Re Worx Equipment Pty Ltd (Administrators Appointed)
[2025] WASC 147
•30 APRIL 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE WORX EQUIPMENT PTY LTD (ADMINISTRATORS APPOINTED); EX PARTE ROBERT MICHAEL KIRMAN AND/OR FOR ROBERT CONRY BRAUER [2025] WASC 147
CORAM: HILL J
HEARD: 28 MARCH 2025
DELIVERED : 28 MARCH 2025
PUBLISHED : 30 APRIL 2025
FILE NO/S: COR 44 of 2025
MATTER: IN THE MATTER OF WORX EQUIPMENT PTY LTD (ADMINISTRATORS APPOINTED)
EX PARTE
ROBERT MICHAEL KIRMAN and/or for ROBERT CONRY BRAUER
First Plaintiffs
WORX EQUIPMENT PTY LTD
Second Plaintiff
Catchwords:
Corporations - Administration - Where funding agreement entered 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
Result:
Application granted
Category: B
Representation:
Counsel:
| First Plaintiffs | : | R M Johnson |
| Second Plaintiff | : | R M Johnson |
Solicitors:
| First Plaintiffs | : | Ashurst Australia |
| Second Plaintiff | : | Ashurst Australia |
Case(s) referred to in decision(s):
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 27 March 2025, the first plaintiffs, who are the joint and several administrators of Worx Equipment Pty Ltd (the Company), seek orders for relief from personal liability for debts incurred in respect of a funding deed entered into with the National Australia Bank (NAB). The application has been listed on an urgent basis, for the grounds set out in the certificate of urgency filed on 27 March 2025.
In support of the application, the first plaintiffs relied on three affidavits all filed on 27 March 2025, being the affidavit of Robert Michael Kirman and two affidavits of Lucas James Pensini, one open and one confidential.
In considering the application, I have also had the benefit of a written outline of submissions and oral submissions from counsel who appeared at the hearing today.
Factual background
The factual background to this application can be briefly summarised as follows.
On 18 March 2025, the first plaintiffs were appointed as joint and several administrators of the Company, Worx Equipment Holdings Pty Ltd (Worx Equipment Holdings), and Rigel Assets Pty Ltd (Rigel) (collectively, the Companies).[1] The Company is the sole trading entity within the group. Its primary business is the provision of mining services, including rental services for mining and civil earthmoving equipment, and asset management services.[2] Worx Equipment Holdings owns or is the hirer under financing agreements of the majority of the operating assets of the Company. Rigel is the ultimate holding company of both of these companies.
[1] Affidavit of Robert Michael Kirman filed 27 March 2025 [3].
[2] Affidavit of Robert Michael Kirman filed 27 March 2025 [16].
Based on the first plaintiffs' preliminary investigations, they believe that:
(a)the creditors of the Companies are owed in excess of $45 million;
(b)the primary assets of the Companies are trade creditors, about half of which is at risk of recovery and other receivables, and property, plant and equipment, with a book value in excess of $45 million; and
(c)the total costs that are likely to be incurred during the administration, until 2 May 2025 (the last date on which the second creditors meeting can be held) will be in excess of $2 million, unless any accommodation is granted by creditors.
As at 25 March 2025, the Companies' cash at bank was less than $1,000, which is clearly insufficient to enable the Companies to continue to operate in the absence of any further funding. The first plaintiffs believe that it is in the best interests of the Companies' creditors, employees, and stakeholders to continue to operate the Company as a going concern, in order to maximise the prospects of the successful sale or recapitalisation of the Company's business. This process, which has already commenced, is likely to take approximately two months.[3] However, in order for this to occur, the plaintiffs require immediate funding.
[3] Affidavit of Robert Michael Kirman filed 27 March 2025 [28] - [29].
On 26 March 2025, the first plaintiffs entered into a funding agreement with NAB for the sum of $500,000 (Loan Agreement).[4] The first plaintiffs do not believe this will be sufficient to cover all the costs of the administration, but will be sufficient for trade to continue in the short term. This will enable them to assess what offers have been received from the process that has been commenced and consider their ongoing strategy for the administration.
[4] Affidavit of Robert Michael Kirman filed 27 March 2025 [33] - [34].
The first plaintiffs are not willing to continue to trade in circumstances where they are personally liable for any debts incurred in the event 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 the 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.
Where an administrator enters into a loan agreement with a financier, 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 contained in s 443B. 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.
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.[5]
[5] Secatore, Re Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493 [23].
Where these circumstances arise, courts have generally expressed the view that administrators should not be expected to expose themselves to substantial personal liability. Where orders are made relieving administrators from personal liability 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 interests of creditors, without any influence on their decision-making process due to 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 Pty Ltd (Administrators Appointed).[6]
[6] 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 plaintiffs have entered into the Loan Agreement in their capacity as joint and several administrators of the Company. The Company is also a party to the Loan Agreement.
(b)Under the Loan Agreement, NAB will make available a loan facility of $500,000 to the first plaintiffs.[7] Interest will be charged in the same manner as the funding provided by NAB to the Company prior to their appointment as administrators. No additional security is being provided for the loan. Instead, NAB proposes to rely on its existing security.
(c)The terms of the Loan Agreement set out how the loan facility can be accessed, what the funds can be used for, and provisions for its repayment.[8]
[7] Affidavit of Robert Michael Kirman filed 27 March 2025 [34(a)].
[8] Confidential affidavit of Lucas James Pensini filed 27 March 2025 'A'.
On the evidence before me, I am satisfied that it is appropriate to make the orders sought 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 continued operation of the Company. Without this funding, I accept that the Company will be unable to continue trading and that, as a consequence, there is a significant risk that the value of the Company's assets will be diminished.
Second, while I accept there is a risk that the loan funds will not be sufficient to complete any sales or recapitalisation process, I also accept that this risk is outweighed by the potential benefit of enabling the sales and recapitalisation process to at least commence. This could provide a significantly higher return to creditors than a liquidation. In my view, the making of the proposed orders is consistent with the interests of unsecured creditors and the objects of pt 5.3A of the Act, as set out in s 435A.
From the evidence before me, it is clear that the Company's creditors have been given very short notice of the hearing before me today. However, I accept that the application is urgent and that their interests can be adequately preserved through an order permitting creditors to apply to vary or discharge the order, as provided in the originating process.
For these reasons, I consider it just and equitable to make the orders sought.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KS
Associate to the Hon Justice Hill
30 APRIL 2025
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