Re The Go2 People Limited (Administrators Appointed) - [2023] WASC 142

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE THE GO2 PEOPLE LIMITED (ADMINISTRATORS APPOINTED) [2023] WASC 142
CORAM:   LUNDBERG J
HEARD:   2 MAY 2023
DELIVERED          :   3 MAY 2023
FILE NO:   COR 65 of 2023
MATTER:   IN THE MATTER OF THE GO2 PEOPLE LIMITED (ADMINISTRATORS APPOINTED)

EX PARTE
ROBERT CONRY BRAUER as administrator of THE GO2 PEOPLE LIMITED
First Plaintiff
ROBERT MICHAEL KIRMAN as administrator of THE GO2 PEOPLE LIMITED
Second Plaintiff
ROBERT CONRY BRAUER as administrator of GO2 RECRUITMENT PTY LTD
Third Plaintiff
ROBERT MICHAEL KIRMAN as administrator of GO2 RECRUITMENT PTY LTD
Fourth Plaintiff
ROBERT CONRY BRAUER as administrator of GO2 SKILLS & TRAINING PTY LTD
Fifth Plaintiff
ROBERT MICHAEL KIRMAN as administrator of GO2 SKILLS & TRAINING PTY LTD
Sixth Plaintiff
ROBERT CONRY BRAUER as administrator of HUNTER EXECUTIVE SEARCH CONSULTANTS PTY LTD
Seventh Plaintiff
ROBERT MICHAEL KIRMAN as administrator of HUNTER EXECUTIVE SEARCH CONSULTANTS PTY LTD
Eighth Plaintiff
ROBERT CONRY BRAUER as administrator of NARA TRAINING AND ASSESSING PTY LTD
Ninth Plaintiff
ROBERT MICHAEL KIRMAN as administrator of NARA TRAINING AND ASSESSING PTY LTD
Tenth Plaintiff
ROBERT CONRY BRAUER as administrator of SKILL HIRE AUSTRALIA PTY LTD
Eleventh Plaintiff
ROBERT MICHAEL KIRMAN as administrator of SKILL HIRE AUSTRALIA PTY LTD
Twelfth Plaintiff
ROBERT CONRY BRAUER as administrator of SKILL HIRE WA PTY LTD
Thirteenth Plaintiff
ROBERT MICHAEL KIRMAN as administrator of SKILL HIRE WA PTY LTD
Fourteenth Plaintiff
ROBERT CONRY BRAUER as administrator of THE GO2 PEOPLE AUSTRALIA PTY LTD
Fifteenth Plaintiff
ROBERT MICHAEL KIRMAN as administrator of THE GO2 PEOPLE AUSTRALIA PTY LTD
Sixteenth Plaintiff

Catchwords:

Corporations - External Administration - Voluntary administrators - Urgent ex parte application - Application for appointment of voluntary administrators as receivers and managers of trust property - Application for orders to limit personal liability of voluntary administrators in relation to a Loan Facility - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), ss 420, 443A, and 447A
Insolvency Practice Schedule (Corporations) (Cth), ss 90-15 and 90-20
Supreme Court Act 1935 (WA), s 25(9)

Result:

Application granted

Category: B

Representation:

Counsel:

First Plaintiff	:	J D Malone
Second Plaintiff	:	J D Malone
Third Plaintiff	:	J D Malone
Fourth Plaintiff	:	J D Malone
Fifth Plaintiff	:	J D Malone
Sixth Plaintiff	:	J D Malone
Seventh Plaintiff	:	J D Malone
Eighth Plaintiff	:	J D Malone
Ninth Plaintiff	:	J D Malone
Tenth Plaintiff	:	J D Malone
Eleventh Plaintiff	:	J D Malone
Twelfth Plaintiff	:	J D Malone
Thirteenth Plaintiff	:	J D Malone
Fourteenth Plaintiff	:	J D Malone
Fifteenth Plaintiff	:	J D Malone
Sixteenth Plaintiff	:	J D Malone

Solicitors:

First Plaintiff	:	Blackwall Legal LLP
Second Plaintiff	:	Blackwall Legal LLP
Third Plaintiff	:	Blackwall Legal LLP
Fourth Plaintiff	:	Blackwall Legal LLP
Fifth Plaintiff	:	Blackwall Legal LLP
Sixth Plaintiff	:	Blackwall Legal LLP
Seventh Plaintiff	:	Blackwall Legal LLP
Eighth Plaintiff	:	Blackwall Legal LLP
Ninth Plaintiff	:	Blackwall Legal LLP
Tenth Plaintiff	:	Blackwall Legal LLP
Eleventh Plaintiff	:	Blackwall Legal LLP
Twelfth Plaintiff	:	Blackwall Legal LLP
Thirteenth Plaintiff	:	Blackwall Legal LLP
Fourteenth Plaintiff	:	Blackwall Legal LLP
Fifteenth Plaintiff	:	Blackwall Legal LLP
Sixteenth Plaintiff	:	Blackwall Legal LLP

Cases referred to in decision:

Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) [2022] FCA 1506
Birch, in the matter of Geelong Fire Services Pty Ltd (Administrators Appointed) [2022] FCA 963
Cardaci v Filippo Primo Cardaci as executor of the estate of Mario Antonio Cardaci [No 5] [2021] WASC 331
Gregorski Investments Pty Ltd (in liq) v 320 Nominees Pty Ltd as Trustee of the Gregorski Property Trust [2019] FCA 1400
In the matter of Ansett Australia Limited and Korda [2002] FCA 90; (2002) 115 FCR 409
In the matter of Peak Invest Pty Ltd (admins apptd) [2021] NSWSC 1714
Parker v Camden Borough Council [1985] 3 WLR 47
Re Great Southern Infrastructure Pty Ltd; Ex parte Jones [2009] WASC 161
Re Mentha (in their capacities as joint and several admins of the Griffin Coal Mining Co Pty Ltd (admins apptd) [2010] FCA 1469; (2010) 82 ACSR 142
Secatore, Re Fletcher Jones and Staff Pty Ltd (admins apptd) [2011] FCA 1493
Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717; (2020) 144 ACSR 347
The University of Western Australia v Gray [No 6] [2006] FCA 1825
Wallman and Quinn in their capacity as joint and several liquidators of Goldeagle Nominees Pty Ltd [2023] WASC 7
Yunghanns v Candoora No 19 Pty Ltd (No 2) [2000] VSC 300; (2000) 35 ACSR 34

LUNDBERG J:

A. Introduction and Summary

On Monday, 1 May 2023, the plaintiffs to this proceeding were appointed as the voluntary administrators (Administrators) to several companies in the group which is headed by the ASX listed entity Go2 People Limited (the Group).[1] The Group operates an executive search, labour hire and workplace training business.
[1] The companies in the Group over which the Administrators were appointed are: (a) The Go2 People Limited (Administrators Appointed) (ACN 616 199 896); (b) Go2 Recruitment Pty Ltd (Administrators Appointed) (ACN 152 130 473); (c) Go2 Skills & Training Pty Ltd (Administrators Appointed) (ACN 156 136 748); (d) Hunter Executive Search Consultants Pty Ltd (Administrators Appointed) (ACN 164 138 023); (e) Nara Training and Assessing Pty Ltd (Administrators Appointed) (ACN 600 658 553); (f) Skill Hire Australia Pty Ltd (Administrators Appointed) (ACN 143 386 707); (g) Skill Hire WA Pty Ltd (Administrators Appointed) (ACN 143 388 881); and (h) The Go2 People Australia Pty Ltd (Administrators Appointed) (ACN 616 564 115).
The Administrators have informed the court that, without funding, it is likely that the Administrators would not be in a position to continue operating the Group as a going concern. The lack of funding and inability to continue as a going concern might well result in decisions being made to terminate hundreds of employees and terminate commercial contracts to which the companies in the Group are a party.
To ameliorate the present financial position of the Group and allow the businesses to trade on, the Administrators entered into a loan agreement on 1 May 2023 and, relatedly to that loan agreement as well as more broadly, urgently applied to the court seeking ex parte orders pursuant to the Corporations Act 2001 (Cth) (CA), the Insolvency Practice Schedule (Corporations) (Cth) (IPS), and the Supreme Court Act 1935 (WA) (Supreme Court Act).[2] In their capacity as administrators, the plaintiffs have standing to seek this relief.
[2] Amended Originating Process dated 1 May 2023.
The urgent ex parte application was filed by the plaintiffs on 1 May 2023, served on ASIC the same day, and heard on the afternoon of 2 May 2023. The urgency of the proceedings meant that notice could not be given to any of the Group's creditors. The application sought orders to:
(a)appoint the Administrators (in their capacity as administrators of one of the companies) as receivers and managers of the assets of a particular trust within the Group, pursuant to s 25(9) Supreme Court Act or in the inherent jurisdiction of the court (together with associated orders and directions pursuant to s 90‑15 IPS); and
(b)to limit the personal liability of the Administrators in respect of liabilities arising out of, or in connection with, the loan agreement to which I have just referred, pursuant to ss 443A(1) and 447A(1) CA (together with associated orders and directions pursuant to s 90‑15 IPS).
Having heard from Mr J D Malone on behalf of the plaintiffs, and having reviewed the outline of submissions filed on behalf of the plaintiffs,[3] I was satisfied the orders sought should be made with some minor amendments. These brief reasons explain why I was so satisfied. The reasons identify the affidavit evidence which was assembled at short notice by the plaintiffs' solicitors (heading B), the factual matters I consider were established by the affidavit material (heading C), and then address the two species of orders which were sought by the Administrators (under heading D and heading E).
[3] Plaintiffs' outline of submissions dated 2 May 2023.

B. Affidavit evidence

The plaintiffs filed and relied upon three affidavits in support of the application, namely the affidavit of Mr Robert Brauer sworn 1 May 2023, the affidavit of Mr Jonathan Shepherd sworn 1 May 2023, and the affidavit of Mr William Haslam sworn 2 May 2023.
Mr Brauer's affidavit dealt with matters of substance in support of the relief sought. Mr Shepherd's affidavit addressed the corporate records and structure of the Group. Lastly, Mr Haslam's affidavit verified service of the proceedings on ASIC, the status of the drawdown arrangements as part of the loan facility discussed at [14] below, and the ownership of the units in the trust which is explained at [21] below.

C. Factual background

On my assessment, the affidavits filed by the plaintiffs collectively demonstrate the matters set out at [9] to [23] below. It is appropriate that I mention the cautionary observation made by the Administrators that their appointment to the Group is relatively embryonic and their review of the books and records of the various companies is not complete, and is continuing. Accordingly, the facts set out below represent the Administrators' present assessment of the landscape, and their current expectations of the likely scenarios moving forward.
The Group has historically provided its clients with a number of services including: (a) executive search, board appointments and white‑collar placements for a range of industries; (b) labour hire and professional recruitment; (c) workplace education and training; and (d) employment solutions.
The Group appears to operate under three broad divisions: the Go2 People division, the Skill Hire division, and the Hunter Executive Search division. The Group employs almost 1,000 employees.[4] The corporate structure of the Group, relevantly for present purposes, is depicted in the diagram below:
[4] Specifically, the Group employs 972 employees comprising 307 full or part-time employees and 665 casual employees.
Mr Brauer and Mr Kirman were appointed as the voluntary administrators to the companies within the Group on 1 May 2023. They are both registered liquidators and experienced insolvency practitioners.
The Group is facing substantial and imminent cash flow difficulties. The principal costs of the business are the costs of employees. Without funding it is likely that the Administrators would not be in a position to continue operating the Group as a going concern with the result that: (a) the employees would need to be terminated; (b) material contracts would be terminated; (c) the Administrators would be less likely to be able to find potential DOCA proponents as the value of the businesses would be substantially reduced; and (d) the return to creditors would be substantially compromised. The overall result would be that the businesses would not continue, with a significantly worse outcome for creditors being likely.
The Group has a number of unsecured creditors (including the Australian Taxation Office which is owed a substantial sum) as well as having some principal secured creditors, being the Commonwealth Bank of Australia, Scottish Pacific (BFS) Pty Ltd and certain vendors to the Skill Hire business.
On the day of their appointment, the Administrators entered into a Loan Facility Agreement with Intowork Australia Limited (Loan Facility)[5] providing for the funding of the companies in the Group during the administration, to ensure that the companies would have sufficient working capital to continue trading. Intowork Australia Limited is a national, not for profit provider of employment, skills, and education support services.
[5] The Loan Facility is Attachment RCB‑5 to the affidavit sworn by Mr Brauer.
Pursuant to the Loan Facility, Intowork Australia Limited will provide a $3,000,000 unsecured loan facility to the companies for the following purposes:
(a)to pay the costs associated with the continued trading of the business of the companies during the voluntary administration period;
(b)to pay any pre‑appointment debts the Administrators consider necessary to facilitate the ongoing operation of the companies;
(c)to fund the Administrators' fees, costs and disbursements; and
(d)any other purpose expressly agreed between the parties.
The initial drawdown will be up to $1,000,000 within one business day of the appointment of the Administrators. Under the Loan Facility, interest will accrue at the rate of 16% per annum as the standard rate, and 5% per annum higher than the standard rate as the default rate. Further, if repayment of the outstanding amount occurs early, the companies will be required to pay an amount of $300,000 as an early repayment fee.
The arrangement with Intowork Australia Limited was struck against the background that the management of the Group had, prior to the appointment of the Administrators, been canvassing funding options with various parties. Further, the Group and Intowork Australia Limited had previously held discussions some months previously about potential transactions, possibly involving a purchase of the Group's business by Intowork Australia Limited.
During the hearing on 2 May 2023, I was informed that certain amounts had already been drawndown by the Administrators pursuant to the Loan Facility. These matters were also explained in Mr Haslam's affidavit.[6] Essentially, the timing imperatives (including for payment of employee wages) were such that drawdowns were required prior to the hearing on 2 May 2023, albeit on the understanding that if the court declined to make the orders sought, the Administrators would be permitted to repay the funds without any interest liability.[7]
[6] See [10] ‑ [12] of the affidavit sworn by Mr Haslam.
[7] I refer in particular to the emails at Attachments WSH-4, WSH-5 and WSH-6 to the affidavit sworn by Mr Haslam which refer to the 'timing challenges' arising from the cashflow issues within the Group.
The Administrators have informed the court that they are not prepared to expose themselves to personal liability having only recently been appointed to the companies. Accordingly, the Administrators seek orders to limit their liability in respect of the Loan Facility so they may continue with that arrangement and proceed to drawdown on the funding. If the Administrators are unable to drawdown on the facility, they would have no option but to take steps urgently to reduce the costs of trading the companies, or to cease trading altogether.
In contrast, with funding in place, the best assessment of the Administrators, bearing in mind their appointment is nascent, is that there is a realistic prospect of a successful restructure having regard to at least the following: (a) their initial assessment that the companies could trade profitably absent legacy debts that might be compromised in part in a restructuring; (b) they will conduct an appropriate marketing campaign to attract proposals in relation to the purchase or recapitalisation of the business; and (c) the entry into the Loan Facility by Intowork Australia Limited indicates its genuine interest in itself making such a proposal. This does not represent a concluded view of the Administrators, by any means.
The affidavit material identified a further factual issue, which has motivated the plaintiffs to seek orders for their appointment as receivers and managers in one respect. The issue that has arisen is that Go2 Recruitment Pty Ltd trades only as the trustee for the Go2 Recruitment Trust (the Go2 Recruitment Trust), and not in its own right. In its capacity as trustee, Go2 Recruitment Pty Ltd provides labour hire services to a range of blue collar industries across Western Australia and Queensland. Go2 Recruitment Pty Ltd has a net liability position of almost $16 million (as at 31 March 2023). I have been informed by counsel that all of the units in the Go2 Recruitment Trust are owned by Go2 People Limited.[8]
[8] There is material in the affidavit sworn by Mr Haslam to support this contention, namely the Go2 People Limited Prospectus at Attachment WSH‑7 (page 59 of the affidavit).
The trust deed which established the Go2 Recruitment Trust has been produced to the court. The deed is dated 8 August 2011 (Trust Deed).[9] The Trust Deed contains the following clauses, among others:
(a)the trustee of the Go2 Recruitment Trust has a broad range of powers, including, amongst other things, and without limitation 'to sell, transfer, hire, lease, dispose of, manage, divide or otherwise deal with any assets of the Trust...' (cl 72.1(g));
(b)the trustee may 'pay out of the assets of the Trust all costs, charges, taxes, duties or expenses of the Trust including those which are: (i) incidental to the management of the assets of the Trust and (ii) incidental to, or incurred in the exercise of any power, authority or discretion of the Trustee' (cl 72.1(i));
(c)as to variations to the Trust Deed, it provides that 'if seventy five percent (75%) or more of the units in the Trust Fund resolve or consent to amend this Deed in a specified way, then the Trustee must execute a deed to amend this Deed...' (cl 95.1); and
(d)as to vacation of the office of the trustee, the Trust Deed provides that 'the appointment of a Trustee terminates automatically if... the Trustee enters into compulsory or voluntary liquidation (except for the purposes of amalgamation or reconstruction), or has an administrator, receiver, official manager, or receiver and manager appointed to any part of its assets' (cl 89.1).
[9] The Trust Deed is Attachment RCB‑6 to the affidavit sworn by Mr Brauer.
Having regard to cl 89.1 of the Trust Deed, the appointment of the Administrators on 1 May 2023 had the effect of immediately vacating the office of trustee of the Go2 Recruitment Trust. For completeness, I note there is no regime within the CA, or elsewhere, which operates to prevent this outcome. The legal implications of this development are dealt with in the next section of these reasons.

D. First set of orders - Appointment as receivers and managers

Upon the office of the trustee of the Go2 Recruitment Trust being vacated, the trustee itself will have become a bare trustee. As a bare trustee, the role of Go2 Recruitment Pty Ltd will be limited to gathering, protecting and maintaining the trust assets. An administrator appointed to that entity will not necessarily have the power to sell or manage the trust assets without seeking an order to this effect from the court.[10]
[10] This issue was recently examined in this court by Hill J in Wallman and Quinn in their capacity as joint and several liquidators of Goldeagle Nominees Pty Ltd [2023] WASC 7 [12], in a liquidation context. As to the power of an external administrator of a corporate trustee, which has ceased to be a trustee, to sell the assets to enforce the former trustee's right of indemnity, I refer to the discussion of the conflicting authorities in Gregorski Investments Pty Ltd (in liq) v 320 Nominees Pty Ltd as Trustee of the Gregorski Property Trust [2019] FCA 1400 (Derrington J). The resolution of this conflict on the authorities is not required for the purposes of this application.

The practical and common solution to this issue is for the external administrator to be appointed as the receiver and manager of the trust assets. Another solution is for a fresh trustee appointment to be made.[11] There is no proposal before the court to pursue the latter solution. Instead, the Administrators move the court for orders that they be appointed (in their capacity as administrators of Go2 Recruitment Pty Ltd) as receivers and managers of the assets of the trust.
[11] See, for example, the scenario in Gregorski Investments Pty Ltd (in liq) [5] and [28].
This court has power, pursuant to s 25(9) Supreme Court Act and in its inherent jurisdiction, to appoint a receiver. The power is a wide, general power and the classes of cases in which the court may appoint a receiver are not closed.[12] The power must be exercised judicially and in accordance with established principles.[13] There is no doubt a receiver may be appointed over trust assets.[14]
[12] The University of Western Australia v Gray [No 6] [2006] FCA 1825 [71] (French J).
[13] Parker v Camden Borough Council [1985] 3 WLR 47, 54.
[14] Yunghanns v Candoora No 19 Pty Ltd (No 2) [2000] VSC 300; (2000) 35 ACSR 34 [84] (Warren J).
One respect in which the power is limited is that the order should be interim in nature. The language of s 25(9) refers to the appointment of a receiver 'by an interlocutory order'. This particular limitation, inherent within the power, was examined be Le Miere J in Cardaci v Filippo Primo Cardaci as executor of the estate of Mario Antonio Cardaci [No 5] [2021] WASC 331 [704] ‑ [709]. I will return to this issue below.
The appointment of voluntary administrators as receivers of trust assets was described by Black J in In the matter of Peak Invest Pty Ltd (admins apptd) [2021] NSWSC 1714 as 'orthodox' (at [35]). It protects the trustee company's right of indemnity and the position of creditors who are dependent on that right of indemnity for their claims to be met. In the context of competing applications for appointment of administrators as receivers and the appointment of new trustees, Black J resolved that dispute in In the matter of Peak Invest Pty Ltd (admins apptd) in the following way:
It seems to me that the insolvency administrators should be appointed as receivers, notwithstanding the proposal put for the appointment of the new trustees. The proposal for the appointment of the voluntary administrators as receivers of the trust assets is orthodox and will protect the former and current trustee companies' right of indemnity and the position of creditors who are dependent on that right of indemnity for their claims to be met. The position put by the Intervenors and the proposed new trustees seems to me to be to involve an excessive degree of risk, from the point of view of unitholders, including those who support it, so far as the proposed new trustees are controlled by a single unitholder; no regulatory regime has been identified which would apply to their conduct, and the regulatory regime that applies to insolvency practitioners would not attach to them; they would not, so far as the evidence goes, have professional indemnity insurance; and the Court, in making orders in respect of their conduct would neither exercise continuing supervision of that conduct, nor have the ability to address any breaches of those orders, other than possibly by an action in contempt after the event, or orders for compensation, which are only of utility if assets remain to meet them.[15]
[15] In the matter of Peak Invest Pty Ltd (admins apptd) [35] (Black J).
The plaintiffs' solicitors highlight similar considerations in the application before me, to advance the case for the plaintiffs to be appointed to the trust assets of the Go2 Recruitment Trust. Their analysis is sound, in my view, and I was thus satisfied the appointment of the plaintiffs as receivers and managers should be made. The considerations identified by Black J apply equally here: the Administrators are subject to the regulatory regime that applies to insolvency practitioners; they have professional indemnity insurance; and their conduct is subject to the continuing supervision by the court which has the ability to address any breaches of the orders.
These orders should be accompanied by supportive and ancillary orders pursuant to s 90‑15 IPS to grant the receivers and managers appropriate powers under s 420 CA, and in relation to their remuneration.[16]
[16] Such orders being consistent with those made in various authorities cited by the plaintiffs including In the matter of Peak Invest Pty Ltd (admins apptd) and Wallman and Quinn in their capacity as joint and several liquidators of Goldeagle Nominees Pty Ltd.
The temporal restriction inherent in the power in s 25(9) Supreme Court Act, to which I have earlier referred, does not present an obstacle to the orders sought, in my view. The appointment of the Administrators as receivers and managers of the trust assets is made to facilitate the role of the plaintiffs solely in their capacity as administrators, which is an inherently temporary role under the regime articulated in Part 5.3A CA.
Additionally, I considered it appropriate to make an order that the plaintiffs return to court in July 2023 for a directions hearing, to enable an assessment to be made as to whether the receiver and manager appointment should continue. This will allow for the continuing supervision of the administrators in their capacity as receivers and managers and further serves to demonstrate the interim nature of appointment. Of course, by the time that directions hearing is called on, a number of alternative scenarios may have emerged which may obviate the need for the further hearing including, for example, the possibility of a creditors' resolution to execute a deed of company arrangement.

E. Second set of orders - The Loan Facility

I turn now to the orders sought by the Administrators in relation to the Loan Facility, pursuant to ss 443A(1) and 447A(1) CA, and s 90‑15 IPS.
The relief which is sought in this regard is connected with the Loan Facility which the Administrators caused the Group to enter on the first day of their appointment, as I have explained. The view of the Administrators, as presented to the court, is that borrowing money pursuant to the Loan Facility is in the best interests of the Group and the best interests of the creditors. This is because it will allow the Administrators to continue to trade the companies and meet ongoing liabilities with a view to completing a sale or recapitalisation of the Group for the ultimate benefit to creditors.
From the Administrators' perspective, the foregoing brings into sharp focus their personal liability for the debts of the Group.
In this regard, the Administrators recognise that they are entitled to be indemnified out of the companies' assets (other than PPSR retention of title property) for certain debts. Principally, these are the debts for which the Administrators are liable pursuant to ss 443A, 443B and 443BA CA, and any other debts or liabilities incurred, or damages sustained, in good faith and without negligence, by the Administrators in their performance or exercise, or purported performance or exercise, of any of their functions or powers as administrators.
However, without the relief which is sought under s 447A(1) CA (to modify s 443A(1) CA) and under s 90‑15 IPS, should the assets of the companies be insufficient to discharge the liabilities of the Administrators incurred during the administration, including amounts owing under the Loan Facility, the Administrators recognise the risk that they would attract a personal liability to repay those amounts.
Of course, one of the purposes of the imposition of personal liability on administrators is to discourage continued trading in circumstances where liquidation is inevitable, or where those with a stake in the survival of the company are not prepared to indemnify the administrators for debts incurred during the administration, and where continuing to trade is not otherwise warranted.[17]
[17] As Middleton J explained in Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717; (2020) 144 ACSR 347 [117].
In the circumstances, and quite understandably, the Administrators say they are not prepared to allow the Group to borrow money pursuant to, and therefore incur liabilities under, the Loan Facility given this potential risk, unless the relief in question is granted.
The plaintiffs submit that orders are frequently made under s 447A CA to deal with the personal liability of administrators. Reference is made to Re Mentha (in their capacities as joint and several admins of the Griffin Coal Mining Co Pty Ltd (admins apptd) [2010] FCA 1469; (2010) 82 ACSR 142 (Gilmour J) and to the more recent decisions of Moshinsky J in Birch, in the matter of Geelong Fire Services Pty Ltd (Administrators Appointed) [2022] FCA 963 [21] ‑ [27] (Moshinsky J) and Banks‑Smith J in Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) [2022] FCA 1506 [47] ‑ [51] (Banks‑Smith J).
I accept that the making of such orders is a frequent occurrence. The nature of the present application is such that I need not dwell upon the various authorities which have examined the operation and application of s 447A CA in the context of limiting the personal liability of administrators. It is enough for present purposes to observe that:
(a)In substance, such orders are typically made where the making of the orders permits the continued trading of the relevant companies and where this is for the benefit of creditors. In such circumstances, courts have held that it is not to be expected that the voluntary administrators should expose themselves to substantial personal liabilities. Further, this regime can be deployed to avoid liability before it is imposed.
(b)In Secatore, Re Fletcher Jones and Staff Pty Ltd (admins apptd) [2011] FCA 1493, Gordon J noted that if orders are made relieving administrators from personal liability in respect of borrowings, it will permit them to make commercial decisions about the ongoing operations by focussing on what is in the best interests of the creditors uninfluenced by concerns of personal liability (at [29]).
(c)In Re Great Southern Infrastructure Pty Ltd; Ex parte Jones [2009] WASC 161 [13], Sanderson M commented that:
The material consideration on such an application is whether the proposed arrangements are in the interests of the company's creditors and consistent with the objectives of Pt 5.3A of the Act. To put that proposition positively - the question is whether the court is satisfied the proposed arrangements are for the benefit of the company's creditors. To put it negatively - the question is whether the court is satisfied the company's creditors are not disadvantaged or prejudiced by the proposed arrangement. These principles have been confirmed in a large number of cases.
The funding provided to the Group by the Loan Facility is, in my view, necessary to avoid the business facing the dire scenario in which a large number of employees would need to be terminated, material commercial contracts would be terminated, and the ability of the Administrators to secure potential DOCA proponents would be substantially reduced. There is obviously some risk involved in the arrangement and it will expose the business to further liability. However, the alternative scenario is one that should be avoided, if at all possible.
Importantly, the counterparty to the Loan Facility, Intowork Australia Limited, has consented to the orders sought by the Administrators pursuant to s 447A(1) CA.
I therefore considered that the entry into, and continuation of, the Loan Facility was (and is) in the best interests of the Group and in the best interests of the creditors. It is a sensible and responsible step. That being so, the personal liability exposure of the Administrators should be protected through the making of orders pursuant to s 447A(1) CA to modify the operation of s 443A(1) CA. Ultimately, this will serve to improve the prospects that the primary objects of Part 5.3A CA may be realised.
Further, I was satisfied that an order should be made pursuant to s 90‑15 IPS, in the context of the orders made under s 447A(1) CA, that the plaintiffs were justified in causing the companies to enter into the Loan Agreement. The making of such an order falls within the purview and intended scope of the broad power in s 90‑15.[18] While a court will generally refrain from making directions pursuant to s 90‑15 which relate to the business or commercial decisions made by an external administrator, the power permits directions relating to issues of power, propriety and reasonableness.[19] In the present circumstances, the material adduced by the plaintiffs on this application, most particularly the sworn statements of Mr Brauer as to the importance of the funding and the appreciable risk of substantial employee terminations in the absence of this arrangement, demonstrate that the exercise of the power in the manner sought by the plaintiffs is just and has demonstrable utility for the purposes of the external administration.
[18] The scope of the power was recently explained by Banks-Smith J in Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) [81] ‑ [87].
[19] In the matter of Ansett Australia Limited and Korda [2002] FCA 90; (2002) 115 FCR 409 [65] (Goldberg J).

F. Conclusion

In all of the circumstances, I was satisfied at the conclusion of the hearing on 2 May 2023 that the orders sought on the application by the plaintiffs should be made, with some minor amendments.
The plaintiffs acknowledged that, as the application was brought on at short notice and it proceeded ex parte, directions should be made to require the plaintiffs to notify creditors of the orders being made by the court, and allow any interested persons liberty to apply. I agree that such orders are appropriate. Such a regime provides a measure of protection to third parties who were not heard on the urgent first return of the application.
As I have earlier noted, I have also scheduled a further directions hearing in July 2023, to allow the Administrators to report back to the court, primarily in relation to their appointment as receivers and managers of the trust assets.
The orders made at the hearing on 2 May 2023 are set out in Attachment A to these reasons.

ATTACHMENT A
Orders made by the Court on 2 May 2023

I certify that the preceding paragraphs comprise the reasons for decision of the Supreme Court of Western Australia.
SAO
Associate to the Honourable Justice Lundberg
3 MAY 2023