Federal Court of Australia

Kelly (administrator), in the matter of Lutum Holdings Pty Ltd (administrators appointed) [2024] FCA 554

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 37AF(1)(b)(iv) of the Federal Court of Australia Act 1976 (Cth) (FCA Act), for a period of 6 months or until further order of the Court, the following information in the following documents is to be kept confidential and not published or otherwise disclosed on the grounds that this order is necessary to prevent prejudice to the proper administration of justice under s 37AG(1)(a) of the FCA Act:

(a)    in the affidavit of David Anthony Kennedy affirmed on 14 May 2024:

(i)    paragraph 34(b);

(ii)    the first sentence of paragraph 34(c);

(iii)    paragraphs 37 to 42;

(b)    in the plaintiffs’ written submissions dated 15 May 2024:

(i)    the last sentence of paragraph 4; and

(ii)    paragraphs 10 and 11.

2.    Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) 2016 (IPS), being Sch 2 to the Corporations Act 2001 (Cth) (Act), the first plaintiffs are justified in:

(a)    entering into and performing the funding deed dated 2 May 2024 entered into by the plaintiffs and the Commonwealth Bank of Australia (Funding Deed); and

(b)    drawing down funds pursuant to the Funding Deed.

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

(a)    any liabilities of the first plaintiffs in their capacity as administrators of each of the second to fifth plaintiffs incurred in connection with, or with respect to any obligations arising out of, the Funding Deed, are in the nature of debts incurred by the first plaintiffs in the performance and exercise of their functions as joint and several administrators of the second to fifth plaintiffs; and

(b)    notwithstanding the liabilities in Order 3(a) of these orders are debts incurred by the first plaintiffs in the performance and exercise of their functions as joint and several administrators of each of the second to fifth plaintiffs, the first plaintiffs will not be personally liable to repay such debts or satisfy such liabilities to the extent that the first plaintiffs’ right of indemnity under s 443D and / or lien under s 443F of the Act are insufficient to satisfy such debts or liabilities.

4.    Pursuant to s 65-45 and s 90-15 of the IPS, notwithstanding the operation of Div 65 of the IPS, nunc pro tunc from 23 April 2024:

(a)    the first plaintiffs are not required to maintain separate administration accounts for each of the second to fifth plaintiffs;

(b)    s 65-5(1) of the IPS is to operate in relation to each of the second to fifth plaintiffs such that the first plaintiffs must pay all money received by them, except any money received by them and required to be held in the CBA account number ending in 750 (CBA Receipting Account) pursuant to clause 1.3(b) of the Funding Deed and transferred into the CBA Receipting Account pursuant to clause 1.2(h) of the Funding Deed, on behalf of or in relation to any one of the second to fifth plaintiffs, into the administration account opened by the first plaintiffs for the second to fifth plaintiffs, being an account in the name of the second plaintiff (Group Administration Account);

(c)    s 65-15(1) of the IPS is to operate in relation to the second to fifth plaintiffs such that the first plaintiffs must not pay any money into the Group Administration Account if the moneys are not received by the first plaintiffs on behalf of or in relation to one or more of the second to fifth plaintiffs; and

(d)    s 65-25 of the IPS is to operate in relation to the second to fifth plaintiffs such that the first plaintiffs must not pay any money out of the Group Administration Account other than:

(i)    for the purposes related to the external administration of any one or more of the second to fifth plaintiffs;

(ii)    in accordance with the Act; or

(iii)    in accordance with any further direction from the Court.

5.    The first plaintiffs are to take all reasonable steps to cause notice of the Court’s orders to be given within 2 business days of the making of the orders to creditors (including persons or entities claiming to be creditors) of each of the second to fifth plaintiffs.

6.    Liberty be granted to any person who can demonstrate sufficient interest to discharge or vary Orders 1, 2 or 3 of these orders on 3 business days’ written notice to the first plaintiffs and the Court.

7.    The plaintiffs’ costs of and incidental to this application be costs in the administration of each of the second to fifth plaintiffs, jointly and severally.

8.    These orders be entered forthwith.

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

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

HALLEY J:

A.     Introduction

1    By an originating process filed on 15 May 2024, the first plaintiff, Morgan Kelly, David Kennedy, Martie Tziotis and Stewart McCallum (Administrators) in their capacity as joint and several voluntary administrators of each of the second plaintiff, Lutum Holdings Pty Ltd (Administrators Appointed) (Lutum Holdings), the third plaintiff, Lutum Pty Ltd (Administrators Appointed) (Lutum), the fourth plaintiff, Montoro Roofing Pty Ltd (Administrators Appointed) (Montoro), and the fifth plaintiff, Hollostone Pty Ltd (Administrators Appointed) (Hollostone) (together, Lutum Group) seek orders:

(a)    pursuant to s 443A(1) and s 447A of the Corporations Act 2001 (Cth) (Act) and s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS) at Sch 2 to the Act, to the effect that:

(i)    the Administrators are justified in entering into a funding deed between the plaintiffs and the Commonwealth Bank of Australia (CBA) dated 2 May 2024 (Funding Deed) and in drawing down funds pursuant to the Funding Deed; and

(ii)    the personal liability of the Administrators in respect of the Funding Deed is limited to the extent of the Administrators’ right of indemnity under s 443D and statutory lien under s 443F of the Act; and

(b)    pursuant to s 65-45 and s 90-15 of the IPS, for orders nunc pro tunc from 23 April 2024 (being the date of the Administrators’ appointment) regarding the operation of a single bank account for the Lutum Group.

2    The Administrators rely upon the affidavit of David Kennedy affirmed on 14 May 2024, together with Exhibit DAK-1 to that affidavit.

3    The Administrators’ application today is supported by detailed written submissions prepared by Nicola Bailey, counsel for the plaintiffs, which have been supplemented by detailed oral submissions today. I found those submissions of considerable assistance in resolving this matter today.

4    Further, I note confidentiality orders were sought and made at the commencement of the application in respect of parts of Mr Kennedy’s affidavit, parts of Exhibit DAK-1 and parts of the written submissions prepared by Ms Bailey. I was satisfied that those orders should be made on the ground that the order is necessary to prevent prejudice to the proper administration of justice under s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth).

B.     Background

5    The Lutum Group was acquired from Boral Limited in November 2021.

6    The Lutum Group is a major manufacturer and installer of roof tiles and concrete masonry products across New South Wales, Victoria and South Australia. The two core product offerings of the Lutum Group are roof tiles that are manufactured by Montoro and masonry products produced by Hollostone.

7    The Lutum Group leases four premises from which it conducts its business operations. Montoro is the tenant of all premises other than premises in Pooraka, South Australia, in which Hollostone is the tenant. For accounting purposes, a portion of the rent paid for the premises in Pooraka is on-charged to Montoro in respect of its share of the occupation of those premises.

8    Montoro is the employer of all head office employees and any other employees directly required for the operation of its roofing business. At the same time, Hollostone is the employer of all employees directly required for the operation of its masonry business.

9    On 23 April 2024, each of the Administrators were appointed as joint and several administrators of the Lutum Group, pursuant to s 436A of the Act.

10    Following their appointment, the Administrators have:

(a)    conducted an urgent assessment of the Lutum Group’s financial position and its ability to continue trading, including the exploration of an expedited expression of interest sale campaign;

(b)    issued correspondence to several key stakeholders, customers, suppliers, creditors, employees, landlords and subcontractors;

(c)    continued to work with key stakeholders to continue supply and operations;

(d)    set up and performed various processes to reflect the voluntary administration process, including notifying banks and securing cash and assets of the Lutum Group;

(e)    held ongoing discussions with key management employees of the Lutum Group;

(f)    issued an initial circular to creditors convening the first meeting of creditors on 6 May 2024;

(g)    commenced an urgent expression of interest campaign in order to pursue a long-term future for the Lutum Group; and

(h)    continued to explore an expedited sale with various interested parties.

11    On 6 May 2024, at 11.00 am, the first meeting of the creditors of the Lutum Group was held via Microsoft Teams.

12    As of the date of the Administrators’ appointment, the Lutum Group operated five bank accounts:

(a)    an account held with National Australia Bank (NAB) in Montoro’s name (NAB receipting account);

(b)    an account held with CBA in Lutum’s name (CBA receipting account);

(c)    an account held with NAB in Hollostone’s name (NAB payment account);

(d)    a further account held with NAB in Hollostone’s name (NAB reserve account); and

(e)    a further account held with CBA in Lutum’s name (CBA holding account).

13    Based on the Administrators’ investigations of the bank accounts held by the Lutum Group and discussions with management, the Administrators understand that the funds of the Lutum Group have been co-mingled in the following manner:

(a)    all invoices from Montoro and Hollostone were issued by Montoro, either in its own capacity or as an agent for Hollostone;

(b)    the products invoiced and the site location indicate to which entity the invoice relates, for example, where the products related to masonry (paving, retaining walls and bricks), this indicated that the relevant entity was Hollostone;

(c)    prior to November 2022, payment of all invoices issued by or for Montoro and Hollostone were made to the NAB receipting account;

(d)    in or about November 2022, the CBA receipting account was opened and from that date, most customers paid into the CBA receipting account, although some payments were still made into the NAB receipting account;

(e)    the funds held in the CBA and NAB receipting accounts were transferred to the NAB payment account as and when funds were needed for the Lutum Group, including for payments that needed to be made to suppliers, subcontractors and employees;

(f)    the NAB reserve account was used to hold any surplus funds of the Lutum Group to meet any unexpected outgoings; and

(g)    the CBA holding account was operated for the sole purpose of holding the monthly $90,000 amortisation payments towards the CBA facility agreement described below.

14    Although none of the CBA and NAB receipting accounts and the NAB reserve account distinguished between funds received by different Lutum Group entities, general ledgers of the Lutum Group recorded if the funds related to Montoro or Hollostone.

15    On 19 December 2022, Lutum entered into a facility agreement with CBA (Facility Agreement) and executed a general security deed. Each of Lutum Holdings, Montoro and Hollostone also executed general security deeds.

16    The Facility Agreement provided that (a) a total working capital facility of $9.8 million be provided to the Lutum Group, (b) a facility pricing margin of 0.98% and a line fee of 3.10% per annum was to be calculated on the facility limit, and (c) for security in the form of guarantees provided by each of Lutum Holdings, Montoro and Hollostone and a security interest over all present after acquired property of the Lutum Group.

17    In aggregate, the Lutum Group provided bank guarantees in an amount of $1.416 million by the end of 2023, which were converted into debt and fully drawn down.

18    On or about 15 December 2023, a first amendment deed was subsequently entered into between Lutum and CBA (First Amendment Deed).

19    The First Amendment Deed provided, in summary:

(a)    for the facility to increase by $1.5 million;

(b)    for CBA to maintain a registered security interest over all present and after acquired property for entities comprising the Lutum Group;

(c)    from March 2024, the Lutum Group was also required to transfer $90,000 to the CBA holding account each month to repay the additional loan of $1.5 million; and

(d)    all of the receivables outstanding as at the date of completion of the First Amendment Deed and all receivables created on or after that time were immediately assigned and transferred to CBA.

20    The Administrators have been informed by management that each month, the Lutum Group would submit to CBA a collateral report and utilisation request to draw down on the facility. The utilisation request would be approved by CBA if the Lutum Group was able to demonstrate that 80% of the eligible receivables (as that term was defined in the First Amendment Deed) and 40% of the eligible inventory (as that term was defined in the First Amendment Deed) were greater than the aggregate of all amounts owing under the facility.

21    Up until the appointment of the Administrators, the Lutum Group had sufficient eligible receivables and eligible inventory each month, in excess of the aggregate of all amounts owing under the facility, to enable each drawdown to be approved by CBA.

22    Since the date of their appointment, the Administrators have sought to continue to trade the business of the Lutum Group on a “business as usual” basis while at the same time assessing viable options for a sale or recapitalisation of the business.

23    The Administrators are currently considering the potential recapitalisation or sale of the whole or part of the business and assets of the Lutum Group.

24    The Administrators have reached the view that a sale would have the advantage of (a) preserving some or all of the jobs of the 151 employees of the Lutum Group, (b) increasing the return on the assets of the Lutum Group as opposed to the price that might otherwise be achievable on a fire sale or piecemeal basis, and (c) returning more funds for the benefit of creditors.

25    The Administrators have commenced a timetable that they have put in place to deal with a sale process.

26    The Administrators anticipate that on or about 7 June 2024, they will have assessed all offers and notified the successful party with a view to then documenting and concluding the sale process. It is therefore presently anticipated that the sale process would continue beyond the end of the convening period, being 29 May 2024.

27    The Administrators expect to be in a position by no later than 23 May 2024 to determine whether an application for an extension of the convening period will need to be made.

28    Based on the information presently available to the Administrators and without adjudicating any proofs of debt or assessing any transactions in detail, it appears to the Administrators that there is approximately a figure of some $21.9 million owing to creditors as at the date of their appointment.

29    On or about 2 May 2024, one of the Administrators, Mr Kelly, undertook negotiations with CBA concerning the Funding Deed. In the course of those negotiations, CBA indicated that it would not agree to the maintenance of the status quo in the absence of additional mechanisms to protect its position, specifically:

(a)    at least $8 million of the receivables would be preserved as a floor and would not be accessible by the Lutum Group for its trading;

(b)    any receivables above the floor would be released to the Lutum Group for trading on the existing terms provided by the First Amendment Deed (Released Funds); and

(c)    the Released Funds would be a loan to the Lutum Group for which CBA would receive priority by subrogating to the Administrators’ statutory lien and as an expense of the administration under s 556(1)(a) of the Act.

30    Later that day, the Lutum Group and CBA entered into the Funding Deed. Among other things, the Funding Deed provided that it was being entered into for the purpose of funding the ongoing trading of the business of the Lutum Group and the Administrators’ costs and expenses during the administration. The Funding Deed also provided that CBA would agree to make the proceeds of receivables, assigned to CBA pursuant to the First Amendment Deed, available to the Lutum Group and the Administrators to meet the expenses of the Lutum Group.

31    The CBA informed the Administrators that the proceeds of receivables assigned to CBA pursuant to the First Amendment Deed would not be made available to the Administrators until the Funding Deed had been executed.

32    Immediately following execution of the Funding Deed on 2 May 2024, those funds were released, and the Administrators immediately paid the trading costs of the Lutum Group then due to be paid.

33    The Administrators anticipate that with access to the receivables as provided by the Funding Deed, they will have sufficient funds to trade the Lutum Group until approximately 24 May 2024. At that point, the Administrators anticipate that they will have further details regarding a potential sale or recapitalisation of the Lutum Group that would facilitate any further funding negotiations that might be necessary with CBA or other alternative funders.

34    The Administrators have formed the view that it was in the best interests of the creditors and stakeholders of the Lutum Group and that it was consistent with the objects of Pt 5.3A of the Act that the first to fifth plaintiffs enter into the Funding Deed, for the following reasons:

(a)    entering into the Funding Deed was in the interests of the Lutum Group’s creditors as it would allow the Lutum Group to continue to trade the business and undertake the sale process which would deliver a better return to creditors;

(b)    the creditors would not be prejudiced;

(c)    the Funding Deed maximises the chances for all or part of the Lutum Group’s business to continue in existence; and

(d)    if a sale of the business and the assets or recapitalisation of the Lutum Group was achieved, that would likely result in a better return for creditors of the Lutum Group than an immediate winding up.

35    Understandably, in view of the size of the transaction and the sums involved, the Administrators are not willing to incur personal liability in relation to the Funding Deed. Although CBA has agreed to limit the personal liability of the Administrators pursuant to the Funding Deed, the Administrators remain concerned that there is a potential risk that the clauses in the Funding Deed limiting the personal liability of the Administrators might be challenged or otherwise be unenforceable. In those circumstances, in order to minimise the risk of any dispute or future litigation with respect to those clauses, the Administrators seek formal relief from the Court to limit any personal liability that they may have incurred to the extent of the assets of the Lutum Group.

C.     Funding Deed

C.1.     Legal principles

36    Pursuant to s 90-15(1) of the IPS, the Court may make any orders that it thinks fit in relation to the external administration of a company.

37    Section 90-15(1) confers a “very broad” power on the Court by virtue of the words “such orders as [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).

38    It includes a power to make orders determining any question arising from the external administration of the company: s 90-15(3)(a) of the IPS.

39    An administrator may apply to the Court for such orders as an officer of the company: s 90-20(1)(d) of the IPS.

40    The function of such a direction is not to determine rights and liabilities arising out of a particular transaction, rather, 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 or undertaking the conduct”: Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409; [2002] FCA 90 at [44] (Goldberg J); Krejci, in the matter of Union Standard International Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 1111 at [7] (Stewart J).

41    Section 443A of the Act relevantly provides that administrators are liable for debts they incur in the performance, or purported performance or exercise, of their functions and powers as administrators, including for the repayment of money borrowed.

42    Where a company in administration borrows funds from a third party financier to help fund the company’s ongoing trade during administration, administrators commonly seek orders limiting their personal liability: Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717 at [90] (Middleton J).

43    In circumstances where continuing to trade a company is for the benefit of creditors, personal liability of administrators can be (and has been) excluded, including pursuant to s 447A of the Act, prior to any such liability being incurred: Hill, in the matter of Ovato Limited (Administrators Appointed) [2022] FCA 903 at [15] (Stewart J).

44    The fact that the s 90-15 direction may relate to a decision or action of a “commercial character” does not prevent such a direction being made: In the matter of RCR Tomlinson Ltd (administrators appointed) [2018] NSWSC 1859 at [14] (Black J).

45    In RCR Tomlinson, Black J stated at [14]:

The Court’s preparedness to grant such a direction in those circumstances reflects 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.

46    In Niccol, in the matter of FLY365 Pty Ltd (in liq) [2020] FCA 1303, Stewart J gave a direction in similar circumstances to liquidators to the effect that they were justified in entering into a funding agreement and were authorised to carry its terms into effect.

C.2.     Consideration

47    I am satisfied in all the circumstances that it is appropriate that orders be made pursuant to s 443A(1) and s 447A of the Act and s 90-15 of the IPS, that (a) the Administrators are justified in entering into the Funding Deed and (b) the personal liability of the Administrators in respect of the Funding Deed is limited to the extent of the Administrators’ right of indemnity under s 443D and the statutory lien under s 443F of the Act. I have reached that conclusion for the following reasons.

48    First, I am satisfied that the Administrators have formed the view that the ongoing trade of the Lutum Group’s business is in the best interests of creditors, and that that view is based on a reasonable assessment of the information currently available to them.

49    Second, it is clear that in order for the ongoing trade of the Lutum Group to continue, additional funding is required and that recourse to the existing facility on terms approved by CBA fulfils, at least in the short term, that funding requirement.

50    Third, I am satisfied that the Funding Deed offers the best chance of a continuation of the business, thereby maximising the prospects of preserving the business of the Lutum Group with a view to its sale or recapitalisation.

51    Fourth, the orders will provide a level of protection to the Administrators with respect to their decision to have acquired that additional funding to secure the ongoing operation of the business of the Lutum Group, including, significantly, the ongoing employment of the Lutum Group’s 151 employees, during the period in which a sale of the business continues to be actively explored for the benefit of creditors.

D.     Bank accounts

D.1.     Overview

52    On their appointment, the Administrators set up four CBA bank accounts as follows:

(a)    an account in the name of Lutum Holdings;

(b)    a group administration account in the name of Lutum (Group Administration Account);

(c)    an account in the name of Montoro; and

(d)    an account in the name of Hollostone

(together, Post Appointment Accounts).

53    Since their appointment, the Administrators have received into the Group Administration Account, (a) $2 million from the CBA receipting account and (b) cash sales from CBA terminals established on appointment, of some $192,831.

54    The Administrators have not used the three remaining Post Appointment Accounts and now propose to close those accounts.

55    Given that the Lutum Group operated through the use of co-mingled funds, the Administrators have formed a view that it is otherwise not practical for them to utilise the Post Appointment Accounts, other than the Group Administration Account, for a number of reasons, including:

(a)    the Administrators are of the view that it would be extremely difficult to trace all the co-mingled funds back to each respective entity of the Lutum Group and to do so would require a significant amount of time and cost;

(b)    even if a tracing exercise was undertaken, it would not resolve the historical co-mingling of funds or necessarily put the Lutum Group in a position where it could undertake proper accounting to correct any shortfall or discrepancies;

(c)    absent a tracing exercise, the Administrators are not able to easily distinguish between the funds of each entity in the Lutum Group;

(d)    certain entities in the Lutum Group are liable for and have made payments for lease premises or employees, ultimately for the benefit of the whole of the Lutum Group;

(e)    management of the Lutum Group have informed the Administrators that customers have been resistant to change the account into which their payments are to be made; and

(f)    the Administrators continue to operate in the same manner the Lutum Group did prior to their appointment, and have utilised funds in the NAB payment account and the CBA receipting account to pay employees, subcontractors and suppliers in the first two weeks of their appointment.

56    The Administrators have formed the view that it would allow for the efficient operation of the Lutum Group if the Administrators could continue to utilise the co-mingled funds and operate only one Post Appointment Account, namely the Group Administration Account.

D.2.     Legal principles

57    The operation of bank accounts that are required to be operated in an external administration is governed by Div 65 of the IPS.

58    Division 65 of the IPS requires all money received by an administrator on behalf of or in relation to a company to be paid into an administration account (s 65-5(1)) and requires an administrator not to pay other monies into such an account (s 65-15).

59    Section 65-25 of the IPS prohibits an administrator from paying money out of such an account other than for purposes related to the administration, or otherwise in accordance with the Act or an order of the Court.

60    Section 65-45 of the IPS provides a power to make orders modifying the arrangements with respect to the operation of such accounts.

61    The approach to be taken by the Court to an application for directions under s 65-45 is analogous with the approach taken to directions pursuant to s 447A of the Act, and similar considerations apply.

62    As Markovic J set out in Korda, in the matter of Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 1144 at [95], those considerations relevantly include:

(a)    where all of the companies under administration are part of the same corporate group;

(b)    whether the proposed course of action reflects the arrangements prior to the administrator’s appointment;

(c)    the difficulty, time and expense involved in segregating funds in circumstances where funds were previously intermingled;

(d)    the possible loss of efficiency involved in otherwise raising inter-company invoices to enable payments received on behalf of one company to be used for liabilities (which might include, for example, wages for head office staff), without such process necessarily resulting in any improved record-keeping of the group; and

(e)    the proposal that such funds will only be used for purposes related to the external administration of the relevant companies, and no extraneous purpose.

D.3.     Consideration

63    I am satisfied in all the circumstances that it is appropriate for orders to be made pursuant to s 65-45 and s 90-15 of the IPS for orders, nunc pro tunc, from 23 April 2024 (being the date of the Administrators’ appointment) concerning the operation of a single bank account for the Lutum Group.

64    I am satisfied that the Administrators have standing to seek orders under s 65-45: Re Grocon Pty Ltd (admins apptd) (No 1) [2020] VSC 833 at [20] (Gardiner AsJ).

65    I consider that such orders are appropriate in circumstances where (a) the companies in the Lutum Group have been administered as part of the same corporate group, (b) the operation of a single operating account reflects the arrangements that existed in substance prior to the Administrators’ appointment, (c) there will be significant difficulty, time and expense in segregating funds in circumstances where those funds had previously been intermingled, (d) there would be an inevitable loss of efficiency involved in otherwise raising inter-company invoices, and (e) the proposed orders will ensure that the funds will only be used for purposes related to the external administration of the relevant companies and no extraneous purposes.

66    I am satisfied for these reasons it is in the creditors’ interests that the orders providing for the co-mingling of accounts to continue should be made.

E.     Notification to creditors

67    The application today has been notified by the Administrators to creditors of the Lutum Group, pursuant to a circular provided by email on 10 May 2024 and by post on 13 May 2024.

68    There was no appearance today by any creditor. Ms Bailey drew to my attention and tendered a communication with one creditor seeking access to the affidavit relied upon and a query with respect to any potential reduction in liability of the Administrators with respect to goods supplied, which has been answered by a representative of the Administrators.

69    In any event, I note that the orders have been framed in a manner that permits affected persons (including creditors) to apply to the Court for any variation of the orders, consistent with the practice adopted by Middleton J in Strawbridge.

F.     Disposition

70    For the reasons outlined above, I am satisfied that it is in the best interests of creditors of the Lutum Group for orders to be made substantially in the form of the orders sought by the Administrators in the originating process, including that the cost of the application be costs of the administration of the companies in the Lutum Group, jointly and severally.

Associate:

Dated:    24 May 2024

SCHEDULE OF PARTIES