Federal Court of Australia
Anderson, in the matter of NT Port and Marine Pty Ltd (Administrators Appointed) (No 2) [2023] FCA 408
ORDERS
DATE OF ORDER: |
THE COURT ORDERS THAT:
1. The plaintiff’s interlocutory application dated 9 March 2023 (Application) is allowed.
2. Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS) Mr Travis Adrian Anderson and Mr Matthew James Donnelly in their capacities as administrators of NT Port and Marine Pty Ltd (Administrators Appointed) (ACN 146 391 219) (Company) were justified, and were otherwise acting reasonably in entering into and performing the Tripartite Deed between the administrators, the Company, Tiwi Land Council (ABN 86 106 441 085) and Tiwi Plantations Corporation Pty Ltd (ACN 140 341 180), exhibited and marked “TAA-2” to the affidavit of Mr Anderson sworn 9 March 2023.
3. Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) or alternatively s 90-15 of the IPS, Pt 5.3A of the Corporations Act is to operate in relation to the administrators as if s 443A(1) of the Corporations Act provided that the administrators will not (except as expressly provided for in the Tripartite Deed) be personally liable to repay any debts or satisfy any liabilities arising in connection with entry into the Tripartite Deed.
4. At or before 5.00pm (ACST) on 9 May 2023, the administrators shall take all reasonable steps to:
(a) cause a copy of these orders together with sealed copies of the Application, to be given to known creditors of the Company (including known persons or entities claiming to be creditors),
(b) notify each such person that the documents relied upon in support of the Application will be provided by them, by way of an electronic link, upon request to a nominated email address, and
(c) make the documents available in response to any such request.
5. Any person who can demonstrate a sufficient interest has liberty to apply to vary or discharge the orders in paragraph 2 and 3 on three (3) business days’ written notice to the administrators and the Court.
6. The administrators’ costs of and incidental to the Application be costs in the administration of the Company, jointly and severally.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
CHARLESWORTH J
1 NT Port and Marine Pty Ltd (Administrators Appointed) (ACN 146 391 219) (the Company) was placed into voluntary administration on 16 December 2022. Mr Travis Adrian Anderson and Mr Matthew James Donnelly were jointly and severally appointed as administrators to the Company. On 23 February 2023, the administrators entered into a Tripartite Deed between themselves, the Tiwi Land Council (ABN 86 106 441 085) (TL Council), Tiwi Plantations Corporation Pty Ltd (ACN 140 341 180) (TPC) and the Company relating to the Company’s business and property.
2 The administrators seek orders under s 443A(1) and s 447A of the Corporations Act 2001 (Cth) and s 90-15 of the Insolvency Practice Schedule (Corporations) forming Sch 2 to the Act (IPS) to the effect that they were justified and were otherwise acting reasonably by entering into and performing the Tripartite Deed that they will not be personally liable to repay any of the debts or satisfy any of the liabilities arising in connection it. Ancillary orders relating to the notification of creditors and the payment of costs and expenses are also sought. It is proposed that there be liberty to apply to any interested person to set the orders aside.
3 The administrators are officers of the Company as defined in s 9 of the Act and so have standing to bring the application: IPS, s 90-20(d).
4 The TL Council and TPC each consent to the relief sought.
5 The Court has before it two affidavits of Mr Anderson sworn on 19 January 2023 and 9 March 2023 (second affidavit), together with written submissions. On the basis of that material, I am satisfied that there should orders substantively in the terms sought.
Facts
6 As summarised in the administrators’ written submissions, the background facts are as follows;
the Company is the sub-lessee and port operator of Port Melville;
the Company occupies the Port pursuant to a sub-lease, the sub-lessor being Port Melville Pty Ltd (PM);
PM’s rights to occupy the Port arise from the head lease, where the head lessor is the Tiwi Aboriginal Land Trust and the TL Council;
TPC is a company owned and operated by the traditional owners of the Tiwi Islands;
TPC has rights to utilise the Port and is reliant on the continued operation of the Port; and
the Port employs local people and engages local businesses, and the continued operation of the Port is important to the local Tiwi Islands community.
7 The TL Council has now obtained funding to enable the Port to continue to operate whilst a sale process for the Port is undertaken.
8 Again as summarised in the written submissions, the Tripartite Deed contains provisions to the effect that:
the National Indigenous Australians Agency will provide to the TL Council the total amount of $1,000,000.00 (Stimulus Amount) to support the payment of the costs and expenses incurred by the administrators in continuing to operate the Port whilst the Company’s business and/or assets are sold, or the Company is recapitalised (Purpose);
the TL Council will provide the Stimulus Amount to TPC to be used for the Purpose;
TPC will pay the Stimulus Amount to the administrators in instalments, to be used only for the Purpose;
the Company’s and the administrators’ obligation to repay the Stimulus Amount will not exceed, and will only be paid out of, the “Net Proceeds of Sale”, as defined in the Tripartite Deed; and
the parties to the Tripartite Deed agree that the administrators will have no personal liability for any transactions or repayments contemplated by or entered into pursuant to the Tripartite Deed.
9 The administrators have received the first instalment of the Stimulus Amount pursuant to the Deed, in the amount of $400,000.00.
Legal Framework
10 The object of Pt 5.3A of the Act and provisions of the IPS relating to that Part are set out in s 435A of the Act. They are:
… to provide for the business, property and affairs of an insolvent company to be administered in a way that:
(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b) if it is not possible for the company or its business to continue in existence—results in a better return for the company’s creditors and members than would result from an immediate winding up of the company.
11 Section 443A(1) is contained in Pt 5.3A. It provides that the administrator of a company under administration is liable for the debts incurred in the performance or exercise, or purported performance or exercise, of any of the administrator’s functions and powers for prescribed things, relevantly including the repayment of money borrowed.
12 Section 443A(1) of the Act has effect despite any agreement to the contrary, but without prejudice to the administrator’s rights against the company or anyone else: Act, s 443A(2).
13 Section 443D of the Act provides that an administrator is entitled to be indemnified out of the company’s property (other than specified secured property), including in respect of debts for which the administrator is liable under (relevantly) s 443A(1).
14 Section 447A(1) of the Act confers powers on this Court to make such orders as it thinks appropriate about how Pt 5.3A is to operate in relation to a particular company, including orders that modify the application of s 443A. The power under s 447A(1) may be exercised to limit or exclude an administrator’s liability for debts: Mentha, in the matter of Griffin Coal Mining Company Pty Limited (administrators appointed) [2010] FCA 1469; 82 ACSR 142 (at [31]); Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717 (at [90]) citing Korda, in the matter of Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 1144 (at [42]); Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) [2022] FCA 1506 (at [45], [47]).
15 As Gordon J said in Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493 (at [23]):
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: see, for example, Re Ansett Australia Ltd (No 1) at [49]; Re Spyglass Management Group Pty Ltd (admin apptd) (2004) 51 ACSR 432 at [6]; Sims; Re Huon Corporation Pty Ltd (admins apptd) (2006) 58 ACSR 620 at [12]; Re Malanos [2007] NSWSC 865 at [13].
16 Her Honour went on to say (at [29]) that relieving the plaintiffs in that case from personal liability in respect of a funding deed will facilitate the making of commercial decisions that are in the best interest of the company’s creditors “uninfluenced by concerns of personal liability”.
17 In Mentha, Gilmour J conveniently identified the circumstances in which it may be appropriate to make orders under s 447A varying or excluding the operation of s 443A as follows (at [30], citations omitted):
(1) the proposed arrangements are in the interest of the company’s creditors and consistent with the objectives of Pt 5.3A of the Act;
(2) the arrangements proposed to enable the company’s business to continue to trade for the benefit of the company’s creditors;
(3) the creditors are not prejudiced or disadvantaged by the types of orders sought and stand to benefit from the administrators entering into the arrangement; and
(4) notice has been given to those who may be affected by the order.
18 See also Hill, in the matter of Autocare Services Pty Ltd (administrators appointed) [2021] FCA 167 (at [38], [39]); Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) (No 4) [2021] FCA 644, (at [26], [27]).
19 Schedule 2 to the Act contains the IPS. The objects of the IPS include the regulation of the external administration of companies consistently and to give greater control to creditors: IPS, s 1-1(2).
20 Section 90-15 of the IPS relevantly provides:
Court may make orders
(1) The Court may make such orders as it thinks fit in relation to the external administration of a company.
Orders on own initiative or on application
(2) The Court may exercise the power under subsection (1):
(a) on its own initiative, during proceedings before the Court; or
(b) on application under section 90-20.
Examples of orders that may be made
(3) Without limiting subsection (1), those orders may include any one or more of the following:
(a) an order determining any question arising in the external administration of the company;
(b) an order that a person cease to be the external administrator of the company;
(c) an order that another registered liquidator be appointed as the external administrator of the company;
(d) an order in relation to the costs of an action (including court action) taken by the external administrator of the company or another person in relation to the external administration of the company;
(e) an order in relation to any loss that the company has sustained because of a breach of duty by the external administrator;
(f) an order in relation to remuneration, including an order requiring a person to repay to a company, or the creditors of a company, remuneration paid to the person as external administrator of the company.
Matters that may be taken into account
(4) Without limiting the matters which the Court may take into account when making orders, the Court may take into account:
(a) whether the liquidator has faithfully performed, or is faithfully performing, the liquidator’s duties; and
(b) whether an action or failure to act by the liquidator is in compliance with this Act and the Insolvency Practice Rules; and
(c) whether an action or failure to act by the liquidator is in compliance with an order of the Court; and
(d) whether the company or any other person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the liquidator; and
(e) the seriousness of the consequences of any action or failure to act by the liquidator, including the effect of that action or failure to act on public confidence in registered liquidators as a group.
Costs orders
(5) Without limiting subsection (1), an order mentioned in paragraph (3)(d) in relation to the costs of an action may include an order that:
(a) the external administrator or another person is personally liable for some or all of those costs; and
(b) the external administrator or another person is not entitled to be reimbursed by the company or its creditors in relation to some or all of those costs.
Orders to make good loss sustained because of a breach of duty
(6) Without limiting subsection (1), an order mentioned in paragraph (3)(e) in relation to a loss may include an order that:
(a) the external administrator is personally liable to make good some or all of the loss; and
(b) the external administrator is not entitled to be reimbursed by the company or creditors in relation to the amount made good.
Section does not limit Court’s powers
(7) This section does not limit the Court’s powers under any other provision of this Act, or under any other law.
21 A direction may be given under s 90-15 to confer a level of protection on the administrator: Krejci, in the matter of Union Standard International Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 1111 (at [9]).
22 In In the matter of RCR Tomlinson Ltd (Administrators Appointed) & Ors [2018] NSWSC 1859, the administrators of companies sought a direction that they be justified in procuring the borrowing of loan funds by the companies in administration. Black J said (at [14]) that the Court’s preparedness to grant the direction reflected:
… the intrinsic unfairness of leaving a voluntary administrator to be at risk of liability, in respect of a complex decision of that kind, where any decision that is made, including making no decision, will have inevitable risks for some or all of the affected constituencies. …
Conclusions
23 It is submitted (and I accept) that although the administrators have not yet drawn down the entirety of the funds available under the Tripartite Deed, and so have not incurred the entirety of the liability contemplated by the Tripartite Deed, the funds are budgeted to be necessary to keep the Port open during the sale campaign and there is no impediment to the Court making the requested orders now.
24 On the basis of the second affidavit, I find that the administrators have formed the following views, expressed in language largely adopted from their written submissions:
the Company’s entry into the Tripartite Deed is in the best interests of the creditors and stakeholders of the Company and is consistent with the objects of Pt 5.3A of the Act;
the funding provided pursuant to the Tripartite Deed will enable them to continue to operate the Port on a largely “business as usual” basis, allowing for the possibility of a sale of the business of the Company as a going concern and preserving the value of the business and the assets of the Company;
without the Stimulus Amount, they cannot continue to operate the Port, which may adversely impact the value and saleability of the Company’s business and assets, as well as the prospects of a successful recapitalisation of the business by means of a deed of company arrangement; and
without the Stimulus Amount the Company would need to be immediately wound up, which would further limit the prospects of a successful restructuring of the business, and in all likelihood lead to an inferior outcome for creditors than the present course.
25 I am satisfied that the administrators’ views have a proper foundation in the facts, including the facts summarised in my earlier judgment in Anderson, in the matter of NT Port and Marine Pty Ltd (Administrators Appointed) [2023] FCA 3. As I said there, the continued operation of the Port is important to the local Tiwi Islands community: their economy is heavily reliant on forestry operations and woodchips are their main export. The Port is the only outlet for the export of woodchips and its ongoing operations also support local jobs, both directly and indirectly.
26 I find that the administrators are not prepared to incur personal liability in relation to the repayment of the Stimulus Amount. That is not an unreasonable position for them to take, given the amount of the borrowed funds. The administrators have properly made that position clear to the other parties to the Tripartite Deed as a condition of accepting the Stimulus Amount. The Tripartite Deed itself contemplates that the administrators would make this application to seek a release from the personal liability that would otherwise arise by virtue of s 443A of the Act in relation to the Stimulus Amount, and they have expressly consented to the relief sought. The administrators would not have entered into the Tripartite Deed if the other parties had not agreed to the administrators not being liable for the repayment of the Stimulus Amount.
27 I am satisfied that the interests of creditors will not be adversely affected if the relief sought in this application is granted. That is because the Company’s obligation to repay the Stimulus Amount will not exceed, and will only be paid out of, the Net Proceeds of Sale (as defined in the Tripartite Deed).
28 If the administrators remained personally liable to repay the Stimulus Amount (or such part of it that is ultimately drawn down), they would have an indemnity against the assets of the Company for this same amount pursuant to s 443D of the Act.
29 To the extent that the TL Council may be prejudiced by the application arising from any default in repayment of the Stimulus Amount, I infer from the position it has taken on the application that it has accepted any risks that might arise by virtue of the Court’s orders.
30 On the basis of the second affidavit, I am also satisfied that if the relief is not granted the administrators would remit the unused portion of the first instalment to TPC to avoid the personal liability attaching to the obligation to repay. If that were to occur, the Company would cease to trade. There would then be a second meeting of creditors to determine the future of the Company, likely resulting in a resolution for its winding up.
31 It is plainly in the best interests of creditors that the Company continue to trade whilst opportunities for the sale of its business and assets are explored. A direction under s 90-15 of the IPS would afford the administrators an appropriate level of protection in respect of their decision to obtain funding to secure the ongoing operation of the business in the intervening period.
Ancillary Orders
32 It is appropriate to make an order that the administrators take reasonable steps to notify creditors (including persons or entities claiming to be creditors) that the application has been granted.
33 It is also appropriate to frame the orders in a way that permits affected persons (including creditors) to apply to the Court for a variation of the orders as appropriate.
34 I am satisfied that the administrators’ costs of and incidental to this application should be costs in the administration of the Company.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Charlesworth. |
Associate:
