Re Quintis (Australia) Pty Ltd (Receivers and Managers Appointed) (Administrators Appointed) & Ors
[2024] WASC 181
•16 MAY 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE QUINTIS (AUSTRALIA) PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) & ORS [2024] WASC 181
CORAM: STRK J
HEARD: 18 APRIL 2024
DELIVERED : 18 APRIL 2024
PUBLISHED : 16 MAY 2024
FILE NO/S: COR 62 of 2024
MATTER: IN THE MATTER OF QUINTIS (AUSTRALIA) PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) & ORS
EX PARTE
DANIEL WOODHOUSE, HAYDEN WHITE, JOHN PARK as joint and several receivers and managers of QUINTIS (AUSTRALIA) PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED)
First Plaintiff
QUINTIS (AUSTRALIA) PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED)
Second Plaintiff
SANDALWOOD PROPERTIES LTD (FORMERLY KNOWN AS T.F.S. PROPERTIES LTD) (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED)
Third Plaintiff
QUINTIS FORESTRY PTY LTD (FORMERLY KNOWN AS TROPICAL FORESTRY SERVICES LTD) (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED)
Fourth Plaintiff
ARWON FINANCE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED)
Fifth Plaintiff
QUINTIS LEASING PTY LTD (IN LIQUIDATION) (FORMERLY KNOWN AS T.F.S. LEASING PTY LTD) (RECEIVERS AND MANAGERS APPOINTED)
Sixth Plaintiff
FIELDPARK PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED)
Seventh Plaintiff
MT ROMANCE HOLDINGS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED)
Eighth Plaintiff
QUINTIS SANDALWOOD PTY LTD (FORMERLY KNOWN AS MT ROMANCE AUSTRALIA PTY LTD) (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED)
Ninth Plaintiff
ABOUT TIME WE MET PTY LTD (FORMERLY KNOWN AS AUSTRALIA SANDALWOOD OIL CO. PTY LTD) (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED)
Tenth Plaintiff
Catchwords:
Corporations - Insolvency - External administration - Receivers and Managers appointed - Liability of controller under pre-existing agreements which concern property used by a corporation - Application to excuse the controller from liability - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 419A(7)
Rules of the Supreme Court 1971 (WA), O 67B r 5
Result:
Application granted
Category: B
Representation:
Counsel:
| First Plaintiff | : | WCJ Zappia |
| Second Plaintiff | : | WCJ Zappia |
| Third Plaintiff | : | WCJ Zappia |
| Fourth Plaintiff | : | WCJ Zappia |
| Fifth Plaintiff | : | WCJ Zappia |
| Sixth Plaintiff | : | WCJ Zappia |
| Seventh Plaintiff | : | WCJ Zappia |
| Eighth Plaintiff | : | WCJ Zappia |
| Ninth Plaintiff | : | WCJ Zappia |
| Tenth Plaintiff | : | WCJ Zappia |
Solicitors:
| First Plaintiff | : | Clifford Chance |
| Second Plaintiff | : | Clifford Chance |
| Third Plaintiff | : | Clifford Chance |
| Fourth Plaintiff | : | Clifford Chance |
| Fifth Plaintiff | : | Clifford Chance |
| Sixth Plaintiff | : | Clifford Chance |
| Seventh Plaintiff | : | Clifford Chance |
| Eighth Plaintiff | : | Clifford Chance |
| Ninth Plaintiff | : | Clifford Chance |
| Tenth Plaintiff | : | Clifford Chance |
Cases referred to in decision:
Featherby v Read [2002] WASC 251
Hardy, in the matter of Greencare Developments Pty Ltd (Administrators Appointed) [2024] FCA 44
Nardell Coal Corp (in liq) v Hunter Valley Coal Processing (2003) 178 FLR 400
Re Mothercare Australia Limited (administrators appointed) [2013] NSWSC 263
Re Quintis Leasing Pty Ltd (No 4) [2024] FCA 189
Re Quintis Leasing Pty Ltd [2023] FCA 1673
Re Strawbridge ((in their capacity as joint and several administrators of CBCH Group Pty Ltd (administrators appointed)) (No 2) [2020] FCA 472
Re Unlocked Ltd (admin apptd) [2018] VSC 345
Re Virgin Australia Holdings Ltd (Administrators Appointed) [2020] FCA 571
Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (admins apptd) [2011] FCA 1493
Silvia v Fea Carbon Pty Ltd [2010] FCA 515
Tucker v Bolten (No 2) [2024] FCA 46
Tucker v Bolten (No 3) [2024] FCA 85
STRK J:
Introduction
On 2 April 2024, Daniel Hillston Woodhouse, Hayden White and John Park were appointed as joint and several receivers and managers of Quintis (Australia) Pty Ltd (receivers and managers appointed) (administrators appointed); Sandalwood Properties Ltd (receivers and managers appointed) (administrators appointed) (formerly known as T.F.S. Properties Ltd); Quintis Forestry Pty Ltd (receivers and managers appointed) (administrators appointed) (formerly known as Tropical Forestry Services Ltd); Arwon Finance Pty Ltd (receivers and managers appointed) (administrators appointed); Quintis Leasing Pty Ltd (receivers and managers appointed) (in liquidation) (formerly known as T.F.S. Leasing Pty Ltd); Fieldpark Pty Ltd (receivers and managers appointed) (administrators appointed); Mt Romance Holdings Pty Ltd (receivers and managers appointed) (administrators appointed); Quintis Sandalwood Pty Ltd (receivers and managers appointed) (administrators appointed) (formerly known as Mt Romance Australia Pty Ltd); and About Time We Met Pty Ltd (receivers and managers appointed) (administrators appointed) (formerly known as Australia Sandalwood Oil Co. Pty Ltd). In these reasons I refer to Messrs Woodhouse, White and Park as the Receivers. The Receivers are all senior managing directors of FTI Consulting (Australia) Pty Ltd (FTI). The nine companies to which the Receivers have been appointed are the second to tenth named plaintiffs in this proceeding and in these reasons I refer to them collectively as the Quintis Group.
The Receivers were appointed to the entire assets and undertakings (subject to some exceptions) of the Quintis Group by an appointment deed pursuant to a fixed and floating charge originally dated 21 June 2011, as amended from time to time. On 3 April 2024, the Receivers were also appointed over the various real property interests owned by the Quintis Group under various mortgages, pursuant to three supplemental appointment deeds.
The companies over which the Receivers were appointed are also subject to voluntary administration, save for Quintis Leasing Pty Ltd (receivers and managers appointed) (in liquidation), which is in liquidation following a voluntary administration process which commenced on 20 December 2023. Scott Kershaw and Richard Tucker were appointed voluntary administrators to the remainder of the Quintis Group companies on 3 April 2024 (together with two additional subsidiary companies) by resolution of the directors pursuant to s 436A of the Corporations Act 2001 (Cth).
The Quintis Group grows and harvests heartwood from sandalwood trees for the purposes of producing logs, oil, chips, and powder. The business has operations in Australia and in China. It also has business development teams in America, France, India and Japan.
Historically, the Quintis Group and its operations have sought investment via retail investors (through managed investment schemes registered and operated in accordance with pt 5C of the Corporations Act), institutional investors and high net worth investors. It has three tiers of plantation investors with over 3,000 Managed Investment Scheme investors, approximately 79 sophisticated investors (some with bespoke arrangements), and three institutional investors with bespoke arrangements. It previously went through a voluntary administration, receivership, deed of company arrangement and scheme of arrangement process in 2018.
The primary operating companies within the Quintis Group are:
(a) Quintis Leasing Pty Ltd (receivers and managers appointed) (in liquidation) (formerly known as T.F.S. Leasing Pty Ltd), the lessee for leases where third parties are the lessor;
(b) Sandalwood Properties Ltd (receivers and managers appointed) (administrators appointed) (formerly known as T.F.S. Properties Ltd), which holds an Australian Financial Services Licence and is the responsible entity of the Quintis Group's Managed Investment Schemes;
(c) Quintis Forestry Pty Ltd (receivers and managers appointed) (administrators appointed) (formerly known as Tropical Forestry Services Ltd), the primary employing entity and the manager for Managed Investment Schemes and non-scheme plantations; and
(d) Quintis Sandalwood Pty Ltd (receivers and managers appointed) (administrators appointed) (formerly known as Mt Romance Australia Pty Ltd), the primary employing entity for the Albany oil distillery and runs the Albany operations.
The court was referred to the recent decision of Feutrill J in Re Quintis Leasing Pty Ltd [2023] FCA 1673 at [2] ‑ [4] and [8] ‑ [12], where his Honour described at a high level the manner in which the managed investment schemes and the lease arrangements operate.[1] At the hearing of the application, counsel confirmed that no sub‑lease arrangements are in place.[2]
[1] Plaintiffs' outline of submissions filed on 17 April 2024, par 3.
[2] ts 7 ‑ 8 (18 April 2024).
It was the Receivers' position that while they had endeavoured to progress their investigations as quickly as possible, and certain leases with respect to third‑party property had already been identified, there remained uncertainty as to the:[3]
(a) precise nature of the property that was the subject of the leases;
(b) precise nature of the obligations associated with the leases;
(c) the use and value of the land and other property the subject of the leases of the Quintis Group; and
(d) the relative importance of the leased property to the Quintis Group, including in respect of the shape and scope of the Quintis Group after any restructure or sale.
[3] First affidavit of DH Woodhouse affirmed on 15 April 2024, par 37; plaintiffs' outline of submissions filed on 17 April 2024, par 7.
The Receivers were unable to make a decision within the time prescribed by s 419A(2) of the Corporations Act as to whether to cause the companies to which they were appointed to cease using, occupying or possessing certain third‑party property the subject of pre‑appointment agreements. Accordingly, by force of s 419A(2) of the Corporations Act, as and from 10 April 2024 the Receivers were personally liable for rent or other amounts payable by the Quintis Group companies under any pre-appointment agreements with respect to third‑party property to which those companies continued to use, occupy or possess.
By an originating process filed on 15 April 2024, the Receivers applied to this court for an order under s 419A(7) of the Corporations Act to be excused from liability under s 419A(2) for two months commencing from 10 April 2024. By a certificate of urgency filed with the originating process, Mark Gillgren of Clifford Chance, certified that the application, which was made ex parte, was of such an urgent nature that it was required to be listed and heard as soon as possible. Satisfied of the urgency, the application was listed for hearing, and papers were filed from 15 to 17 April 2024. The filed papers included a minute of proposed orders filed on 15 April 2024 and submissions in support of the application filed on 17 April 2024.
On 18 April 2024 the court heard the urgent application, and orders were made at the conclusion of the hearing. Given the urgency of the application I indicated that I was prepared to grant the substantive relief sought and would publish my reasons for decision, which are set out below.
Evidence
Three affidavits were read at the hearing of the application, all made by Mr Woodhouse, the second and third marked confidential. The confidential affidavits (and a number of other documents) were the subject of application for restriction pursuant to O 67B r 5 of the Rules of the Supreme Court 1971 (WA).
First Woodhouse affidavit
Mr Woodhouse's 'open' affidavit affirmed on 15 April 2024 was read in support of the application, to which Mr Woodhouse attached documents marked DHW‑1 to DHW‑20. Among other things, Mr Woodhouse deposed to having been a registered liquidator since 2018, with over 20 years experience in corporate restructuring and turnaround review and advisory services. He deposed that the Quintis Group manages, operates and owns several Indian sandalwood plantations and ancillary businesses in Australia; to his understanding of the structure and business operations of the Quintis Group, and its investors; and to the basis for his view that the business and affairs of various members of the Quintis Group are intermingled and complex.
Mr Woodhouse also deposed to the background to the appointment of the Receivers; to the appointment of the Receivers; and to the steps taken following the appointment, which included taking steps to identify all the real property leases to which the Quintis Group entities are a party that are within in the scope of the Receivers' appointment.
At paragraph 28 of his affidavit, Mr Woodhouse deposed that in the short amount of time available between the appointment date and filing the application to the court, the Receivers had not had the opportunity to identify all the relevant leases to which the Quintis Group entities are parties; to undertake a detailed analysis of the known leases; or to consider the extent to which those leases are required and in respect of which the leased property should continue to be used or occupied for the purposes of the Quintis Group's operations (whether on a 'business as usual' or restructured basis). Mr Woodhouse attached to his affidavit a list of the 19 Quintis Group leases within the scope of the Receivers' appointment that the Receivers had been able to identify to date and examples of the types of leases to which Quintis Group entities are a party, which were categorised as plantation leases for former Managed Investment Scheme plantations; plantation leases for plantations directly owned by the Quintis Group; infrastructure leases (which are comprised of shed, office and production facilities); and employee housing leases.
As to the timing of the application, Mr Woodhouse acknowledged that under s 419A of the Corporations Act, the Receivers were liable for rent payable under third‑party property leases for the period that commenced seven days after the control day (that is, the appointment date); that accordingly, the seven day grace period had expired on 9 April 2024; and from 10 April 2024 the Receivers had started to incur liability for the rent and other amounts payable by the relevant Quintis Group entity under the leases.
As to the timing of the application, Mr Woodhouse deposed that:
(a)in the short amount of time available between the appointment date (2 April 2024) and the grace period expiring (9 April 2024), it has not been possible to identify all of the relevant leases of the Quintis Group, nor has it been possible to conduct the relevant investigations of the 19 leases that had been identified to determine which leases were required;
(b)the fact that the whole of the Quintis Group had been placed into receivership (as opposed to a single entity, namely Quintis Leasing Pty Ltd (receivers and managers appointed) (in liquidation), which was previously in administration before entering into liquidation), together with the complexity of the intergroup arrangement had meant that there was a high level of complexity and a very large volume of work required to obtain and understand the assets and liabilities of each entity within the Quintis Group, the interaction between those entities and the manner in which the Quintis Group's operations may ultimately be restructured and/or sold;
(c)as a result of the extensive and complex intercompany relationships, and review of the intercompany accounts payable and receivable balances, Mr Woodhouse had formed the preliminary view that some of those relationships were undocumented or may otherwise be structured in a way which may not tally precisely with the underlying documents;
(d)certain companies had also entered into a deed of cross‑guarantee, which meant that the obligations and liabilities of those companies to creditors were effectively cross‑guaranteed in a liquidation scenario; and
(e)the Receivers required additional time to review and analyse these relationships and intercompany obligations further in order to determine the manner in which the Quintis Group might be restructured and/or its assets sold, which had resulted in the application being submitted four business days after the grace period had expired.
As to the need for the additional time sought, Mr Woodhouse deposed that:
(a)given the complexity of the Quintis Group, whilst investigations were progressing as quickly as possible and certain leases had been identified, there was ongoing uncertainty as to the precise nature of the property that was the subject of the leases; the precise nature of the obligations associated with the leases; the use and value of the land and other property the subject of the leases of the Quintis Group; and the relative importance of the leased property to the Quintis Group, including in respect of the shape and scope of the Quintis Group after any restructure or sale;
(b)in his experience, interested parties involved in the sale process may require at least two months to complete due diligence, obtain finance (if required), submit final proposals and establish a funding arrangement to reduce financial exposure to the Receivers and administrators during a sale completion process; and without allowing sufficient time for interested parties to undertake adequate due diligence, the Receivers would have difficulty delivering an outcome from the sale process;
(c)the combination of the complexity, uncertainty and steps taken since the appointment date had meant that identifying which leases were relevant for the business had been and continued to be a significant task for the Receivers such that more time was required; and
(d)in the circumstances, he expected that the Receivers would require a period of at least two months to progress investigations, and the potential sale process in parallel, to form an informed view as to whether or not to continue to use, occupy or possess the properties the subject of the leases.
Mr Woodhouse further deposed that if the orders sought by the plaintiffs were made, then the Receivers proposed to take reasonable steps to notify each known owner, lessor or sub-lessee of property affected by the Receivers being excused from liability within three business days of the orders being made. Further, the Receivers would move for an order for granting any affected person liberty to apply within 21 days of the making of the order.
As to the risk of prejudice to lessors, Mr Woodhouse deposed to his belief that such would be limited if the order were made, and the basis for the same. In this regard, Mr Woodhouse deposed to his belief that:
(a)if the application was not granted, there was a likelihood that the Receivers would have to cause the relevant Quintis Group entities to cease use, occupation or possession of the leased properties under s 419A(2)(b) of the Corporations Act, to ensure that they would no longer incur personal liability in respect of rent or other amounts payable in respect of those properties; but if given an extension of time in which to conduct their necessary investigations into the viability of the Quintis Group continuing to use, occupy or possess the properties the subject of the leases, then there was a prospect that the Receivers may form the view that, moving forward, some of the properties will need to be utilised;
(b)the leased properties that had been identified were unique in that they were either established sandalwood plantations or were facilities which rely on the harvesting of these plantations to operate, and because of the specialised nature of the leased property, Mr Woodhouse did not foresee any prejudice to the lessors if the relief was granted. This was because, in view of the nature of the majority of the properties and the nature of the use of the properties (that is, growing trees or processing and storing wood), the lessors would be limited in the alternative uses for the leased properties over the next two months, in any event;
(c)if the Receivers did not have the benefit of further time to conduct their investigations and had to cause the relevant Quintis Group entities to cease using, occupying and/or possessing the properties, then the practical outcome would be that save for the brief period between seven days after the control day (that is, 10 April 2024) and the date the leases were effectively repudiated, there would be no ability for the owners of the properties the subject of the leases to derive rental income from those properties, given that (with the exception of Quintis Leasing Pty Ltd (receivers and managers appointed) (in liquidation)) the companies were also under administration, and therefore subject to the moratorium under s 440B of the Corporations Act; and
(d)there was a likelihood of the convening period of the voluntary administration being extended (which he observed was often the case in complex administrations), so that in the absence of obtaining the consent of the voluntary administrators or obtaining the leave of the court, the owners of each property would be unable to re‑take possession of their property for the duration of the administration of the company the subject of the pre-appointment lease in any event.
Second Woodhouse affidavit (marked confidential)
A further affidavit affirmed by Mr Woodhouse on 15 April 2024 was also read in support of the application, to which Mr Woodhouse attached documents marked CDW‑1 to CDW‑6.
Third Woodhouse affidavit (marked confidential)
A supplementary confidential affidavit affirmed by Mr Woodhouse on 17 April 2024 was also read in support of the application, to which Mr Woodhouse attached documents marked SCDW‑1 to SCDW‑9. In his two further affidavits, Mr Woodhouse deposed to matters which had arisen after he made his first affidavit, some of which were matters commercially sensitive to the Quintis Group.
As was acknowledged by counsel at the hearing of the application, there were aspects of the second and third Woodhouse affidavits that were not confidential.[4] Following the hearing of the application, the Receivers' representatives proposed redaction to only those parts of the further affidavits of Mr Woodhouse and the submissions filed in support of the application, that the Receivers' maintained access ought be restricted, and confidentiality orders were ultimately made to restrict access to only those parts the court was satisfied were commercially sensitive to the Quintis Group.[5]
[4] ts 3 (18 April 2024).
[5] See sch C to these reasons.
While I weighed all of the affidavit evidence before the court in the disposition of the application, these reasons have been prepared so as to not disclose the substance of confidential information which was before the court.
Statutory framework and legal principles
Section 419A of the Corporations Act concerns pre‑existing agreements about property used or occupied by a corporation. The section applies if:
(a) under an agreement made before the control day in relation to a controller of property of a corporation, the corporation continues after that day to use or occupy, or to be in possession of, property (the third‑party property) of which someone else is the owner or lessor; and
(b) the controller is controller of the third‑party property.[6]
[6] Corporations Act s 419A(1).
Whether property is being 'used' or 'occupied' by a corporation, and whether such use or occupation is within the scope of the intention of the agreement so as to be use or occupation under the agreement, are questions of fact.[7]
[7] Nardell Coal Corp (in liq) v Hunter Valley Coal Processing (2003) 178 FLR 400 [87].
Section 419A(2) provides that subject to subsections (4) and (7), the controller is liable for so much of the rent or other amounts payable by the corporation under the agreement as is attributable to a period:
(a) that begins more than seven days after the control day; and
(b) throughout which:
(i) the corporation continues to use or occupy, or to be in possession of, the third‑party property; and
(ii) the controller is controller of the third‑party property.
Section 419A(3) provides that within seven days after the control day, the controller may give to the owner or lessor a notice that specifies the third‑party property and states that the controller does not propose to exercise rights in relation to that property as controller of the property, whether on behalf of the corporation or anyone else.
Section 491A(4) provides that despite subsection (2), the controller is not liable for so much of the rent or other amounts payable by the corporation under the agreement as is attributable to a period during which a notice under subsection (3) is in force, but such a notice does not affect a liability of the corporation. Further, by operation of s 419(5), a notice under subsection (3) ceases to have effect if:
(a) the controller revokes it by writing given to the owner or lessor; or
(b) the controller exercises, or purports to exercise, a right in relation to the third‑party property as controller of the property, whether on behalf of the corporation or anyone else.
Section 419A(6) provides that for the purposes of subsection (5), the controller does not exercise, or purport to exercise, a right as mentioned in order (5)(b) merely because the controller continues to be in possession, or to have control, of the third‑party property, unless the controller:
(a) also uses the property; or
(b) asserts a right, as against the owner or lessor, so to continue.
Relevantly, s 419A(7) provides that subsection (2) does not apply in so far as a court, by order, excuses the controller from liability, but an order does not affect a liability of the corporation.
Finally, 419A(8) makes plain that the controller is not taken because of subsection (2) to have adopted the agreement; or to be liable under the agreement otherwise than as mentioned in subsection (2).
It is clear that s 419A of the Corporations Act applies to the lease of real or personal property,[8] and that a 'controller' of property of a corporation includes a receiver and manager, and (relevantly), the 'control day' in the case of a receiver and manager of that property is the day when the receiver and manager was appointed.
[8] Corporations Act s 9.
Section 419(A)(7) contains no criteria to which the power to excuse should be exercised. The leading decision with respect to the exercise of the court's discretion under s 419A(7) is Nardell Coal Corp (in liq) v Hunter Valley Coal Processing, and at [70] to [73], Campbell J described the legislative history of the section.
As Campbell J observed at [73], the Corporate Law Reform Bill 1992, when passed, added s 443B to the then Corporations Law, which in some ways parallels s 419A so far as administrators are concerned.
As to how the exercise of power ought be approached, at [113] Campbell J found as follows:
It is preferable, in my view, to approach the task of deciding whether to excuse, under section 419A(7) or section 443B(8), without relying upon any analogy with the law concerning disclaimer of onerous contracts. If that is done, the Court is free to focus on those aspects of the case before it which can properly be taken into account for the purpose of sections 419A(7) or 443B(8).
In so finding, Campbell J considered but declined to follow Featherby v Read [2002] WASC 251, which decision concerned s 443B(8).
As to how the court ought approach the exercise of the power under s 419A(7), Campbell J at [115] concluded that the subsection 'should not be approached with any presuppositions about whether the court should be slow, or fast, to grant relief under it. And while it is desirable for a process of imposing or releasing from liability which operates in the ordinary commercial world to proceed using criteria which are objective and fairly readily ascertainable, there is no need for the court's discretion to be hedged in by such requirements. The court should be able to take into account any considerations which are proper.'
I proceeded on the basis that when considering whether to excuse liability under s 419A(7) the court's discretion is wide, but must be exercised judicially.
As was observed by counsel for the Receivers, the number of published decisions which concern s 419A(7) have been relatively limited when compared to the analogous provision that applies to voluntary administrators, that is, s 443B(8) of the Corporations Act. A voluntary administrator might also or alternatively ask the court to extend the time for investigation by modifying the operation of s 443B, and a number of cases refer to the exercise of power under both s 447A(1) and s 443B(8).[9] In that context, the exercise of discretion has been observed to facilitate the making of commercial decisions about the ongoing operations by allowing the controller to focus on what is in the best interests of the creditors 'uninfluenced by concerns of personal liability'.[10]
[9] See Re Quintis Leasing Pty Ltd, and the reasoning as to the exercise of power pursuant to s 447A(1) at [34]. See also Tucker v Bolten (No 2) [2024] FCA 46; and Tucker v Bolten (No 3) [2024] FCA 85.
[10] Re Unlocked Ltd (admin apptd) [2018] VSC 345 [62] citing Gordon J in Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (admins apptd) [2011] FCA 1493 [29].
I proceeded on the basis that it may be an appropriate exercise of discretion under s 419A(7) to excuse the controller from liability (and in so doing, in effect, extend the decision period under s 419A(2)), if the controller has had insufficient time to conduct necessary investigations to decide whether he or she thinks it best to retain or give up possession of leased property. There are numerous examples of the court exercising discretion pursuant to the analogous s 443B(8) power in such circumstances.[11] Of course, there may be competing considerations to be weighed in the balance.
[11] See Tucker v Bolton (No 2); and Tucker v Bolton (No 3); Re Strawbridge ((in their capacity as joint and several administrators of CBCH Group Pty Ltd (administrators appointed)) (No 2) [2020] FCA 472 [39]; Silvia v Fea Carbon Pty Ltd [2010] FCA 515 [8], [12]; Re Virgin Australia Holdings Ltd (Administrators Appointed) [2020] FCA 571 [45]; Re Mothercare Australia Limited (administrators appointed) [2013] NSWSC 263 [2] - [4]; Hardy, in the matter of Greencare Developments Pty Ltd (Administrators Appointed) [2024] FCA 44.
I accepted and proceeded on the basis that the decision as to whether to excuse liability under s 419A(7) and if so, for what period, will depend on the complexity of the external administration, the interests of creditors and other affected parties (including the secured creditor who appointed the controller), and where the relevant company is also subject to voluntary administration, whether the grant of relief would be conducive to achieving the expressed objects of pt 5.3A of the Corporations Act.[12]
[12] Re Mothercare Australia Limited (administrators appointed) [2] - [4]; Re Virgin Australia Holdings Ltd (Administrators Appointed) [44]; Re Quintis Leasing Pty Ltd [26]; and Tucker v Bolton (No 2) [21].
Finally, I was cognisant that the court is empowered to excuse a liability that has already accrued.[13]
[13] Nardell Coal Corp (in liq) v Hunter Valley Coal Processing [100] - [106].
Disposition
Standing
Section 9 of the Corporations Act provides that a 'controller', in relation to property of a corporation, means:
(a)a receiver, or receiver and manager, of that property; or
(b)anyone else who (whether or not as agent for the corporation) is in possession, or has control, of that property for the purpose of enforcing a security interest;
and has a meaning affected by paragraph 434F(b) (which deals with two or more persons appointed as controllers).
I was satisfied that the Receivers were subject to s 419A of the Corporations Act, and had standing to make the application to be excused from liability.
Power
The Receivers did not serve a notice under s 419A(3) of the Corporations Act within seven days after the day when they were appointed and were therefore exposed to personal liability. I was satisfied that s 419A(7) of the Corporations Act conferred power on the court to excuse the Receivers from liability.
The Receivers sought that they be excused from liability for two months commencing 10 April 2024. I proceeded on the basis that pursuant to s 419(A)(7), a receiver may be excused from past or future liability,[14] and thus the court had the power to grant the relief sought on behalf of the Receivers to be excused from liability from 10 April 2024.
Discretion
[14] Nardell Coal Corp (in liq) v Hunter Valley Coal Processing [100] - [106].
While the application was listed with urgency, there was a significant volume of affidavit evidence before the court. Over 780 pages of affidavit evidence (including attachments) were read. I weighed all of the evidence, including the following matters, in the balance.
First, I accepted that the Receivers had had insufficient time to conduct the investigations necessary to identify all of the relevant leases or to decide whether they thought it best to retain or give up possession of leased property. Mr Woodhouse deposed that the Receivers' inability to make a decision with respect to such third-party property was a product of the complexity of the Quintis Group structure and operations, and the large volume of work required to be undertaken by the Receivers to obtain and understand the assets of each entity within the Quintis Group, and the interaction between those entities. The evidence before the court made plain the complexity of the Quintis Group arrangements.
Mr Woodhouse further deposed that in his view an understanding of the assets of each entity within the Quintis Group and the interaction between those entities was necessary in order for the Receivers to determine the way(s) in which the Quintis Group may be restructured and/or its assets sold.[15] I accepted that Mr Woodhouse's view was a reasonable one.
[15] First affidavit of DH Woodhouse affirmed on 15 April 2024, pars 32 - 39.
Secondly, all of the companies which comprise the Quintis Group, with the exception of Quintis Leasing Pty Ltd (receivers and managers appointed) (in liquidation), were in voluntary administration, and on the evidence, I accepted that the requested relief had the potential to be conducive to achieving the expressed objects of pt 5.3A of the Corporations Act. Indeed, there appeared to be considerable force in counsel's submission that the Receivers, together possibly with the administrators of the companies that remained subject to voluntary administration, appeared to be best placed to achieve a 'whole of group solution for creditors'.[16]
[16] ts 8 (18 April 2024).
Thirdly, I was persuaded that excusing the Receivers from personal liability would facilitate their further investigations and the making of commercial decisions by permitting them to focus on what is in the best interests of creditors (including the secured creditors who appointed them) uninfluenced by concerns of personal liability.
In this regard, I also noted that although the Receivers had been granted an indemnity by their appointor, I understood it to be limited to the assets of the Quintis Group companies,[17] and as was observed by counsel for the Receivers, the value of that indemnity was uncertain.[18]
[17] First affidavit of DH Woodhouse affirmed on 15 April 2024, DHW-7 (Deed of appointment cl 9.2).
[18] Plaintiffs' outline of submissions filed on 17 April 2024, par 5.
Fourthly, I was satisfied that there had not been delay or inattention on the part of the Receivers that contributed to their inability to make a decision.
Fifthly, I was cognisant that the administrators' fourth application for an extension of the period under s 443B(2) had been rejected.[19] However, I was also cognisant that an extension had been granted on three separate occasions when regard was had to, among other things, the complexity of the arrangements.[20] The refusal of a fourth extension came about in circumstances where the Federal Court considered there to be no real basis on the evidence to think that it was likely that further extensions of time would bring a deed of company arrangement proposal to fruition, or even that there was a significant chance of this occurring.[21] I did not consider the Federal Court's refusal on the occasion of the fourth application to be a matter which ought be determinative of the Receivers' application.
[19] Re Quintis Leasing Pty Ltd (No 4) [2024] FCA 189 [28].
[20] Tucker v Bolton (No 2) and Tucker v Bolton (No 3).
[21] Re Quintis Leasing Pty Ltd (No 4) [28].
Sixthly, when considering the application, I also had regard to the developments deposed to by Mr Woodhouse in his third affidavit, affirmed on 17 April 2024, including those developments which counsel addressed in the course of the hearing.[22]
[22] ts 9 ‑ 12 (18 April 2024).
It was drawn to the court's attention that commercial premises in West Perth leased from Realside 87 Colin Pty Ltd by Quintis Forestry Pty Ltd (receivers and managers appointed) (administrators appointed), were being used as the head office of the Quintis Group, and that on 15 April 2024, notice had been received from the lessor's representatives advising that access was sought to the leased premises for the purpose of showing the premises to a potential new tenant.[23] As to this development, counsel for the Receivers noted that there was no evidence before the court of any offer to lease or agreement with respect to the re‑leasing of the West Perth commercial premises, or evidence of any lost opportunity at this stage.[24]
[23] Third affidavit of DH Woodhouse affirmed on 17 April 2024, pars 11 and 16, SCDW‑1 and SCDW‑4.
[24] ts 9 ‑ 10 (18 April 2024).
Counsel submitted, and I accepted, that this development ought not preclude the grant of relief, particularly while the lessee company remained in voluntary administration and subject to the statutory moratorium.
Counsel also drew the court's attention to communications that had passed between employees of FTI on behalf of the Receivers, and Realside 87 Colin Pty Ltd, the lessor of the West Perth commercial premises, in early April 2024 concerning the Receivers' position with respect to the leased premises.[25]
[25] ts 10 ‑ 11 (18 April 2024); third affidavit of DH Woodhouse affirmed on 17 April 2024, pars 12 ‑ 17, SCDW‑2 ‑ SCDW‑4.
While the position expressed on behalf of the Receivers was unfortunate, I accepted that the communications were not matters which were determinative against the grant of ex parte relief in favour of the Receivers with respect to that tenancy, and I took comfort that the lessor would be afforded the opportunity to be heard.
Finally, I was cognisant that the application was made ex parte, but considered it appropriate to hear and determine the application on an urgent basis in light of the accruing personal liability of the Receivers, in circumstances where the Receivers also moved for ancillary orders which contemplated notice of the relief being promptly given to affected persons, with liberty to apply to modify or discharge the orders. The form of notice proposed by the Receivers to be sent to affected persons is reproduced at sch A to these reasons. Therefore, any affected person, including Realside 87 Colin Pty Ltd, might apply to be heard with respect to relief granted in favour of the Receivers and the appropriateness of them being excused from liability from 10 April 2024.
Weighing all of the evidence and the submissions made by counsel in the balance (including the matters described above), I considered it appropriate to grant the relief sought.
Costs
Further, I considered it appropriate that the Receivers' costs of and incidental to the application be costs in the receivership of the second to tenth plaintiffs (that is, the Quintis Group). Further, liberty to apply with respect to the allocation of those costs as between the nine entities was reserved to the Receivers.
Conclusion and orders made on 19 April 2024
At the hearing of the application, counsel moved for orders in the form of a minute provided to the court in the course of the hearing, and did not rely upon the minute of proposed orders that had been filed in advance of the hearing on 15 April 2024.[26]
[26] ts 2 (18 April 2024).
For the reasons set out above, I granted the substantive relief pressed on behalf of the Receivers, and the orders made on 19 April 2024 are reproduced at sch B to these reasons.[27]
[27] Annexure A to the orders made on 19 April 2024 was in the same form as the proposed notice reproduced at sch A to these reasons.
Confidentiality and orders made on 15 May 2024
After the hearing of the application, the Receivers revisited the ambit of their request to restrict access to documents. In the end, the only documents which remained the subject to an application for restriction on the basis that they contained or referred to confidential or commercially sensitive information were:
(a)the submissions filed in support of the application, but only as to paragraph 5, part of paragraph 9, part of paragraph 19, part of paragraph 21 and footnote 18;
(b)the second Woodhouse affidavit affirmed by Mr Woodhouse on 15 April 2024, but only as to paragraph 11, part of paragraph 13, part of paragraph 15, paragraph 17, paragraph 22, part of paragraph 24, part of paragraph 25, paragraphs 26 ‑ 34 inclusive, part of paragraph 35 and attachments CDW‑4, CDW‑5 and CDW-6;
(c) the third Woodhouse affidavit affirmed by Mr Woodhouse on 17 April 2024, but only as to part of attachment SCDW-1; and
(d)any document in this proceeding that refers to the confidential information contained in the confidential affidavit of Mr Woodhouse affirmed on 15 April 2024 or that the supplementary confidential affidavit affirmed on 17 April 2024 (including their attachments) as identified in (b) and (c) above.
On behalf of the Receivers, an order was sought that the unredacted version of the documents described at [66(a) to (d)] above be restricted and not be made available for inspection by anyone, without prior notice being provided to the plaintiffs and an order of this court.
Orders ancillary to the restriction order were also sought in terms summarised below:
(a)The plaintiffs have leave to file redacted versions of the documents referred to in [66(a), (b) and (c)] above, which versions will have redacted those paragraphs and omit those attachments that are identified in [66(a), (b) and (c)] above as containing or referring to commercially sensitive information.
(b)For the avoidance of doubt, the redacted documents will not be subject to restriction.
(c)The restriction is to apply until further order of the court.
(d)Any application for access to any of the restricted documents is to be referred to the judge seized of this matter, and advance notice of the application for access is to be provided to the plaintiffs.
After giving careful consideration to the parts of the documents which remained subject to the application for restriction, I was satisfied that confidential information was disclosed in the documents filed, and that it was appropriate to restrict access to certain parts.
I made confidentiality orders on the terms proposed, save that I was not prepared to make an order that restricted access to paragraph 5 of the submissions filed (on the basis that the information was disclosed in Mr Woodhouse's first affidavit), nor the category of documents described at [66(d)] above.
It must be the responsibility of the plaintiffs to identify and apply for restriction over any document which contains confidential or commercially sensitive information. The effect of an order as promoted on behalf of the plaintiffs (and reproduced at [66(d)] above) would be to require the court to undertake a review of all documents that form part of the court record upon receipt of a non‑party request for access, and form a view as to whether the requested document might be a restricted document (falling within the ambit of subparagraph (d)), in circumstances where the person requesting access to that document might otherwise be entitled to access as of right. The responsibility to review documents filed in the proceeding or documents that form part of the court's record (such as transcript) to ascertain if they contain restricted information is one that must properly fall to the party seeking to restrict access.
The confidentiality orders that were made on 15 May 2024 are reproduced at sch C to these reasons.
Sch A – Form of notice proposed by the Receivers
ANNEXURE A
FORM OF NOTIFICATION PROPOSED BY THE PLAINTIFFS
Dear Sir / Madam
Quintis (Australia) Pty Ltd (Receivers and Managers Appointed)
(Administrators Appointed) ACN 626 970 821 and the Quintis Group
companies (as defined in Schedule 1) ('Quintis Group')
[The Leased Property]
We refer to:
●The appointment of Daniel Woodhouse, Hayden White and John Park as joint and several receivers and managers (the 'Receivers') to the Quintis Group on 2 April 2024; and
●The attached Orders of Justice [name] of the Supreme Court of Western Australia dated [X] April 2024 in [Proceeding Number].
On 15 April 2024, the Receivers applied to the Supreme Court of Western Australia to seek orders under section 419A(7) of the Corporations Act 2001 (Cth) (the 'Act') to extend the time in which they are excused from liability under section 419A(2) of the Corporations Act for so much of the rent or other amounts of payable by the relevant Quintis Group entity until [insert time period granted].
By way of service, please find attached the Orders of Justice [name] of the Supreme Court of Western Australia dated [X] April 2024 (the 'Orders').
The Receivers sought the extension as they require further time, noting the complexity and size of the Quintis Group, to identify and investigate those lease arrangements and develop a plan in respect of these existing arrangements of the Quintis Group entities.
The Receivers will use the time granted to continue expediting their investigations into the affairs of the Quintis Group and the related lease agreements.
Any person who can demonstrate a sufficient interest (including any affected person) will have liberty to apply on two business days notice being given to the Receivers and the Court to modify or discharge the Orders within twenty‑one days of the granting of the Orders, being [insert date].
Should you have any queries in relation to this matter, please contact the Receivers on +61 8 9321 8533 or by [email protected].
Yours faithfully
The Receivers
Sch B - Orders made on 19 April 2024
Sch C - Orders made on 15 May 2024
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SE
Associate to the Honourable Justice Strk
16 MAY 2024
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