Re Yeeda Pastoral Company Pty Ltd (administrators appointed) (ACN 094 819 717); Ex Parte Richard Scott Tucker as Joint And Several Administrator of Yeeda Pastoral Company Pty Ltd (administrators appointed) (ACN 094...

Case •

[2024] WASC 120

•

11 APRIL 2024

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   RE YEEDA PASTORAL COMPANY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 094 819 717); EX PARTE RICHARD SCOTT TUCKER as joint and several administrator of YEEDA PASTORAL COMPANY PTY LTD (ADMINISTRATORS APPOINTED)
(ACN 094 819 717) [2024] WASC 120

CORAM:   HILL J

HEARD:   27 MARCH 2024

DELIVERED          :   27 MARCH 2024

PUBLISHED           :   11 APRIL 2024

FILE NO/S:   COR 49 of 2024

MATTER:   IN THE MATTER OF YEEDA PASTORAL COMPANY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 094 819 717)

EX PARTE

RICHARD SCOTT TUCKER as joint and several administrator of YEEDA PASTORAL COMPANY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 094 819 717)

First named First Plaintiff

ANTHONY JAY EDWARD MISKIEWICZ as joint and several administrator of YEEDA PASTORAL COMPANY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 094 819 717)

Second named First Plaintiff

DAVID CHRISTOPHER OSBORNE as joint and several administrator of YEEDA PASTORAL COMPANY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 094 819 717)

Third named First Plaintiff

RICHARD SCOTT TUCKER as joint and several administrator of AUSTRALIAN RANGELAND MEAT PTY LTD (ADMINISTRATORS APPOINTED) (ACN 156 047 111)

First named Second Plaintiff

ANTHONY JAY EDWARD MISKIEWICZ as joint and several administrator of AUSTRALIAN RANGELAND MEAT PTY LTD (ADMINISTRATORS APPOINTED)
(ACN 156 047 111)

Second named Second Plaintiff

DAVID CHRISTOPHER OSBORNE as joint and several administrator of AUSTRALIAN RANGELAND MEAT PTY LTD (ADMINISTRATORS APPOINTED)
(ACN 156 047 111)

Third named Second Plaintiff

RICHARD SCOTT TUCKER as joint and several administrator of KIMBERLEY PROPERTIES PTY LTD (ADMINISTRATORS APPOINTED)
(ACN 658 990 160)

First named Third Plaintiff

ANTHONY JAY EDWARD MISKIEWICZ as joint and several administrator of KIMBERLEY PROPERTIES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 658 990 160)

Second named Third Plaintiff

DAVID CHRISTOPHER OSBORNE as joint and several administrator of KIMBERLEY PROPERTIES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 658 990 160)

Third named Third Plaintiff

RICHARD SCOTT TUCKER as joint and several administrator of KIMBERLEY MEAT COMPANY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 159 933 392)

First named Fourth Plaintiff

ANTHONY JAY EDWARD MISKIEWICZ as joint and several administrator of KIMBERLEY MEAT COMPANY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 159 933 392)

Second named Fourth Plaintiff

DAVID CHRISTOPHER OSBORNE as joint and several administrator of KIMBERLEY MEAT COMPANY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 159 933 392)

Third named Fourth Plaintiff

RICHARD SCOTT TUCKER as joint and several administrator of YEEDA KIMBERLEY TOURS PTY LTD (ADMINISTRATORS APPOINTED)
(ACN 126 760 281)

First named Fifth Plaintiff

ANTHONY JAY EDWARD MISKIEWICZ as joint and several administrator of YEEDA KIMBERLEY TOURS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 126 760 281)

Second named Fifth Plaintiff

DAVID CHRISTOPHER OSBORNE as joint and several administrator of YEEDA KIMBERLEY TOURS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 126 760 281)

Third named Fifth Plaintiff

RICHARD SCOTT TUCKER as joint and several administrator of YEEDA FODDER COMPANY PTY LTD (ADMINISTRATORS APPOINTED)
(ACN 660 216 777)

First named Sixth Plaintiff

ANTHONY JAY EDWARD MISKIEWICZ as joint and several administrator of YEEDA FODDER COMPANY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 660 216 777)

Second named Sixth Plaintiff

DAVID CHRISTOPHER OSBORNE as joint and several administrator of YEEDA FODDER COMPANY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 660 216 777)

Third named Sixth Plaintiff


Catchwords:

Corporations - Insolvency - External administration - Application by administrators to extend convening period for second creditors' meeting - Whether modification is in the interests of creditors as a whole - Whether interests of any persons prejudiced by modification are protected by terms of orders - Turns on own facts

Corporations - Insolvency - Absence of quorum for one company in administration - Application by administrators for directions to validate first meeting of creditors - Application for directions that administrators justified in convening and closing meeting without any resolution being put - Turns on own facts

Corporations - Administration - Where funding agreement entered between administrators - Application for order relieving administrators of personal liability - Turns on own facts

Corporations - Insolvency - Whether plaintiffs validly appointed by directors as administrators - Validation of appointment of administrators - Turns on own facts

Corporations - Insolvency - Security interest over personal property - Where security interest securing obligations of funding agreement arose after appointment of administrators - Application for directions under s 90-15 of Sch 2 of the Corporations Act 2001 (Cth) that the administrators are justified in not seeking relief under s 588FL(2)(b)(iv) of the Corporations Act 2001 (Cth) - Application to extend time to the extent necessary for registration of security interest - Proper construction of s 588FL of Corporations Act 2001 (Cth)

Legislation:

Corporations Act 2001 (Cth) s 435A, s 436E, s 439A, s 443A, s 443D, s 447A, s 588FL, s 588FM, Sch 2 s 90-15

Insolvency Practice Rules (Corporations) 2016 (Cth) s 75-105

Result:

Convening period extended
Orders and directions given

Category:    B

Representation:

Counsel:

First named First Plaintiff : Mr N L Pham
Second named First Plaintiff : Mr N L Pham
Third named First Plaintiff : Mr N L Pham
First named Second Plaintiff : Mr N L Pham
Second named Second Plaintiff : Mr N L Pham
Third named Second Plaintiff : Mr N L Pham
First named Third Plaintiff : Mr N L Pham
Second named Third Plaintiff : Mr N L Pham
Third named Third Plaintiff : Mr N L Pham
First named Fourth Plaintiff : Mr N L Pham
Second named Fourth Plaintiff : Mr N L Pham
Third named Fourth Plaintiff : Mr N L Pham
First named Fifth Plaintiff : Mr N L Pham
Second named Fifth Plaintiff : Mr N L Pham
Third named Fifth Plaintiff : Mr N L Pham
First named Sixth Plaintiff : Mr N L Pham
Second named Sixth Plaintiff : Mr N L Pham
Third named Sixth Plaintiff : Mr N L Pham

Solicitors:

First named First Plaintiff : Lavan
Second named First Plaintiff : Lavan
Third named First Plaintiff : Lavan
First named Second Plaintiff : Lavan
Second named Second Plaintiff : Lavan
Third named Second Plaintiff : Lavan
First named Third Plaintiff : Lavan
Second named Third Plaintiff : Lavan
Third named Third Plaintiff : Lavan
First named Fourth Plaintiff : Lavan
Second named Fourth Plaintiff : Lavan
Third named Fourth Plaintiff : Lavan
First named Fifth Plaintiff : Lavan
Second named Fifth Plaintiff : Lavan
Third named Fifth Plaintiff : Lavan
First named Sixth Plaintiff : Lavan
Second named Sixth Plaintiff : Lavan
Third named Sixth Plaintiff : Lavan

Cases referred to in decision:

AWE Perth Pty Ltd v Clough Projects Australia Pty Ltd [2023] WASC 203

Calabretta v Redpen Developments Pty Ltd (in liq) (2010) 183 FCR 47

Correa v Whittingham (No 3) [2012] NSWSC 526

Diamond Press Australia Limited [2001] NSWSC 313

Dickerson, Re McWilliam's Wines Group Ltd (Administrators Appointed) [No 2] [2020] FCA 417

Hayes v Doran (No 2) [2012] WASC 486

Hutton, Re Big Village Australia Pty Ltd (Administrators Appointed) [2023] FCA 48

Hutton, Re Caydon Flemington Pty Ltd (Receivers and Managers Appointed) (in liq) [2023] FCA 796

KJ Renfrey Nominees Pty Ltd (Trustee) in the matter of OneSteel v OneSteel Manufacturing Pty Ltd [2017] FCA 325

Mentha, Re Griffin Coal Mining Company Pty Ltd (Administrators Appointed) [2010] FCA 1469; (2010) 82 ACSR 142

Mighty River International Limited v Hughes [2018] HCA 38

Re Ansett Australia Ltd (No 3) [2002] FCA 90; (2002) 115 FCR 409

Re Antqip Hire Pty Ltd (in liq) [2021] NSWSC 1122

Re Australian Art Investment [2012] VSC 18

Re Cubic Interiors NSW Pty Ltd (in liq) [2023] FCA 694

Re Geelong Fire Services [2022] FCA 963

Re Harrisons Pharmacy Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458

Re One Steel Manufacturing Pty Ltd (Administrators Appointed) [2017] NSWSC 21; (2017) 93 NSWLR 611

Re Pasdonnay Pty Ltd (ACN 009 131 622) (Administrators Appointed); McDonald (2005) 53 ACSR 717

Revroof Pty Ltd (Receivers and Managers Appointed) (Administrators Appointed) v Taminga Street Investments Pty Ltd [2023] FCA 543

Secatore, Re Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493

Shaw and Albarran (Joint and Several Administrators of Home Art Building Group Pty Ltd) v Home Art Building Group Pty Ltd (Administrators Appointed) [2016] WASC 274

Tucker (Administrator) v Bolten (Trustee), in the matter of Quintis Leasing Pty Ltd (Administrators Appointed) (No 2) [2024] FCA 46

Woods, Re Paladin Energy Ltd (Administrators Appointed) [2017] FCA 836

HILL J:

(Apart from the section of these reasons addressing the proper construction of s 588FL of the Act, this judgment was delivered extemporaneously and has been edited from the transcript.)

  1. By originating process filed on 22 March 2024, the plaintiffs seek a series of orders in relation to Yeeda Pastoral Company Pty Ltd (Yeeda) and various companies within the group. 

  2. The plaintiffs were appointed as joint and several administrators of Yeeda (as well as other companies in the group) on 29 February 2024, having been appointed as joint and several administrators of Kimberley Meat Company Pty Ltd (KMC) two days previously.

  3. Specifically, the plaintiffs seek:

    (a)orders for an extension of time to convene the second creditors' meeting for each of the companies;

    (b)to be relieved from personal future liabilities in relation to a loan agreement;

    (c)orders validating an inquorate first meeting of creditors of one of the companies and validating their appointment as administrators of two of the companies; and

    (d)directions in relation to whether an extension of time is required under s 588FM of the Corporations Act 2001 (Cth) (Act) for the registration of a security interest.

  4. In support of the application, the plaintiffs relied on five affidavits at the hearing before me.  They are two affidavits of David Christopher Osborne filed 22 March 2024 (one open and one confidential), as well as three affidavits of their solicitor, Leith David Ayres.  The first affidavit of Mr Ayres attests to service of the application on the Australian Securities and Investments Commission (ASIC).  The second affidavit provided an update on feedback from creditors on the proposed application and the third was a confidential affidavit annexing copies of the loan agreement (and associated agreements) that have now been entered into by the plaintiffs. 

Factual background

  1. Yeeda was established in about June 2006 and runs a pastoral operation in the Kimberley region of Western Australia.  It is the parent company of a number of wholly owned subsidiaries, who are collectively referred to in this application as the Yeeda group.  These companies include KMC, Kimberley Properties Pty Ltd (KPPL), Yeeda Fodder Company Pty Ltd (YFC), Australian Rangeland Meat Pty Ltd, and Yeeda Kimberley Tours Pty Ltd.[1]

    [1] Affidavit of David Christopher Osborne filed 22 March 2024 [9].

  2. Yeeda, together with its subsidiaries:[2]

    (a)owns and operates KMC's Colourstone Abattoir (Abattoir) (and holds the associated licences and leases).  The Abattoir processes cattle from the group's landholdings and from other landholders in the Kimberley region;

    (b)controls two cattle stations;

    (c)owns approximately 15,000 head of cattle; and

    (d)owns eight residential properties.

    [2] Affidavit of David Christopher Osborne filed 22 March 2024 [10].

  3. In addition, Yeeda has an interest in the Yeeda Station Carbon Project, which is located at Mount Jowlaenga Station, and is pursuing a claim in a class action against the Commonwealth.[3]

    [3] Affidavit of David Christopher Osborne filed 22 March 2024 [10.4].

  4. Based on their investigations to date, the plaintiffs' preliminary understanding of the consolidated creditor position of the Yeeda group is as follows:[4]

    (a)there are debts owing to secured creditors totalling about $50.4 million.  This includes a debt to Commonwealth Bank (CBA) of approximately $43.6 million, which is cross-collateralised over Yeeda, KMC, ARM and YKT.  There is also a debt of approximately $5.9 million owing to Westpac Banking Corporation;

    (b)there are employee entitlements of about $840,000; and

    (c)there are debts owing to unsecured creditors totalling about $53 million.

    [4] Affidavit of David Christopher Osborne filed 22 March 2024 [31].

  5. Based on their investigations to date, the plaintiffs believe that each of the Yeeda entities is insolvent (except for YFC which appears to the plaintiffs to be a dormant company).[5]

    [5] Affidavit of David Christopher Osborne filed 22 March 2024 [32]; See also Affidavit of David Christopher Osborne filed 22 March 2024, 'DCO-20'.

  6. On 8 March 2024, the plaintiffs held the first meeting of creditors of each of the companies in the Yeeda group.[6]

    [6] Affidavit of David Christopher Osborne filed 22 March 2024 [66].

  7. Mr Osborne's evidence is that the administrators intend to undertake a sale process for the assets and interests of the Yeeda Group.  The plaintiffs have already sought proposals from prospective sales agents and expect they will appoint agents to undertake the sale process in the near future.  At this stage, they believe this process will take well in excess of three months and is more likely to take up to six months. 

  8. The convening period for the second meeting of creditors of KMC ends on 2 April 2024, with the convening period for the second meeting of creditors for each of the remaining Yeeda companies ending on 4 April 2024.[7]

    [7] Affidavit of David Christopher Osborne filed 22 March 2024 [36].

Extension of time to convene second creditors' meeting

Legal principles

  1. The legal principles that govern this application are well-known. 

  2. Pursuant to s 439A(6) of the Act, the court may extend the convening period on an application made during or after the period referred to in s 439A(5)(a) or (b) as the case requires.

  3. In determining the application, it is necessary for the court to consider the objects and scheme of pt 5.3A of the Act. These objects are set out in s 435A of the Act, namely, to maximise the chances of the company (or as much as possible of its business) continuing in existence, or, if not this is not possible, for the administration to be done in a way as to result in a better return for the company's creditors and members than would result from an immediate winding up of the company.

  4. In reaching its decision, the court must maintain an appropriate balance between the expectation that an administration will be undertaken in a relatively speedy and summary manner with a need to ensure that the administration is not concluded without consideration of sensible and constructive options directed towards maximising the returns for creditors and any return for shareholders.[8] 

    [8] Tucker (Administrator) v Bolten (Trustee), in the matter of Quintis Leasing Pty Ltd (Administrators Appointed) (No 2) [2024] FCA 46 [54], citing Barrett J in Diamond Press Australia Limited [2001] NSWSC 313 [10].

  5. The court must also take into account the detriment to third parties (if any), including the suspension of rights and remedies of secured creditors, lessors and others.[9]  In this regard, creditors' interests can be prejudiced by not only delay, but by convening meetings prematurely.  Instances where creditors have been prejudiced include where an administrator has been unable to obtain adequate information for the preparation of an administrator's report in a form which enables creditors to make an informed decision.[10] 

    [9] Shaw and Albarran (Joint and Several Administrators of Home Art Building Group Pty Ltd) v Home Art Building Group Pty Ltd (Administrators Appointed) [2016] WASC 274 [18].

    [10] Re Harrisons Pharmacy Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458 [13].

  6. In Mighty River International Limited v Hughes, Nettle and Gordon JJ stated that the court will generally exercise its discretion to extend the convening period where one or more of the established categories are raised, where there is no evidence of material prejudice to those affected by the extension of time and the court is satisfied that the administrators' estimate of time has a reasonable basis.[11]

    [11] Mighty River International Limited v Hughes [2018] HCA 38 [73]

  7. The relevant established categories include:

    (a)whether the convening period allows enough time for the administrator to produce a satisfactory report;

    (b)where there is a need to extend the administration period to facilitate the sale of the business of the company as a going concern or to progress and assess a deed of company arrangement (DOCA) proposal;

    (c)the complexity of the administration, including transactions entered into by the company;

    (d)whether creditors support the extension;

    (e)the administrators' own opinion as to the need for an extension, particularly where the administration is complex; and

    (f)more generally, where additional time is likely to enhance the return for unsecured creditors.

Disposition

  1. The evidence of the plaintiffs is that further time is needed to facilitate the sale of the business of the group as a going concern or to progress proposals for a DOCA.  This is due, in part, to the complexity of the structure and business of the Yeeda group.  The reasons for complexity include:[12]

    (a)the interconnected nature of the companies' operations within the group and the various uses by companies of land owned by other companies within the group;

    (b)geographical and weather matters, including the regional 'wet season', which will require proactive herd management and limit access to assets;

    (c)the need to investigate planning and environmental law issues associated with the assets of the Yeeda group including the Abattoir; and

    (d)issues with employees, including the position of foreign workers whose employment has been terminated, but who remain in properties or residences leased or owned by companies in the Yeeda group.

    [12] Affidavit of David Christopher Osborne filed 22 March 2024 [41].

  2. Given the interdependence between the station operations and the Abattoir, and feedback the plaintiffs have received from prospective sale agents and advisors, the plaintiffs believe the assets of the Yeeda group should be marketed together in order to maximise the value for the assets and the return to creditors.

  3. The plaintiffs believe the sales and marketing process is likely to involve two initial stages:[13]

    (a)the receipt of non-binding indicative offers (which is likely to take 45 days); and

    (b)confirmatory due diligence (which will likely take at least 45 days and will depend on the form of the offers). 

    [13] Affidavit of David Christopher Osborne filed 22 March 2024 [43].

  4. The timing of any subsequent stages and completion of any transactions will depend on the nature of the final offers that are received.  In the event that any potential purchasers require Foreign Investment Review Board approval and wish to obtain this before submitting their final bids, this will add some further time to the process.[14]

    [14] Affidavit of David Christopher Osborne filed 22 March 2024 [43] - [44].

  5. The plaintiffs believe that, given these matters, an extension of at least six months will be required for the convening period.

  1. On 21 March 2024, the administrators issued a notice to the creditors of the Yeeda group giving notice of the plaintiffs' intention to seek an extension of the convening period for the second creditors' meeting.  One of KMC's creditors has informed the plaintiffs that it objects to any extension of time being granted.[15]  This creditor is currently owed approximately $5,000, which was due for payment on 15 February 2024, and wishes to have its invoice paid in full.[16]

    [15] Affidavit of Leigh David Ayres filed 26 March 2024, 'LDA-4'.

    [16] Affidavit of Leigh David Ayres filed 26 March 2024, 'LDA-5'.

  2. For the following reasons, I am satisfied that the application for an extension of the convening period should be granted, including the proposed Daisytek order.

  3. First, I accept that the convening period mandated under the Act does not enable the administrators to produce a report containing a considered recommendation to creditors.  I specifically accept Mr Osborne's evidence that, without the extension, the plaintiffs will not be in a position to provide an informed recommendation to creditors about the future of the Yeeda Group companies, given the proposed sale process has not yet started. 

  4. Second, I accept that the convening period is required to be extended in order to facilitate the sale of the business or to enable a DOCA to be proposed and negotiated.  Both of these matters are consistent with the purposes of pt 5.3A of the Act.

  5. Third, I accept that there is some complexity to the administration of the Yeeda Group, including the issues I have already referred to. 

  6. Fourth, on the evidence before me, one creditor has raised opposition to the proposed extension.  While this creditor wishes to be paid in full, on the evidence before me, this appears to be unlikely.  On the evidence before me, I consider the return to creditors, including this creditor, is likely to be significantly enhanced through the granting of an extension and enabling the sale process proposed by the plaintiffs to occur. 

  7. Fifth, the opinion of the administrators is that an extension is required for a period of six months.  On the basis of the evidence before me, particularly in relation to the proposed sale process, I am satisfied that there is a reasonable basis for this estimate.

  8. Finally, I am satisfied on all of the evidence that the potential benefit of the extension will outweigh any prejudice to creditors and is in the best interests of creditors of the Yeeda Group companies as a whole.

Application to be relieved from personal future liabilities

  1. The evidence of Mr Osborne is that to enable the sale process to occur, it is necessary for the plaintiffs to maintain the assets of the Yeeda group to preserve their value for sale and that various care and maintenance services are required.  At present, there is very little cash that is available to the plaintiffs to pay for this care and maintenance.  As a consequence, the plaintiffs have approached various parties to provide funding for the administration.

  2. On 26 March 2024, the plaintiffs entered into a funding agreement with ADM Capital Investments Pte Ltd (ADM)[17] (Loan Agreement) and seek orders relieving them of personal liability in respect of debts or liabilities arising out of the agreement. 

Legal principles

[17] Confidential affidavit of Leigh David Ayres filed 27 March 2024, 'LDA-3'.  The parties previously entered into a term sheet on 22 March 2024 (Confidential Affidavit of David Christopher Osborne field 22 March 2024, 'DCO-1').

  1. Pursuant to s 443A of the 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.

  2. 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.

  3. If 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 s 443A and the indemnity 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 administrator is personally liable for the loan and interest.

  4. Section 447A of the Act empowers the Court to make orders which limit the personal liability of an administrator where it is satisfied that loan agreements are made for the purpose of allowing the company in administration to trade for the benefit of creditors.

  5. In Secatore, Re Fletcher Jones and Staff Pty Ltd (Administrators Appointed), Gordon J stated:[18]

    Section 447A(1) of the Act empowers the Court, in an appropriate case, to modify the operation of s 443A to exclude personal liability on the part of a voluntary administrator, and to provide that a loan taken by the company via the voluntary administrator is repayable on a limited recourse basis. Orders in similar terms have frequently been made in circumstances where the Court is satisfied that an administrator has entered into a loan agreement or other arrangement to enable the company's business to continue to trade for the benefit of the company's creditors. (citations omitted)

    [18] Secatore, Re Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493 [23].

  6. Where these circumstances arise, courts have expressed the view that administrators should not be expected to expose themselves to substantial personal liabilities.  Where orders are made which relieve administrators from personal liability in respect of borrowings, the orders will 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 the creditors, absent the influence of any concern as to personal liability.

  7. In Mentha, Re Griffin Coal Mining Company Pty Ltd (Administrators Appointed), Gilmour J set out the factors that the court will take into account in considering an application for orders under s 447A to vary the liability of administrators under s 443A:[19]

    (a)whether the proposed arrangements are in the interests of the company's creditors and consistent with the objectives of pt 5.3A (set out in s 435A of the Act);

    (b)whether the arrangements proposed are to enable the company's business to continue to trade for the benefit of the company's creditors;

    (c)a consideration of whether the creditors of the company are not prejudiced or disadvantaged by the types of orders sought and whether they stand to benefit from the administrators entering into the arrangement; and

    (c)whether notice has been given to those who may be affected by the order.

Disposition

[19] Mentha, Re Griffin Coal Mining Company Pty Ltd (Administrators Appointed) [2010] FCA 1469; (2010) 82 ACSR 142 [30].

  1. The key terms of the Loan Agreement can be summarised as follows.[20]

    (a)The plaintiffs have entered into the Loan Agreement in their capacity as joint and several administrators of Yeeda, KMC, ARM and YKT.

    (b)ADM will make available to the plaintiffs a loan facility of $5 million in three tranches. 

    (c)The Loan Agreement sets out the time in which each of the tranches will be available and the amounts of each of those tranches.  It also contains the provisions for the repayment of the loan facility, as well as the interest rate and the establishment fee. 

    (d)In circumstances where KMC is the primary operating subsidiary of the group and YKT and ARM have minimal assets, KMC guarantees the performance of all the plaintiffs' obligations under the Loan Agreement in favour of the lender.  This guarantee is secured by an all-assets security arrangement (General Security Agreement).[21]

    (e)The loan facility is subject to the satisfaction of certain conditions precedent including the execution of various documents, which I note has now occurred, as well as the consent of the secured lender and other relevant parties.  The loan facility is subject to the relevant parties entering into priority arrangements, which I also note has now occurred.[22]

    [20] Confidential affidavit of Leith David Ayres filed 27 March 2024, 'LDA-3'.

    [21] Confidential affidavit of Leith David Ayres filed 27 March 2024, 'LDA-2'.

    [22] Confidential affidavit of Leith David Ayres filed 27 March 2024, 'LDA-1'.

  2. I am satisfied on the evidence before me that it is appropriate to make the orders sought for the following reasons.

  3. First, I accept that the purpose of the funding under the Loan Agreement is to provide working capital for the administration and to fund the necessary care and maintenance for the assets of the Yeeda group.  Without the continuing provision of care and maintenance services, I accept there is a risk that the value of the assets will be diminished. 

  4. Second, subject to the agreement of the secured creditors, their interests will not be affected by the Loan Agreement.  I note that the secured creditor has agreed to the Loan Agreement. 

  5. Finally, the plaintiffs' proposed orders are, in my view, consistent with the interests of unsecured creditors whose interests can be adequately preserved through an order permitting creditors to apply to vary or discharge the order.

Validation of appointment

Legal principles

  1. Section 447A of the Act permits the court to make orders to cure any defects in the appointment of an administrator.[23] 

    [23] Hayes v Doran (No 2) [2012] WASC 486 [406]; Hutton, Re Big Village Australia Pty Ltd (Administrators Appointed) [2023] FCA 48 [30] - [32].

  2. In considering whether an order should be made to cure a defective appointment, the court will take into account a number of considerations including:

    (a)the likely insolvency of the company;[24]

    (b)whether the administrators made inquiries to confirm the validity of their appointment;[25]

    (c)the fact that the administrator has carried out substantial work and incurred costs in the not unreasonable belief at the time that their appointment as administrator was valid;[26]

    (d)the effect of an order on the administrator's entitlement to a statutory indemnity and remuneration;[27] and

    (e)whether any person would be subject to any particular prejudice by the validation of the appointment.[28]

Disposition

[24] Correa v Whittingham (No 3) [2012] NSWSC 526 [83]; Re Pasdonnay Pty Ltd (ACN 009 131 622) (Administrators Appointed); McDonald (2005) 53 ACSR 717 [20]; Re Australian Art Investment [2012] VSC 18 [8].

[25] Correa v Whittingham (No 3) [81] - [82]

[26] Calabretta v Redpen DevelopmentsPty Ltd (in liq) (2010) 183 FCR 47 [50].

[27] Calabretta v Redpen DevelopmentsPty Ltd (in liq) [38]

[28] Re Australian Art Investment [10].

  1. In this case, the defect in the appointment of the plaintiffs as administrators of KPPL and YFC arises from the following.  As at 22 February 2024, prior to their appointment as administrators, the records of ASIC did not record Mr Petrie as a director of either KPPL and YFC.  On discovering this, the plaintiffs made enquiries and were provided with a document that referred to Mr Key being replaced by Mr Petrie as a director of these companies.[29] 

    [29] Affidavit of David Christopher Osborne filed 22 March 2024 [17] - [20], 'DCO-7'.

  2. On 27 February 2024 (prior to their appointments on 29 February 2024), the plaintiffs were provided with resolutions, dated 24 October 2023, appointing Mr Petrie as the sole director of each of KPPL and YFC.  These resolutions were signed by two directors of Yeeda and, on their face, appeared valid.

  3. On 29 February 2024, Mr Petrie executed instruments appointing the plaintiffs as joint and several administrators of each of KPPL and YFC.[30]  However, it was not until the next day, 1 March 2024, that papers were lodged with ASIC to reflect that Mr Petrie had replaced Mr Key as the sole director of each of KPPL and YFC.[31]

    [30] Affidavit of David Christopher Osborne filed 22 March 2024 [13], 'DCO-5'.

    [31] Affidavit of David Christopher Osborne filed 22 March 2024 [23].

  4. For the following reasons, I am satisfied it is appropriate to make the orders validating the plaintiffs' appointment as administrators to KPPL and YFC. 

  5. First, I accept the plaintiffs' belief that KPPL is insolvent and that YFC is, in effect, a dormant company.

  6. Second, I accept that substantial work has already been done by the plaintiffs, which was on the belief they were validly appointed as administrators of KPPL and YFC.

  7. Third, I accept that unless their appointment is validated, there is a possibility the plaintiffs will be denied remuneration for that work.

  8. Fourth, there is no evidence that any particular prejudice will flow to any party from the making of the proposed order.

Inquorate meeting of creditors of YFC

  1. The plaintiffs also sought orders in respect of the inquorate meeting of YFC. These orders were sought under s 90-15 of the Insolvency Practice Schedule (Corporations) (sch 2 to the Act) (IPS), which provides that the court may make such orders as it thinks fit in relation to the external administration of a company.

  2. I accept that under s 90-20 of the IPS, the application can be brought by the administrators as officers of the company. Section 90-15 of the IPS encompasses the court's form of power to give directions to external administrators that was previously contained s 447D and s 479(3) of the Act.

  3. In Re Ansett Australia Limited (No 3), Goldberg J discussed the circumstances in which a direction will be given.  His Honour stated that:[32]

    There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision.  It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised.  It is insufficient to attract an order giving directions that the liquidator or administrator has a feeling of apprehension or unease about the business decision made and wants reassurance.

    [32] Re Ansett Australia Ltd (No 3) [2002] FCA 90; (2002) 115 FCR 409 [65].

  4. Directions are sought in respect of the first meeting of creditors of YFC, which took place on 8 March 2024.  Prior to convening the meeting, the plaintiffs took steps to identify the creditors of YFC, including by publishing notices and speaking with key personnel.  From these investigations, the plaintiffs believe that YFC is a dormant entity and does not have any known creditors.  When the meeting was convened, no quorum was present, the meeting did not proceed and was, in effect, immediately closed.[33]

    [33] Affidavit of David Christopher Osborne filed 22 March 2024 [65], [68], 'DCO-20'.

  5. The course that was adopted by the plaintiffs was consistent with s 75‑105 of the Insolvency Practice Rules (Corporations) 2016 (Cth), which provides, in essence, that in the absence of a quorum, a meeting must not act for any purpose other than the election of a person to preside at the meeting, the proving of debts, or the adjournment of the meeting.

  6. In the circumstances of this case, the plaintiffs seek a direction from the court that they were justified in proceeding as they did at the meeting of creditors. 

  7. The issue raised by the plaintiff is a legal issue of procedure as to how they proceeded at the meeting of creditors of YFC.  In my view, for the following reasons, it is appropriate to give the direction sought by the plaintiffs for the following reasons. 

  8. First, s 436E(2) of the Act obliged the plaintiffs to hold a meeting of creditors within eight business days after the administration. Second, on the evidence before me, I accept that the plaintiff has taken all reasonable steps to identify creditors and that YFC has no known creditors.

  9. In these circumstances, I accept that the plaintiffs were justified in convening the meeting and then closing the meeting in the absence of a quorum.

Relief in relation to registration of security interests

  1. The final orders sought by the plaintiffs concern whether relief is required under s 588FM of the Act in relation to the registration of the security interest granted by KMC to ADM under the General Security Agreement[34] on the Personal Properties Securities Register (PPSR), as required by the Loan Agreement.

    [34] Confidential affidavit of Leith David Ayers filed 27 March 2024, 'LDA-2'.

  2. The plaintiffs (in their capacities as joint and several administrators of KMC) sought orders that:

    9.Pursuant to [s] 90-15 of the IPS, that the plaintiffs (in their capacities as joint and several voluntary administrators of KMC) are justified in not seeking relief under [s] 588FM of the Act in respect of the time for registration of the security interest to be registered on the Personal Properties Securities Register pursuant to the Loan Agreement.

    10.To the extent necessary, pursuant to section 588FM of the Act, in respect of the security interest granted by the plaintiffs (in their capacities as joint and several voluntary administrators of KMC) in favour of ADM Capital Investments Pte Ltd in connection with the Loan Agreement, the registration time for the security interest be fixed as the date that is 20 business days after the security agreement giving rise to the security interest comes into force for the purposes of section 588FL(2)(b)(iv) of the Act.

  3. This issue arises because of the question as to whether, by operation of s 588FL of the Act, the security interest created by the General Security Agreement (which was created after the appointment of the plaintiffs as external administrators) vests in KMC. This is because it will not be registered until after the 'critical time' referred to in s 588FL(7)(a) of the Act, being the appointment of external administrators.

  4. In this case, there is no question that the agreement is a 'security interest' within the meaning of s 12 of the Personal Properties Securities Act 2009 (Cth) (PPSA) as the agreement provides for 'an interest in personal property' and secures payment of an obligation under the Loan Agreement.

  5. Where a security interest is not perfected in the manner prescribed by the PPSA prior to the appointment of an external administrator to the grantor of the interest, the security interest vests in the grantor.[35]  This vesting is irreversible.[36]

    [35] Personal Property Securities Act 2009 (Cth) s 267.

    [36] Re One Steel Manufacturing Pty Ltd (Administrators Appointed) [2017] NSWSC 21; (2017) 93 NSWLR 611 [82].

  6. A security interest is perfected if it has attached to collateral, is enforceable against third parties, and certain extra steps (possession or control of the collateral, or registration on the PPSR) have been taken to protect the interest.[37]

    [37] Personal Property Securities Act 2009 (Cth) s 21.

  7. Pursuant to s 588FL of the Act, a security interest under the PPSA vests in the company on the appointment of a voluntary administrator if:

    (a)the security interest is enforceable and was perfected by registration;

    (b)it was registered within the six months preceding the administration or liquidation; but

    (c) it was not registered within 20 business days after the grant, unless it was registered within such later time as is ordered by the court under s 588FM.

  8. At present, there is divergence on the authorities as to the extent s 588FL applies to security interests that arise after the 'critical time' and before the company is no longer subject to external administration. In KJ Renfrey Nominees Pty Ltd (Trustee) in the matter of OneSteel v OneSteel Manufacturing Pty Ltd, Davies J held that where a security interest was registered after the commencement of the winding up or appointment of administrator, the security interest vested on creation even if it was registered within 20 business days, unless an order is made under s 588FM extending the time for registration.[38]  This view has been adopted by other judges at first instance.[39]

    [38] KJ Renfrey Nominees Pty Ltd (Trustee) in the matter of OneSteel v OneSteel Manufacturing Pty Ltd [2017] FCA 325 [26].

    [39] See for example Woods, Re Paladin Energy Ltd (Administrators Appointed) [2017] FCA 836 (Barker J); Dickerson, Re McWilliam's Wines Group Ltd (Administrators Appointed) [No 2] [2020] FCA 417 (Gleeson J); Re Geelong Fire Services [2022] FCA 963 (Moshinsky J).

  1. However, this construction was rejected by Brereton JA (sitting at first instance) in Re Antqip Hire Pty Ltd (in liq).[40] His Honour held that s 588FL does not apply to security interests granted by a company after the critical time but only to security interests that arise after the critical time under a transaction entered into before the critical time.[41]  This view has been described as compelling by other judges at first instance.[42]

    [40] Re Antqip Hire Pty Ltd (in liq) [2021] NSWSC 1122 [40] - [62].

    [41] Re Antqip Hire Pty Ltd (in liq) [63].

    [42] See for example Revroof Pty Ltd (Receivers and Managers Appointed) (Administrators Appointed) v Taminga Street Investments Pty Ltd [2023] FCA 543; Hutton, Re Caydon Flemington Pty Ltd (Receivers and Managers Appointed) (in liq) [2023] FCA 796 [28].

  2. I considered this issue in AWE Perth Pty Ltd v Clough Projects Australia Pty Ltd.[43]  However, for the reasons set out in that decision, it was not necessary for me to express any concluded view as to which construction of the Act I preferred. 

    [43] AWE Perth Pty Ltd v Clough Projects Australia Pty Ltd [2023] WASC 203.

  3. At about the same time as this decision was published, Cheeseman J considered the same issue in Re Cubic Interiors NSW Pty Ltd (in liq).[44] Because of the proximity of the judgments to each other, neither judgment refers to the other. After considering the competing authorities referred to above, her Honour preferred the construction given to s 588FL by Brereton JA in Re Antqip Hire Pty Ltd (in liq) because:[45]

    [H]is Honour's conclusion was supported by a textual analysis which honed in on the distinction between the use of 'granted' and 'arises' in the particular subsections and was further supported by the interrelationship between s 588FL of the Act and the broader relevant legislative framework including s 468 of the Act and ss 267 and 267A of the PPSA.

    Having considered the two competing lines of authority, I have respectfully reached the conclusion that s 588FL does not cover security interests granted after the critical time. Like Jackman J in Revroof, I find the analysis in Re Antqip compelling.  The approach accords with the well-established principles of statutory construction.  The starting, and finishing, point must be the text of the relevant provisions in the context of the legislative scheme. 

    [44] Re Cubic Interiors NSW Pty Ltd (in liq) [2023] FCA 694.

    [45] Re Cubic Interiors NSW Pty Ltd (in liq) [54] - [55].

  4. In addition to the matters referred to by Brereton JA in Re Antqip, her Honour added that if s 588FL applied to security interests granted after the 'critical time', it would create the odd result that a security interest would vest prior to its creation, which in accordance with the usual principles of statutory construction, means the court should prefer the construction of Brereton JA.[46] Cheeseman J then referred to a number of matters comprising the context in which s 588FL should be considered in supporting her preferred construction and its purpose.

    [46] Re Cubic Interiors NSW Pty Ltd (in liq) [56].

  5. I respectfully adopt the reasons of Cheeseman J in Re Cubic Interior NSW Pty Ltd (in liq) at [55] - [84] in preferring the analysis of Brereton JA in Re Antqip, including the additional matters of text, context and purpose referred to by her Honour. 

  6. The orders sought in this case were identical to those considered and ultimately made by her Honour.

  7. Section 90-15 of the IPS relevantly provides that the court may make such orders as it thinks fit in relation to the external administration of a company. It is accepted that this is a very broad power, which includes the power to give directions about a matter arising in connection with the performance or exercise of an administrator's powers.

  8. On my preferred construction of s 588FL of the Act, I was and am satisfied that the General Security Interest is not covered by this section. On this basis, I considered it was (and is) appropriate to make a direction in the form sought by the plaintiffs (in their capacity as administrators of KMC) that they are justified in not seeking relief under s 588FM of the Act.

  9. However, as noted by both Jackman J and Cheeseman J, at present, there is no intermediate appellate authority on the proper construction of s 588FL. Given this, I accept there is utility in making an additional order which is conditional on there being a requirement for an extension of time for registration under s 588FM of the Act. In my view, this is a practical and appropriate resolution to the issue that has confronted the plaintiffs. In this case, it would be just and equitable (as required under s 588FM(2)(b)) to make the order.

Conclusion

  1. For these reasons, at the conclusion of the hearing, I made orders in terms of 'Annexure A' to these reasons.

Annexure A

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

JN

Associate to the Honourable Justice Hill

11 APRIL 2024


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