FEDERAL COURT OF AUSTRALIA

Sparks, in the matter of IG Energy Holdings (Australia) Pty Ltd [2023] FCA 538

ORDERS

THE COURT NOTES THAT:

A.    Pursuant to s 37AL of the Federal Court of Australia Act 1976 (Cth) (Act), a person commits an offence if that person does an act or omits to do an act and the act or omission contravenes an order made by the Court under s 37AF and may be punished as an offence even though it could be punished as a contempt of court.

THE COURT ORDERS THAT:

1.    Until further order of the Court, pursuant to s 37AF of the Act and on the ground that it is necessary to prevent prejudice to the proper administration of justice for the purposes of s 37AG of the Act, publication or disclosure of the following information is prohibited:

a.    In the following paragraphs in the submissions of Counsel for the plaintiffs’ dated 22 May 2023:

i.     [7] (the words in the last sentence between “But” and “(the Alternative Funding Solution)”);

ii.    [8];

iii.    [9] (the words after “a letter of comfort”);

iv.     [10(a)] (the words between “signing the” and “and causing”);

v.    [10(b)] (the words between “any debts” and “; and”);

vi.    [17] (the words and dollar figures between “is about” and “but it” and all the words after “under review,” including footnote 28);

vii.    [19] (all the words after “administrators is”);

viii.    [53(c)] (all the words after “Alternative Funding Solution”);

ix.    [53(d)] (the words between “personal liability” and “and”); and

x.     [53(e)] (the first two words).

b.    In the following paragraphs and/or pages in the affidavit of Richard John Hughes affirmed on 22 May 2023:

i.    [27(a)] (the dollar figures before “to finalise”);

ii.    [27(b)] (the dollar figures before “to demolish”);

iii.    [28] (the figures in the third line and the dollar figures in the fourth line);

iv.    [29];

v.    [30] (the words between “to obtaining” and “we may need”);

vi.    [39] (all words after “(the letter of comfort)”);

vii.    [41];

viii.    [43] (the words between “Administrators’ view” and “enabling us”);

ix.    [45] (the words between “the value of” and “and any”);

x.    [71(b)] (all the words after “personally liable for”);

xi.    [72] (all the words after “recourse to the Administrators”);

xii.    Pages 28 to 30 inclusive of annexure RJH-2;

xiii.    Page 33 of annexure RJH-2 (the words in the email from Richard Hughes between “rights under” and “and at all” and the words in the email from Petr Šlechta in the first bullet point after “interest rate on the”);

xiv.    Page 35 of annexure RJH-2 (in the email from Gavin Rakoczy, the words in the second paragraph before “we don’t understand”);

xv.    Page 43 of annexure RJH-2 (all the words in the subject line of the email from Megan Lowe after “Re” and all the words in the second paragraph after “proposal to the Administrators”); and

xvi.    Pages 97 to 98 of annexure RJH-2 (the first paragraph of the 1.43 pm email from Brett Cook and the second, third and fourth bullet points and the last two paragraphs in the 12.16 pm email from Brett Cook).

c.    In the following page in the affidavit of Megan Bridget Lowe affirmed on 25 May 2023:

i.    Page 24 of annexure MBL-2 (the word in the email from Mr MacKenzie dated 24 May 2023 at 4.26 pm in the third bullet point between “contract appointing” and “as the principal”.

2.    Order 1 does not prohibit disclosure to:

a.    the Commercial and Corporations Duty Judge;

b.    their Honour’s personal staff; and

c.    any officer of the Court authorised by the Commercial and Corporations Duty Judge.

3.    The following documents are to be marked confidential on the Court’s file, and not to be made available for inspection without prior notice being provided to the first plaintiffs (administrators) or the second to fifth plaintiffs and an order of the Court:

a.    the affidavit of Richard John Hughes affirmed on 22 May 2023;

b.    the affidavit of Megan Bridget Lowe affirmed on 25 May 2023; and

c.    the first plaintiffs’ outline of submissions dated 22 May 2023.

4.    Within 3 business days following the making of these orders, the first plaintiffs are to file copies of the affidavits of Richard John Hughes affirmed on 22 May 2023 and Megan Bridget Lowe affirmed on 25 May 2023 and the first plaintiffs’ outline of submissions dated 22 May 2023 which are redacted to mask the confidential portions of them that are the subject of Order 1 of these orders.

Amended interlocutory process

5.    The plaintiffs be granted leave to amend the interlocutory process dated 22 May 2023 by filing an amended version in the form handed up in Court on Thursday, 25 May 2023.

6.    The amended interlocutory process be made returnable, nunc pro tunc, at 9.00 am on Thursday, 25 May 2023.

Funding the staged return to service

7.    The Court determines, pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS) being Sch 2 to the Corporations Act 2001 (Cth) (Corporations Act), that the administrators are justified and acting reasonably in:

a.    entering into, and causing fifth plaintiff (IGPC) to enter into, the agreement documented in the letter (which is at pages 28 to 30 of annexure RJH-2 to the affidavit of John Richard Hughes affirmed on 22 May 2023) (the Letter);

b.    entering into, and causing IGPC to enter into, any variation to that agreement, provided that the variation is limited to increasing the amount mentioned at [30] of that affidavit; and

c.    approving, and, where applicable, entering into and causing IGPC to enter into, any future contracts to be entered for the purpose of the “Staged Return to Service” (as that term is defined in the affidavit of John Richard Hughes affirmed on 27 April 2023).

Limitation of administrators’ liability

8.    An order pursuant to s 447A(1) of the Corporations Act and s 90-15 of the IPS, that Pt 5.3A of the Corporations Act is to operate in relation to the plaintiffs as if s 443A(1) of the Corporations Act provides that:

a.    the liabilities of the administrators (in their capacity as administrators of IGPC) incurred with respect to:

i.    any obligations arising out of, or in connection with, the Letter and any variation to the Letter of the kind described in Order 7.b of these orders; and

ii.    any future contracts entered into for the purpose of the Staged Return to Service and approved by the administrators,

are in the nature of debts incurred by the administrators in the performance and exercise of their functions as joint and several administrators of IGPC; and

b.    notwithstanding that the liabilities, as set out in Order 8.a of these orders, are debts incurred by the administrators in the performance and exercise of their functions as joint and several administrators of IGPC, the administrators will not be personally liable to repay such debts or satisfy such liabilities to the extent that the assets of IGPC is insufficient to satisfy that debt or liability.

9.    Within 2 business days of these orders being made, the administrators are to take all reasonable steps to give notice of these orders to the creditors of IGPC (including persons claiming to be creditors) by means of a circular:

a.    to be published on the website maintained by the administrators in respect of the administration of the second to fifth plaintiffs; and

b.    to be sent by email or by post to all known creditors.

Other ancillary orders

10.    Any person who can demonstrate sufficient interest to discharge or modify these orders has liberty to apply on 3 business days’ written notice to the plaintiffs and the Court.

11.    The administrators’ costs of and incidental to this application be costs in the administration of each of the second to fifth plaintiffs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

HALLEY J:

INTRODUCTION

1    In the years leading up to 2021, the Callide C Power Station at Biloela in central Queensland (Callide Power Station) provided some 30% of Queensland’s energy supply. As the result of an explosion in 2021 and a structural failure in its cooling towers in 2022, the Callide Power Station was forced offline. Its operations remain suspended.

2    The Callide Power Station is run as a joint venture, known as the Callide Power Project (Project). It is owned, in equal parts by the fifth plaintiff (IGPC) and Callide Energy Pty Ltd (Callide Energy), a subsidiary of CS Energy Ltd, a Queensland Government-owned company. The joint venturers are equally liable for the expenses and liabilities of the Project.

3    IGPC and three related entities, the second to fourth plaintiffs, (together, the Companies) entered into voluntary administration in March 2023 and Grant Dene Sparks and Richard John Hughes were appointed as joint and several administrators of each of the Companies (Administrators).

4    In order to return the Callide Power Station to operation, the Administrators have concluded that significant and expensive building works need to be performed. Those works are in progress, but decisions to undertake the largest part of the work need to be made by the Administrators in the immediate future.

5    On 25 May 2023, I made orders pursuant to s 447A of the Corporations Act 2001 (Cth) (Corporations Act) relieving the Administrators from liability under s 443A(1) and a direction pursuant to s 90-15(1) of the Insolvency Practice Schedule (Corporations) (IPS) being Sch 2 to the Corporations Act 2001 (Cth) that the Administrators were justified in entering into alternative funding arrangements to fund the building works that need to be undertaken to enable the Callide Power Station to resume operation. I also made suppression orders pursuant to s 37AF and s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) to protect confidential information in the affidavit evidence relied upon by the plaintiffs and in the plaintiffs’ written submissions.

6    These are my reasons for making those orders and direction.

7    The Administrators moved on an amended interlocutory process filed in Court on 25 May 2023. The Administrators relied on comprehensive written submissions prepared by their counsel, Mr S.J. Maiden KC, which I found of considerable assistance in preparing these reasons.

8    On 26 May 2023, Mr Maiden provided a short supplementary written submission addressing whether there was any recent authority where a Court had declined to provide a direction under s 90-15(1) of the IPS because the administrators’ request solely related to a commercial decision.

9    The Administrators also relied on the following affidavits:

(a)    affidavits affirmed by Mr Hughes on 27 April 2023 (First Hughes Affidavit) and 22 May 2023 (Second Hughes Affidavit); and

(b)    affidavits affirmed by Ms Megan Bridget Lowe, a solicitor employed by Gilbert + Tobin, the solicitors for the Administrators, on 23 May 2023 and 25 May 2023 (Second Lowe Affidavit).

10    At a preliminary hearing on 23 May 2023, Sev.en Gamma A.S. (Sev.en) and Arcadia Energy Trading Pty Ltd (Arcadia) applied and were each granted leave to appear as interested parties pursuant to r 2.13 of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules). Sev.en subsequently informed the Court that it did not wish to appear at the hearing of the amended interlocutory process on 25 May 2023. Arcadia appeared by their counsel, Mr S Adair, at the hearing on 25 May 2023 for the purpose of seeking access to unredacted copies of affidavits and submissions relied upon by the Administrators.

BACKGROUND

11    The Companies are part of the Genuity Group of companies which develops, owns and operates interests in power stations in Queensland.

12    IGPC’s interest in the Project is governed by a joint venture agreement dated 11 May 1998 (JVA). Relevantly, the JVA provides that the manager, being Callide Power Management Pty Ltd (CPM), must submit current cash estimates each week to each participant which show the aggregate cash amounts required to be paid by each participant: cl 5.5(a)(iii). If a participant fails to pay such cash amount by the due date (called sum), it is considered to be a debt owing to CPM: cl 5.6. Pursuant to cl 7.1 of the JVA, if a participant fails to pay a called sum on the due date, CPM must give a “Default Notice” to the participant specifying the unpaid called sum and a relevant due date for the sum. A participant that becomes insolvent (including by the appointment of an administrator) or who subsequently fails to pay a called sum by the due date becomes a defaulting participant: cl 7.2. As a defaulting participant, the participant is stripped of its voting rights: cl 4.10.

13    The Callide Power Station has two production units: Unit C3 and Unit C4. On or about 25 May 2021, the Unit C4 turbine exploded, damaging the generator and associated infrastructure and equipment and forcing Unit C4 offline. On 31 October 2022, a further structural failure occurred resulting in Unit C3 losing connection to the grid and going offline. These events caused operation of the Callide Power Station to be suspended, which remains the case.

14    A new turbine, cooling tower structures, and associated infrastructure and equipment, are necessary to bring the Callide Power Station back online. The work program for their construction and commissioning is referred to as the Staged Return to Service.

15    Assuming that the committee responsible for approving actions in relation to the Project (Management Committee) resolves to take all actions necessary to return the Callide Power Station back online, the JVA will oblige IGPC to pay 50% of the costs to do so. The Companies do not have the financial resources to meet that obligation, and so, the Administrators have considered alternative means by which to fund it.

16    The Administrators have concluded that the most viable funding model is a confidential proposal referred to as the Alternative Funding Solution.

17    While it is not without uncertainty, the Administrators have determined that in their view, the Staged Return to Service is necessary to maximise the chances of the Companies and their businesses remaining in existence. It is also the Administrators’ view that this proposed program will maximise the value of the Companies’ assets to its creditors and shareholders.

18    The speed at which the Callide Power Station can be returned to operation is of critical importance, both to the Companies, which are without a source of revenue until it is back online, and to the State of Queensland, which had relied on the Callide Power Station for some 30% of its electricity needs.

JUDICIAL ADVICE UNDER S 90-15 OF THE IPS

Statutory provisions and legal principles

19    Pursuant to s 90-15(1) of the IPS, a Court may make any orders it thinks fit in relation to the external administration of a company. Section 90-15(1) confers a “very broad” power on the Court by virtue of the words “such orders as it (the Court) thinks fit”: Kelly, in the matter of Halifax Investment Services Pty Ltd (in liquidation) (No 8) [2020] FCA 533 at [51] (Gleeson J, as her Honour then was). It includes a power to make orders determining any question arising in the external administration of the company: s 90-15(3)(a). An administrator may apply to the Court for such orders as an officer of the company: s 90-20(1)(d).

20    It is generally accepted that s 90-15(1) confers a power that was previously conferred by s 447D(1) and s 479(3) of the Corporations Act: see Reidy, in the matter of eChoice Ltd (Administrators Appointed) [2017] FCA 1582 at [26]-[27] (Yates J); Krejci, in the matter of Union Standard International Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 1111 at [8] (Stewart J) and the cases cited therein. In this regard, the application of s 90-15(1) may, relevantly, be informed by the principles previously applicable to the application of s 447D(1) and s 479(3) of the Corporations Act: see Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409; [2002] FCA 90 at [65]-[66] (Goldberg J).

21    The “prevailing principle” to be applied in circumstances where liquidators and administrators request a judicial direction in respect of a business or commercial decision, is that the decision must give rise to an issue requiring the exercise of legal judgment. An issue of this kind includes one of substance or procedure or of power, propriety or reasonableness of the decision: Ansett at [65] (Goldberg J).

22    Nevertheless, a Court’s preparedness to issue a judicial direction will depend on the circumstances of each request by the liquidators or administrators. Courts have previously issued such a direction where a decision, substantially commercial in character, is complex, made under time pressure and involved the balancing of competing interests in respect of a large corporate group: Re RCR Tomlinson Ltd [2018] NSWSC 1859 at [14] (Black J). This reflects the “intrinsic unfairness” of exposing an administrator to risk of personal liability where the decision is complex and “where any decision that is made, including making no decision, will have inevitable risks for some or all of the affected constituencies”: RCR at [14].

23    In the course of the hearing on 25 May 2023, I asked senior counsel for the plaintiffs whether he was aware of any recent authorities in which a Court had declined to issue a direction under s 90-15(1) of the IPS on the basis that the request for such advice related solely to a commercial decision. The plaintiffs advised in their supplementary written submission, that their legal representatives had conducted a review of “126 cases delivered since the commencement of s 90-15” and that they were not aware of any authority “in which an insolvency practitioner’s application for directions has been refused solely because it related to a commercial decision”.

24    The function of such a direction is not to determine rights and liabilities arising out of a particular transaction. It is to provide liquidators and administrators, having made a full and fair disclosure of all relevant facts to the Court, with “protection against claims that they have acted unreasonably or inappropriately or in breach of their duty in making the decision of undertaking the conduct”: Ansett at [44] (Goldberg J); see also Krejci at [7] (Stewart J).

Consideration

25    I was satisfied that it was consistent with the objectives of Pt 5.3A of the Corporations Act for the Administrators to pursue the rebuilding of the Callide Power Station, for the following reasons.

26    First, the primary asset of the business of the Companies’, the Callide Power Station, is not presently operational. It requires a substantial investment of capital before it can recommence generating any revenue. The Administrators have concluded that rebuilding the Callide Power Station gives them the best prospect of achieving the objectives in s 435A of the Corporations Act. This is because (a) generating power from the Callide Power Station and selling power under the existing long-term power supply agreement should, as it did prior to the shutdown, generate significant cash flow, and (b) it may positively impact the value of the Companies’ business by an increase in cash reserves and a potential increase in the value of the Callide Power Station.

27    Second, under the JVA, IGPC is presently exposed to adverse action, which may diminish the value of its interest in the Project.

28    Callide Energy can cause the Management Committee to resolve to take whatever action it sees fit, consistent with the JVA. This may lead to IGPC becoming liable for 50% of the cost of that action, and to IGPC’s share in the joint venture being charged to secure payment. There is no obligation on Callide Energy to consult with IGPC before taking such action.

29    Callide Energy can also exercise its option to purchase IGPC’s interest in the joint venture for lower than market value or fair value. As matters stand, there is a possibility that the exercise of that option, before any reconstruction is completed, may result in the Administrators receiving less than what might be received if the Callide Power Station were brought back online.

30    At the same time, the Administrators recognise the risk that the Staged Return to Service may not improve the Companies’ prospects. The uncertainty exists because (a) the value of the Companies’ business is presently unknown, (b) the costs that are likely to be incurred to reinstate operation of the Callide Power Station are significant, and (c) whether the value of the Companies’ interest in the Callide Power Station will be increased by more than their share of the rebuilding costs is presently uncertain.

31    Yet, despite the uncertainty, the Administrators have concluded that co-operating with Callide Energy in the Staged Return to Service reduces the likelihood of it taking unilateral action, which would potentially be adverse to IGPC’s interests. The Administrators are, ultimately, of the view that the objects of s 435A of the Corporations Act are best advanced by causing IGPC to take the actions necessary to participate in the rebuilding.

32    Accepting that as true, the following consequences flow:

(a)    the Administrators expect that they will need to consent to joint venture resolutions to advance the rebuilding of the Callide Power Station, including entering into construction contracts;

(b)    presently, the terms of those resolutions, or the terms of any contracts to which they relate, are unknown; and

(c)    IGPC would become liable to pay 50% of the rebuild costs which the Companies presently cannot pay from their own funds.

33    The decision of whether to consent to the proposed Alternative Funding Proposal and pursue the rebuilding of the Callide Power Station had a commercial character but, equally, was also a complex decision. The decision had to be made under considerable time pressure and raised significant matters of public interest, given the potential implications to the wholesale price of electricity in Queensland. The complexity of the decision was driven not only by the limited financial resources currently available to the Companies and the extent of their ongoing and future financial commitments if a decision were made to pursue the rebuilding of the Callide Power Station. It was also driven by the need to balance the current value of a non-performing asset against the prospective increased value of that asset if significant costs were incurred in repairing the non-performing asset.

34    Third, in the plaintiffs’ supplementary written submission, the Court’s attention was specifically drawn to the decisions of Gleeson J (as her Honour then was) in Halifax and Manly Warringah Cabs (Trading) Co-operative Limited v Sydney Taxis Pty Ltd, in the matter of Sydney Taxis Pty Ltd (No 2) [2020] FCA 1336. I am satisfied that the issues in both cases did not rise to a similar level of complexity, as in this proceeding. Further, the information provided in the plaintiffs’ affidavit evidence, including the material subject to the suppression order, was sufficient to enable the Court to determine that the Administrators were justified in entering into arrangements to facilitate the Staged Return to Service and it was likely to be advantageous to the administration of the Companies.

35    For the foregoing reasons, I was satisfied that the plaintiffs’ affidavit evidence, including the material subject to the suppression orders, established that the Administrators considered the relevant competing considerations in concluding that it was in the best interests of creditors to pursue the rebuild of the Callide Power Station. I concluded that it was, therefore, appropriate to issue the direction under s 90-15(1) of the IPS that the Administrators were justified and acting reasonably in taking steps to advance the rebuild of the Callide Power Station.

PERSONAL LIABILITY OF THE ADMINISTRATORS

Statutory provisions and legal principles

36    The application of Pt 5.3A of the Corporations Act is governed by the objects set out in s 435A:

Object of Part

The object of this Part, and Schedule 2 to the extent that it relates to this Part, is 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.

37    Section 443A(1) of the Corporations Act provides:

443A    General debts

(1)    The administrator of a company under administration is liable for debts he or she incurs, in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator, for:

(a)    services rendered; or

(b)    goods bought; or

(c)    property hired, leased, used or occupied, including property consisting of goods that is subject to a lease that gives rise to a PPSA security interest in the goods; or

(d)    the repayment of money borrowed; or

(e)    interest in respect of money borrowed; or

(f)    borrowing costs.

38    The imposition of personal liability under s 443A(1), consistent with the objects set out in s 435A, advances purposes which include (a) offering a degree of protection to a company’s creditors in circumstances, for example, where an administrator causes a company to trade while it is insolvent: Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1; [1998] HCA 30 at [52] (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ), (b) encouraging third parties to continue dealing with a company during its administration: Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717 at [116] (Middleton J), and (c) discouraging administrators from continued trading if liquidation is inevitable or where major company stakeholders are not prepared to indemnify the administrators for debts incurred and continued trading is not otherwise warranted: Virgin at [117] (Middleton J).

39    Section 447A(1) of the Corporations Act empowers the Court to make any order it thinks appropriate about how Pt 5.3A of the Corporations Act is to operate in relation to a particular company. The Court’s main concern in the making of such an order, is to consider the best interests of a company’s creditors as a whole: Virgin at [104] (Middleton J).

40    It is well established that s 447A(1) confers power on a Court to make orders, in appropriate cases, modifying the operation of s 443A(1) of the Corporations Act to protect administrators from incurring substantial personal liabilities: Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493 at [23] (Gordon J, as her Honour then was); see also In the matter of Renex Holdings (Dandenong) 1 Pty Ltd (administrators appointed) & Ors [2015] NSWSC 2003 at [13] (Black J); Korda, in the matter of Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 1144 at [43]-[44] (Markovic J); Mentha, in the matter of Griffin Coal Mining Company Pty Ltd (administrators appointed) [2010] FCA 1469 at [29] (Gilmour J); Strawbridge (Administrator), in the matter of CBCH Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 472 at [36] (Markovic J).

41    The principles governing the making of an order modifying the operation of s 443A(1) of the Corporations Act to limit the personal liability of administrators were summarised by Gilmour J in Griffin Coal as follows, and which summary I respectfully adopt:

(a)    the proposed arrangements are in the interests of the company's creditors and consistent with the objectives of Part 5.3A of the Corporations Act.

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

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

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

(Citations omitted.)

42    Orders relieving administrators of personal liability have been made in circumstances where contracts have not been negotiated or entered into at the time the order was made: see Virgin; Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) [2022] FCA 1506 (Clough). Relevant considerations for the Court in such cases included that (a) continued trading was consistent with the objective of selling or recapitalising the business of the company as a going concern in the best interests of all creditors: Virgin at [102], (b) continued trading would provide additional revenue that would not otherwise be received: Virgin at [103], (c) creditors would be notified of the Court’s orders excluding the administrators’ personal liability, prior to entry into any agreement which in turn, preserved creditors’ capacity to apply to the Court to vary the orders: Virgin at [105(2)], Clough at [57] (Banks-Smith J), (d) it was “efficient and cost effective” to make such orders: Virgin at [105(3)], and (e) there was a need for flexibility: Virgin at [107].

Consideration

43    Absent orders protecting against it, the Administrators will become personally liable under s 443A of the Corporations Act for any shortfall in the Companies’ available funds to satisfy the rebuilding costs. Returning the Callide Power Station to service is a complex transaction, but it is one that must be pursued quickly. Otherwise, in the Administrators’ view, there is a real prospect that the adverse action addressed above at [27]-[29] will eventuate. Avoiding adverse action, which may result in a less favourable outcome for the Companies’ business, its creditors and its members, is consistent with the objects in s 435A of the Corporations Act.

44    I was satisfied that the time pressure increased the need for the Administrators to proceed urgently (which was why this application has been brought on quickly), and emphasised why a direction under s 90-15(1) of the IPS and an order under s 447A(1) of the Corporations Act was appropriate. The Administrators’ capacity to weigh the risks and benefits of the rebuild has been significantly limited by the urgency with which they must act to advance the objects in s 435A, coupled with the continually shifting of expected costs and timing for the rebuild.

45    As set out above at [42], there is recent authority for orders being made, of the kind sought in this proceeding, even though the Administrators were unable to specify precisely which contracts would be made and the terms of those contracts. In this proceeding, the Administrators sought relief concerning a class of contracts which will facilitate the rebuilding of the Callide Power Station.

46    I was satisfied that relieving the Administrators from personal liability concerning a class of proposed but, as-yet, unspecified contracts, was consistent with the Court’s general approach of affording administrators greater protection when they seek to trade large-scale businesses: Clough at [60]. The nature and scale of the rebuild project created risks that might not be presently apparent. Granting the Administrators the protection requested enabled them to enter the necessary agreements. Without that relief, I was satisfied that the Administrators could not be expected to continue pursuing the rebuild of the Callide Power Station.

47    I was also satisfied that the Administrators’ approach was an efficient and cost-effective way to retain and continue to trade the Companies’ business without having to make multiple applications to the Court: Virgin at [106]-[107].

48    While it cannot be said that the relief in question does not involve any risk of prejudice to the creditors, any increase in the value of the Companies’ assets may be outweighed by their share of the reconstruction costs. However, in the present case, that risk of prejudice or disadvantage does not arise directly from the relief sought, but rather from the underlying project which is the subject of the relief.

49    In both Virgin and Clough, the Court imposed conditions on the limitation of the administrators’ liability to meet the risk that persons contracting with the business might suffer prejudice or disadvantage. This is not a case in which conditions of that kind are necessary.

50    The imposition of conditions designed to guard against prejudice or disadvantage are not necessary in the present case. In this case, CPM, has the right to make calls on the participants (including IGPC) concerning the cost of the contractual liability incurred by it under the proposed rebuilding contracts. Where such calls are made, the participants are obliged to pay the calls. Relevantly, Ms Lowe gave evidence in the Second Lowe Affidavit that CPM gave notice of such a call, pursuant to cl 7.1 of the JVA, by a Default Notice dated 22 May 2023 in respect of IGPC’s failure to pay two called sums by their due date.

51    Callide Energy has agreed that the Administrators will not bear personal liability for IGPC’s obligations. The only creditor whose interests are directly affected by the Administrators avoiding personal liability has voluntarily entered into the arrangement on a fully-informed basis.

52    For the foregoing reasons, I was satisfied that the affidavit evidence relied upon by the plaintiffs, including the material subject to the suppression orders, established that it was appropriate to make orders under s 447A(1) of the Corporations Act to relieve the Administrators of personal liability in pursuing the rebuild of the Callide Power Station.

NATURAL CONTRADICTOR

Legal principles

53    The absence of a contradictor, whilst undesirable, does not preclude a Court from determining an application of an administrator if all reasonable steps have been undertaken to obtain a contradictor or if the natural contradictor has elected against intervening: Re Jick Holdings Pty Ltd (in liq) (2009) 234 FLR 22; [2009] NSWSC 574 at [7] (White J); see Re Dalma No 1 Pty Ltd (in liq) (2013) 279 FLR 80; [2013] NSWSC 1335 at [9] (Brereton J); Hall v Poolman (2009) 75 NSWLR 99; [2009] NSWCA 64 at [7]-[8] (Spigelman CJ, Hodgson JA and Austin J).

54    Reasonable steps can include giving notice of the proceedings to persons with a potential interest in the outcome of the application, circulating a report to creditors of the company and inviting creditors to express an opinion on the application, including by appearing before the Court: Re Jick at [7] (White J); see also Lewis and Templeton and Another v LG Electronics Australia Pty Ltd and Others (No 2) (2016) 48 VR 450; [2016] VSC 63 at [63] (Sifris J).

Consideration

55    This application has been brought on notice to those who the Administrators believe are likely to be interested in or impacted by the orders sought. This includes the Companies’ creditors and shareholders, together with the joint venture parties.

56    Notice of this application was given to those ‘natural contradictors’, and none have expressed opposition to the orders sought.

57    As the principles identified above at [53]-[54] show, the absence of a contradictor does not preclude the Court from determining the application. I am satisfied that it is appropriate to make the orders and direction sought in the absence of a contradictor, given (a) those who have a potential interest in the outcome of the application have been given notice of it and an opportunity to put their views before the Court, (b) the Administrators recognised that they must give “full and fair” disclosure of all relevant facts to the Court, (c) the matters the subject of this application are important to the finalisation of the administration, and the pursuit of the objects set out in s 435A, and (d) any person claiming to be adversely affected by the order can apply to the Court on 3 business days’ notice.

CONFIDENTIALITY

Statutory provisions and legal principles

58    The Court may make suppression and non-publication orders pursuant to s 37AF and s 37AG(1)(a) of the FCA Act to prevent prejudice to the proper administration of justice.

59    In deciding whether to make a suppression order, the Court must consider that a primary objective of the administration of justice is to safeguard the public interest in open justice: s 37AE of the FCA Act.

60    A Court may prohibit or restrict the publication or other disclosure of information that relates to a proceeding before the Court and is information that comprises evidence or information about evidence: s 37AF(1)(b)(i), or information lodged with or filed in the Court: s 37AF(1)(b)(iv). Pursuant to s 37AF(2) of the FCA Act, the Court may make such orders as it thinks appropriate to give effect to a suppression order. The grounds on which a suppression order may be made are prescribed in s 37AG(1) of the FCA Act.

61    The principles governing the making of suppression orders under s 37AF of the FCA Act are well established and were relevantly summarised by the Full Court of this Court in Country Care Group Pty Ltd v Director of Public Prosecutions (Cth) (No 2) (2020) 275 FCR 377; [2020] FCAFC 44 at [4]-[9] (Allsop CJ, Wigney and Abraham JJ). Their Honours’ emphasised that the operative word in s 37AG(1)(a) is “necessary” and therefore, suppression orders should only be made in exceptional circumstances where necessity compels departure from the open justice principle articulated in s 37AE: at [8]. Further, the question of whether an order is “necessary” will depend on the circumstances of each case but once the Court is satisfied that such an order is necessary, it would be an error to not make it: at [9].

Consideration

62    The Administrators sought orders for the suppression of certain material in the Second Hughes Affidavit, the Second Lowe Affidavit and the submissions of the plaintiffs in support of the amended interlocutory process.

63    Mr Hughes gives evidence in the Second Hughes Affidavit that revealing the costs of restoring the Callide Power Station might (a) reveal the basis on which a potential contractor tendered for the work, giving a market competitor an advantage by permitting them to know a competitor’s estimated price, and (b) prejudice the ability to negotiate the terms of construction and other contracts concerning the Staged Return to Service as it may foreshadow a preparedness to accept the stated costs.

64    Mr Hughes also gives evidence that (a) disclosure of the estimated costs to return the Callide Power Station to service, and the time it will take to do so, are likely to impact the energy market because supply is an accepted driver of price, and (b) the Administrators are not the reporting entity with disclosure obligations, and revealing the costs and time without consideration of all of the facts, which the Administrators accept they do not have, has a risk of causing prejudice to the reporting entity and the energy market.

65    Mr Hughes gives the following evidence in the Second Hughes Affidavit at [25]:

The Administrators are, however, aware of the potential for disclosure of information relevant to the Callide Power Station having a significant impact on behaviour on the wholesale energy market in Queensland. For instance, following CS Energy’s announcement in March that the Staged Return to Service was not expected to be concluded until October 2023, future electricity prices increase by up to $15 per hour. The significance of this event is demonstrated by it being reported in the Australian Financial Review, and a copy of the media report is contained at pages 23 to 27 of Annexure RJH-2.

(Original emphasis.)

66    Finally, Mr Hughes gives evidence that disclosure of the specific terms of the Alternative Funding Solution might have a tendency to give commercial competitors an advantage by seeing the basis on which the parties contracted.

67    I am satisfied for the reasons advanced by Mr Hughes that it is necessary for the proper administration of justice to make suppression orders pursuant to s 37AF of the FCA Act, substantially in the form sought by the Administrators.

68    Relatedly, Arcadia, by their counsel, sought access to unredacted copies of the Second Hughes Affidavit, the Second Lowe affidavit and the plaintiffs’ submissions in support of the amended interlocutory process, in order to consider their position. In doing so, Arcadia implicitly opposed the making of the suppression orders sought by the Administrators, or otherwise sought to be exempted from them.

69    There was no evidence before me that Arcadia was a creditor or contributory of IGPC. At best, the evidence demonstrated that Arcadia had a derivative interest in IGPC. The Administrators initially opposed Arcadia from appearing as an interested party pursuant to r 2.13 of Corporations Rules. Ultimately, the Administrators withdrew their objection to Arcadia appearing as an interested party, but for the purpose of only making an application for access to the material the subject of the proposed suppression orders. The Administrators otherwise reserved their rights to contend that Arcadia lacked a sufficient interest to appear as an interested person on the application.

70    I declined to accede to Arcadia’s application for access to the material proposed to be suppressed. I was not persuaded that it was necessary for Arcadia to be provided with access to that material in order for Arcadia to determine its position on the application, particularly given that the evidence only established that it had a derivative interest in the financial positon of IGPC. Moreover, given that Arcadia was a participant in the Queensland wholesale market, disclosure to Arcadia of the cost and time to undertake the Staged Return to Service of the Callide Power Station, carried a risk that the market might be distorted.

DISPOSITION

71    For the foregoing reasons, I concluded that this was an appropriate case in which the Court should exercise its discretion and grant the orders sought pursuant to s 90-15(1) of the IPS, s 447A(1) of the Corporations Act and s 37AF and s 37AG of the FCA Act. Consistently with the approach taken by the Court in Virgin, the costs of the Administrators of and incidental to the application are to be costs in the administration of each of the Companies.

Associate:

Dated:    29 May 2023

SCHEDULE OF PARTIES