman filed 4 April 2025 [13], [21], [33].
On 2 April 2025, the plaintiffs entered into the Loan Agreement with the Lender for the sum of $460,000.[5] The plaintiffs consider that the provision of these funds will enable them to continue to operate the Company as a going concern during the administration and will allow them to progress negotiations with any external party expressing an interest in restructuring or recapitalising the Company, including by way of a deed of company arrangement (DOCA).
[5] Affidavit of Robert Michael Kirman filed 4 April 2025 [35(b)], 'RMK-7'.
The plaintiffs are not willing to continue to trade in circumstances where they are personally liable for any debts in the event that the Company's assets are insufficient to meet the repayment of the loan.
Should directions be given for approval to enter in the Loan Agreement and to relieve the plaintiffs from personal liability?
Pursuant to s 443A of the Corporations Act 2001 (Cth) (Act), an administrator is personally liable for any debts they incur in the performance or exercise, or purported performance or exercise of their functions and powers as administrators.
Pursuant to s 443D of the Act, an administrator is entitled to be indemnified out of the company's property for the debts for which they are liable under s 443A.
If an administrator enters into a loan agreement, the loan and the interest payable on it are not considered to be a debt falling within the terms of s 443A of the Act, and the indemnity that is the subject in s 443D. For this reason, unless an order is made by the court modifying the operation of pt 5.3A of the Act, the administrators will be personally liable for the loan and any interest that is payable on it.
It is well accepted that s 447A of the Act empowers the court to make orders limiting the personal liability of an administrator where it is satisfied that the loan agreement is made for the purpose of allowing the company in administration to trade or to continue operating for the benefit of creditors.[6]
[6] Secatore, Re Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493.
Where these circumstances arise, courts have generally expressed the view that administrators should not be expected to expose themselves to substantial personal liabilities. Where orders are made relieving administrators from personal liabilities in respect of borrowings, the orders permit the administrators to make commercial decisions about the ongoing operations of the company under administration by focusing on what is in the best interest of creditors, without any influence of the concern as to their personal liability.
The factors that the court will take into account on an application under s 447A of the Act to vary the liability of administrators under s 443A were summarised by Gilmour J in Mentha, Re Griffin Coal Mining Company Proprietary Limited (Administrators Appointed).[7]
[7] Mentha, Re Griffin Coal Mining Company Pty Ltd (Administrators Appointed) [2010] FCA 1469; (2010) 82 ACSR 142 [30].
In this case, the key terms of the Loan Agreement can be summarised as follows:
(a)the first plaintiff has entered into the Loan Agreement in his capacity as one of the joint and several administrators of the Company;
(b)the Lender will make available to the plaintiffs an interest-free loan facility of $460,000; and
(c)the terms of the Loan Agreement set out how that loan facility can be accessed, what the funds can be used for, and includes provisions for its repayment.
On the basis of the evidence before me, I am satisfied it is appropriate to make the orders sought under s 447A of the Act for two primary reasons.
First, I accept that the purpose of the funding is to provide working capital for the administration, and to fund the continuing operation of the Company during the period of the administration. Without this funding, I accept the Company will be unable to continue to trade and that, as a consequence, there is a significant risk that the value of the Company's assets will be diminished.
Second, the proposed orders are, in my view, consistent with the interests of unsecured creditors and the objects of pt 5.3A of the Act.
Should the court make the direction sought?
In this case, the plaintiffs seek orders pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (sch 2 to the Act) (IPS) that they were justified in causing the Company to enter into the Loan Agreement.
Pursuant to s 90-15(1) of the IPS, the court may make 'such orders as it thinks fit in relation to the external administration of a company'. It is accepted by the courts that this power is broad and is at least as extensive as the powers that were formerly available under s 479(3) and s 511 of the Act.
The principles which govern the exercise of this power can be summarised as follows.
(a)The power to give advice is intended to facilitate external administrators' performance of their functions and should be interpreted widely to give effect to that purpose.
(b)The court may give a direction where it is just and beneficial to do so.
(c)The function of the power is to give an external administrator advice as to the proper course of action to take in the external administration.
(d)The court will not give a direction as to a matter of commercial or business judgment. There must be a legal issue of substance or procedure, including an issue of power, propriety or reasonableness.
(e)The power will generally not be used to determine substantive rights and make binding orders, although it is possible to do so if necessary parties are before the court.
The evidence of Mr Kirman is that without entry into the Loan Agreement, it will be necessary to terminate the Company's employees and to suspend work on the Continuing Projects. The suspension of work on these projects could result in these contracts being terminated.
I accept that in the circumstances of this case, the direction sought goes to the reasonableness or propriety of the plaintiffs entering into the Loan Agreement and that it is appropriate to make the direction sought.
On the evidence before me, it is clear that creditors have only been given short notice of this hearing and the application. While I accept that the application is urgent, in my view, the interests of creditors can be adequately preserved through an order permitting creditors to apply to vary or discharge the orders, which is provided for in the minutes of proposed orders filed on 4 April 2025.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KC
Associate to the Honourable Justice Hill
6 MAY 2025
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