Sparks, in the matter of IG Energy Holdings (Australia) Pty Ltd (Administrators Appointed) (No 3)
[2024] FCA 673
•23 May 2024
FEDERAL COURT OF AUSTRALIA
Sparks, in the matter of IG Energy Holdings (Australia) Pty Ltd (Administrators Appointed) (No 3) [2024] FCA 673
File numbers: QUD 155 of 2023
QUD 185 of 2024Judgment of: DERRINGTON J Date of judgment: 23 May 2024 Date of publication of reasons: 21 June 2024 Catchwords: PRACTICE AND PROCEDURE – application for urgent hearing of interlocutory application to vary earlier orders made by the Court – where interlocutory application is brought in proceedings listed for imminent hearing – where matters raised in upcoming hearing may bear upon relief sought in the interlocutory application – order that application be heard at upcoming hearing Cases cited: Mighty River International Ltd v Hughes (2018) 265 CLR 480
Re Ten Network Holdings Ltd (subject to a deed of company arrangement) (recs and mgrs apptd) (2017) 123 ACSR 253
Division: General Division Registry: Queensland National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 37 Date of hearing: 23 May 2024 Counsel for the Plaintiff in QUD 185 of 2024: Ms A Lyons with Mr M Gvozdenovic Solicitor for the Plaintiff in QUD 185 of 2024: Quinn Emanuel Urquhart & Sullivan Counsel for the Plaintiffs in QUD 155 of 2023 and the First to Third and Sixth to Fourteenth Defendants in QUD 185 of 2024: Mr A Pomerenke KC with Mr D Krochmalik
Solicitor for the Plaintiffs in QUD 155 of 2023 and the First to Third and Sixth to Fourteenth Defendants in QUD 185 of 2024: Gilbert + Tobin Counsel for the Fourth and Fifth Defendants in QUD 185 of 2024: Mr B O’Donnell KC with Ms J Sargent Solicitor for the Fourth and Fifth Defendants in QUD 185 of 2024: White & Case ORDERS
QUD 155 of 2023 IN THE MATTER OF IG ENERGY HOLDINGS (AUSTRALIA) PTY LTD ACN 090 996 142 (ADMINISTRATORS APPOINTED) & ORS
GRANT DENE SPARKS AND RICHARD JOHN HUGHES IN THEIR CAPACITY AS JOINT AND SEVERAL ADMINISTRATORS OF EACH OF THE SECOND TO FIFTH PLAINTIFFS
First Plaintiff
IG ENERGY HOLDINGS (AUSTRALIA) PTY LTD ACN 090 996 142 (ADMINISTRATORS APPOINTED)
Second Plaintiff
IG POWER HOLDINGS LIMITED PTY LTD ACN 082 413 876 (ADMINISTRATORS APPOINTED) (and others named in the Schedule)
Third Plaintiff
QUD 185 of 2024 BETWEEN: SEV.EN GAMMA A.S.
Plaintiff
AND: IG POWER (CALLIDE) PTY LTD (ADMINISTRATORS APPOINTED) (SPECIAL PURPOSE ADMINISTRATORS APPOINTED) ACN 082 413 885 (and others named in the Schedule)
First Defendant
ORDER MADE BY:
DERRINGTON J
DATE OF ORDER:
23 MAY 2024
THE COURT ORDERS THAT:
1.The interlocutory application lodged 19 May 2024 in proceeding QUD155/2023 be heard together with the applications already listed for hearing at 10:15 am on 18 and 19 June 2024 pursuant to the Orders made on 11 April 2024 in proceedings QUD155/2023 and QUD185/2024.
2.The costs of the mention on 23 May 2024 be each party’s costs in the cause.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DERRINGTON J:
This is an application seeking an urgent hearing of an interlocutory application recently filed by the general purpose administrators of the “IG Power” group of companies, being the plaintiffs in QUD 155 of 2023.
For the reasons that follow, the only appropriate order to be made is that the interlocutory application be heard together with the applications in QUD 155 of 2023 and QUD 185 of 2024 already listed for a joint hearing in June.
Background
On 11 April 2024, an urgent mention was held to address the filing of two competing applications in two separate proceedings. Orders were made, amongst other things, that the two applications be heard concurrently and on an expedited basis. The first application is made by Sev.en Gamma a.s. (Sev.en) in QUD 185 of 2024, by which it seeks the removal of the general purpose administrators of the IG Power group of companies. This application will be referred to as the “Sev.en application”. The second is an application filed in QUD 155 of 2023 by the general purpose administrators for judicial advice that they are justified in recommending that IG Power (Callide) Pty Ltd (IGPC) enter into a deed of company arrangement proposed by Callide Energy Pty Ltd (CEPL) and CS Energy Limited (CSEL) (the DOCA). This will be referred to as the “GPA application”. The hearing has been set down in June 2024.
By Order 7 of the orders made 11 April 2024, the Court also further extended the convening period for the second meeting of creditors, as follows:
(a) the period for the General Purpose Administrators to convene the second meeting of creditors of the IG Companies under s 439A of the Act (the Meeting) is the period ending at 11:59 pm on:
(i) 7 May 2024; or
(ii) the day after the Sev.en and GPA Applications are finally determined, whichever is later.
(b) the Meeting may be held within 5 business days after the end of the convening period as extended by subparagraph (a).
The interlocutory application
On 19 May 2024, the general purpose administrators lodged an interlocutory application in QUD 155 of 2023 seeking to vary paragraph (b) of Order 7 to provide:
(b)the Meeting may be held at any time during, or within 5 business days after the end of, the convening period as extended by subparagraph (a).
(Emphasis added).
This application was referred to by the parties as the “Daisytek application”.
The substance of the variation sought by the Daisytek application is to give the general purpose administrators the ability to call a second meeting of creditors to propose the DOCA for the creditors’ consideration. As can be seen, the existing Order 7 prevents them from doing so.
The general purpose administrators submit that the Daisytek application should be heard and determined urgently. They assert that there have been a number of developments since the orders of 11 April 2024 were made which necessitate the variation to Order 7. In broad terms:
(a)On 2 May 2024 and 13 May 2024, CEPL took certain steps under its joint venture agreement with IGPC which will now require IGPC to meet very significant cash calls made on the joint venturers, instead of CEPL, which has previously met the calls on IGPC’s behalf.
(b)The cash position of IGPC will therefore deteriorate by a significant amount over the next few months, and IGPC’s cash at bank will be exhausted by August 2024.
(c)As a result, the estimated return to creditors and members from the DOCA, if approved by creditors, will be diminished by continued delay in the execution of that DOCA, in circumstances where it cannot be put to creditors unless Order 7 is varied.
Sev.en opposes this course for two reasons. First, it says that the matters raised by the general purpose administrators in support of the urgency of the application are not new. Secondly, it complains that, if the Daisytek application is heard urgently and the relief is granted, the Court will have approved the holding of the second creditors’ meeting, and likely the approval of the DOCA, before either of the Sev.en and GPA applications are addressed.
Should the Daisytek application be heard urgently?
For the reasons that follow, the Daisytek application should not be heard prior to the imminent hearing of the Sev.en and GPA applications. The Daisytek application should be heard at the same time as the Sev.en application.
At present, special purpose administrators have been appointed to investigate the existence and value of certain assets of IGPC and, in particular, what claims it might have for relief against CSEL in relation to the failure of two power units at the Callide Power Station. There is no need to further detail the precise nature of such claims for present purposes.
Another relevant factor in the context of this application is that the Sev.en application, which seeks to remove the general purpose administrators, is on foot. It is set down for hearing in less than four weeks. Directions have been made in relation to that matter, and there is no present suggestion that it will not proceed on that date. Indeed, certain interlocutory applications in it are set down for determination next week.
The application presently before the Court was brought on urgently and there is no criticism in that. Despite some submissions to the contrary, the application was brought bona fide and on the basis that the changed circumstances have necessitated it being made. Those changed circumstances are, in general terms, that CEPL, IGPC’s joint venture partner, has ceased funding certain payment obligations which IGPC has under the joint venture agreement.
Those payment obligations are referred to as “cash calls”, and are issued periodically by Callide Power Management Pty Ltd under the joint venture agreement. They require the payment by IGPC and CEPL of “Called Sums”, which reflect the expenses of the joint venture, including the cost of rebuilding the two power units at the Callide Power Station.
CEPL’s decision to cease making payments on behalf of IGPC has had the consequence that the general purpose administrators have been required to use IGPC’s money to meet the expenses or the obligation to pay the sums required by the cash calls. That money is the proceeds of insurance claims made following damage to power units at the Callide Power Station.
The general purpose administrators have received a DOCA proposal from CEPL and CSEL, which, as originally constituted, would provide a 100 cents in the dollar return to IGPC’s creditors. That is very significant in the present circumstances.
The evidence before the Court has indicated that as IGPC uses its existing funds to meet the cash calls, the amounts which will ultimately become available to IGPC’s creditors, in the event the DOCA is entered into, will be reduced. That diminution will continue as more payments are made.
In these circumstances, there is a prima facie case that the general purpose administrators’ application to vary the Court’s original order should be brought on expeditiously so as to prevent any further reduction in the potential returns to creditors.
Focus was given to the position of the creditors, as is right and proper in an administration: Mighty River International Ltd v Hughes (2018) 265 CLR 480, 506 – 507 [61]: but it must also be kept steadily in mind that members of the company in administration are also interested parties.
This administration is far from an ordinary one. Indeed, it has some peculiar or unusual aspects. For a start, the major creditors of IGPC are largely crystallised between the two protagonists in the matter. On one side is CSEL and its related entities, including CEPL. On the other is the foreign company, Sev.en, which has a strong financial interest in IGPC along with other investors. There is an appearance, and it ought to be stressed that it is nothing more than an appearance, that the substantive fight between the protagonists is in relation to IGPC’s assets, being its interests in the joint venture which operates two of the power units at the Callide Power Station.
The administration of IGPC is an essential part of the context in which that disputation occurs, as are the parties’ rights under the joint venture. For these reasons, it may be that, in the context of the administration, the creditors’ and members’ interests might have to be viewed with a slightly more nuanced eye.
It is important to consider the practical realities of the matter to the extent to which they affect the legal position of the parties involved. Those practical realities include the effect on the rights of IGPC and CEPL under the joint venture agreement. These are not unimportant in the present circumstances, and in particular, CEPL has rights to call for and acquire the interests of IGPC under the joint venture agreement. Any payment made in respect of that acquisition will be substantial, although presently it is not clear what return that will provide to creditors. The exercise of that right was withdrawn but a question exists as to whether it can be re-enlivened.
To those circumstances, it can be added that consideration should be given to the rights of the members of IGPC as well. On a brief consideration, the current DOCA proposal sets some of their interests at a minimum, if not at naught: cf Re Ten Network Holdings Ltd (subject to a deed of company arrangement) (recs and mgrs apptd) (2017) 123 ACSR 253, 278 [81] – [82].
The reduction in the potential return to creditors is, on any view, an important consideration. However, it is not the only one. It is also relevant that the cash calls which have been paid have been spent on the continuation of the joint venture business, including the rebuilding of the power units. That will necessarily provide consequential benefit to the assets of both joint venturers but, in particular, IGPC.
Whilst it may be that creditors may lose the benefit of cash payments under the DOCA, it is not necessarily the case that they will not ultimately have access to the benefit of the money spent through the cash calls, even though that might be in a less direct and more prolongated way.
Moreover, it is not entirely clear in this case that CSEL and CEPL will not amend the terms of their DOCA proposal such that future versions may still offer the creditors a full payment.
The position as between the parties is necessarily dynamic and as CEPL’s position changed in relation to the making of payments of the cash calls, so are there numerous other moving parts which may affect the position of the parties in the future and the terms of any further DOCA.
It is not entirely clear if CEPL will withdraw its current DOCA proposal in its present form. However, CEPL is a substantial entity, and it has an ability to provide a DOCA which might satisfy the requirements of all creditors at any time. It is also to be noted that the circumstances of this case are slightly unusual in that CEPL is not only the proponent of the DOCA, but has its rights under the joint venture agreement as well.
A further factor which has persuaded me that it is appropriate to hear the Daisytek application together with the Sev.en application, is that part of that latter application involves or partly relies upon the general purpose administrators’ conduct in relation to the circumstances which resulted in the proposed DOCA being advanced. If a contention is made good that some conduct on behalf of the general purpose administrators warrants consideration, the issue will not be ventilated if the Daisytek application is heard before Sev.en’s application to remove them. Whilst there exists a theoretical possibility that the removal proceedings could continue in some form or another after the hearing of the Daisytek application, it is, in reality, unlikely.
Therefore, as a matter of substance, the determination of the general purpose administrators’ Daisytek application, ahead of the Sev.en application, is likely to negate the substance of it.
There is a further complication that the determination of the general purpose administrators’ application to vary the terms of the Court’s current orders will not be finalised prior to the hearing of the Sev.en application. This is a not insignificant factor. Given the available court time, it is unlikely that an appropriate date could be found on which a hearing could take place and, even if it were possible, if the matter required a reserved and considered decision — which it probably would — it is unlikely that decision could be produced prior to the time presently set for the hearing of the Sev.en application.
The Sev.en application has been set down for some time. The parties have been working towards a hearing of it, which is in less than four weeks’ time. Given the lateness of the present application, though that is said without criticism, it would not now be possible to hear and determine the Daisytek application in adequate time.
Taking all of those matters into account and the fact that there is at least some overlap in the issues between the two applications, the Daisytek application ought not be heard prior to the Sev.en application. It is more appropriate that the applications all be heard together.
Importantly, however, that does not necessarily mean that they have to be determined together. If the Daisytek application is straightforward — and it has been suggested that it is not overly complex — it may be determined prior to the determination of the other application, if it is appropriate to do so.
Conclusion
In any event, in the circumstances, and though it is not the perfect solution by any means, the preferable, and only appropriate course, is to join the general purpose administrators’ Daisytek application with Sev.en’s application to remove the general purpose administrators, which is to be heard at 10:15 am on 18 June 2024.
Each party’s costs of today’s case management hearing should be each party’s costs in the cause.
These reasons have been revised, amended, and corrected in accordance with the Court’s protocol for the publishing of ex tempore reasons.
I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington. Associate:
Dated: 21 June 2024
SCHEDULE OF PARTIES
QUD 155 of 2023 Plaintiffs
Fourth Plaintiff:
IG POWER MARKETING PTY LTD ACN 082 413 867 (ADMINISTRATORS APPOINTED)
Fifth Plaintiff:
IG POWER (CALLIDE) LTD ACN 082 413 885 (ADMINISTRATORS APPOINTED)
Supporting Creditor:
SEV.EN GAMMA A.S.
Supporting Creditor:
ARCADIA ENERGY TRADING PTY LTD
QUD 185 of 2024 Defendants
Second Defendant:
RICHARD J HUGHES IN HIS CAPACITY AS JOINT AND SEVERAL ADMINISTRATOR OF IG POWER (CALLIDE) PTY LTD (ADMINISTRATORS APPOINTED) (SPECIAL PURPOSE ADMINISTRATORS APPOINTED) ACN 082 413 885
Third Defendant:
GRANT D SPARKS IN HIS CAPACITY AS JOINT AND SEVERAL ADMINISTRATOR OF IG POWER (CALLIDE) PTY LTD (ADMINISTRATORS APPOINTED) (SPECIAL PURPOSE ADMINISTRATORS APPOINTED) ACN 082 413 885
Fourth Defendant:
JOHN RICHARD PARK IN HIS CAPACITY AS JOINT AND SEVERAL SPECIAL PURPOSE ADMINISTRATOR OF IG POWER (CALLIDE) PTY LTD (ADMINISTRATORS APPOINTED) (SPECIAL PURPOSE ADMINISTRATORS APPOINTED) ACN 082 413 885
Fifth Defendant:
BENJAMIN PETER CAMPBELL IN HIS CAPACITY AS
JOINT AND SEVERAL SPECIAL PURPOSE
ADMINISTRATOR OF IG POWER (CALLIDE) PTY LTD (ADMINISTRATORS APPOINTED) (SPECIAL PURPOSE ADMINISTRATORS APPOINTED) ACN 082 413 885Sixth Defendant:
IG POWER HOLDINGS LIMITED ADMINISTRATORS
APPOINTED) ACN 082 413 876
Seventh Defendant:
RICHARD J HUGHES IN HIS CAPACITY AS JOINT AND SEVERAL ADMINISTRATOR OF IG POWER HOLDINGS LIMITED (ADMINISTRATORS APPOINTED) ACN 082 413 876
Eighth Defendant:
GRANT D SPARKS IN HIS CAPACITY AS JOINT AND
SEVERAL ADMINISTRATOR OF IG POWER HOLDINGS LIMITED (ADMINISTRATORS APPOINTED) ACN 082 413 876Ninth Defendant:
IG POWER MARKETING PTY LIMITED
(ADMINISTRATORS APPOINTED) ACN 082 413 867Tenth Defendant:
RICHARD J HUGHES IN HIS CAPACITY AS JOINT AND SEVERAL ADMINISTRATOR OF IG POWER MARKETING PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 082 413 867
Eleventh Defendant:
GRANT D SPARKS IN HIS CAPACITY AS JOINT AND
SEVERAL ADMINISTRATOR OF IG POWER MARKETING PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 082 413 867Twelfth Defendant:
IG ENERGY HOLDINGS (AUSTRALIA) PTY LIMITED
(ADMINISTRATORS APPOINTED) ACN 090 996 142Thirteenth Defendant:
RICHARD J HUGHES IN HIS CAPACITY AS JOINT AND SEVERAL ADMINISTRATOR OF IG ENERGY HOLDINGS (AUSTRALIA) PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 090 996 142
Fourteenth Defendant:
GRANT D SPARKS IN HIS CAPACITY AS JOINT AND
SEVERAL ADMINISTRATOR OF IG ENERGY HOLDINGS (AUSTRALIA) PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 090 996 142Interested Person:
CALLIDE ENERGY PTY LTD ACN 082 468 746
Interested Person:
CS ENERGY LIMITED ACN 078 848 745
Interested Person:
SEAN BRADY
Interested Person:
ARCADIA ENERGY TRADING PTY LTD ACN 121 803 638
0
2
0