Federal Court of Australia

Marsden, in the matter of Brindabella Christian Education Limited (Administrators Appointed) [2025] FCA 456

ORDERS

THE COURT ORDERS THAT:

Section 560 Loan

1.    Pursuant to s 90-15 of the Insolvency Practice Schedule (IPS), being Schedule 2 to the Corporations Act 2001 (Cth) (Act), the first and second plaintiffs (Administrators) were justified in entering into and causing, the third plaintiff, Brindabella Christian Education Limited (Administrators Appointed) ACN 100 229 669 (Company), to enter into and assume obligations under the document titled “Advance for the payment of wages and employee entitlements” dated 10 March 2025 with National Australia Bank (NAB) (Section 560 Loan), including (but not limited to) borrowing loan monies not exceeding $602,214.42 and receiving funds pursuant to the Section 560 Loan on and from 6 March 2025, prior to its execution.

2.    Pursuant to s 447A(1) of the Act and s 90-15 of the IPS, Part 5.3A of the Act is to operate in relation to the Company:

(a)    as if s 443A(1) of the Act provided that any liabilities incurred by the Administrators arising out of or in connection with the Section 560 Loan are in the nature of debts incurred by the Administrators in the performance and exercise of their functions as Administrators of the Company; and

(b)    as if ss 443A(1) and 443D of the Act provided that the Administrators will not be personally liable to repay any such debts to the extent that the indemnity under s 443D of the Act is insufficient to pay the debts.

Funding Deed

3.    Pursuant to s 90-15 of the IPS, the Administrators were justified in causing the Company to enter into and assume obligations under the document titled “Administrators’ Funding Deed” dated 26 March 2025 with NAB (Funding Deed).

4.    Pursuant to s 447A(1) of the Act and s 90-15 of the IPS, Part 5.3A of the Act is to operate in relation to the Company:

(a)    as if s 443A(1) of the Act provided that any liabilities incurred by the Administrators arising out of or in connection with the Funding Deed are in the nature of debts incurred by the Administrators in the performance and exercise of their functions as Administrators of the Company; and

(b)    (b) as if ss 443A(1) and 443D of the Act provided that the Administrators will not be personally liable to repay any such debts to the extent that the indemnity under s 443D of the Act is insufficient to pay the debts.

Government funding

5.    Pursuant to s 447A(1) of the Act and s 90-15 of the IPS, Part 5.3A of the Act is to operate in relation to the Company:

(a)    as if s 443A(1) of the Act provided that any liabilities incurred by the Administrators arising out of or in connection with the Government Funding (as defined in paragraph 62 of the affidavit of Sam Andrew Marsden affirmed 31 March 2025) are in the nature of debts incurred by the Administrators in the performance and exercise of their functions as Administrators of the Company; and

(b)    as if ss 443A(1) and 443D of the Act provided that the Administrators will not be personally liable to repay any such debts to the extent that the indemnity under s 443D of the Act is insufficient to pay the debts.

Employee wages

6.    Pursuant to s 90-15 of the IPS, the Administrators were and are justified in paying, on a fortnightly basis, until the earlier of:

(a)    the conclusion of the administration; or

(b)    the finalisation of any investigation by the Administrators into the accuracy and reliability of the books and records of the Company insofar as they relate to staff entitlements,

entitlements of a kind referred to in s 560(a) of the Act to the employees of the Company listed in columns A and B of pages 1 to 4 of Confidential Exhibit SAM-2, at the rates referred to in column J of pages 1 to 4 of Confidential Exhibit SAM-2, for the hours worked over the relevant fortnightly pay cycle period.

Committee of inspection

7.    Pursuant to s 90-15 of the IPS, the Administrators are justified in appointing a committee of inspection (COI) in the manner set out in the affidavit of Sam Andrew Marsden affirmed 31 March 2025, including by:

(a)    proposing a committee of inspection of seven members;

(b)    receiving nominations for the COI in advance of the meeting of creditors held on 17 March 2025;

(c)    circulating a ballot paper to creditors on 20 March 2025, with details of each of the 19 COI nominations and inviting creditors to select up to seven preferred members to be include on the COI, with nominations to be received by 4.00 pm on 24 March 2025 (Ballot Process); and

(d)    forming the COI based on the seven creditors that received the highest number of votes following the Ballot Process.

8.    Pursuant to s 80-55(5)(b) of the IPS, NAB has leave to derive any profit or advantage (including by way of any interest and/or fees received) under each of the Section 560 Loan and the Funding Deed.

Extension of convening period

9.    Pursuant to s 439A(6) of the Act, or in the alternative, s 1322(4) of the Act, the date of the convening period as defined by s 439A(5) of the Act, for the second meeting of creditors of the Company required pursuant to s 439A of the Act (Second Meeting) be extended up to and including 3 August 2025.

10.    Pursuant to s 447A of the Act, Part 5.3A of the Act is to operate in relation to the Company as if the Second Meeting may be convened and held at any time during the convening period or within five business days after the end of the convening period, as extended by the orders sought in paragraph 9 above, notwithstanding the provisions of s 439A(2) of the Act.

11.    The plaintiffs have leave to apply for any further extension of the convening period referred to in paragraphs 9 and/or 10 above or any other matter arising in the administration of the Company, generally.

Notification of orders

12.    The plaintiffs to cause notice of these orders to be given to the creditors of the Company within 48 hours of the making of these orders, by:

(a)    notifying each creditor via email of the making of the orders and providing a link to a website where the creditor may download the orders, using the email address of each creditor at the email address that is recorded in the books and records of the Company;

(b)    where an email address is not recorded in the books and records of the Company but a postal address is recorded, notifying each such creditor in writing of the making of the orders and providing a link to a website where the creditor may download the orders, using that postal address; and

(c)    placing the orders on the website maintained by the Administrators at https://aurestructuring.deloitte-halo.com/service/website/BCC?Pg=3.

Other orders

13.    Pursuant to s 37AF(1)(b)(i) and (iv) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and on the grounds referred to in s 37AG(1)(a) the FCA Act, Confidential Exhibit SAM-2 to the Affidavit of Sam Andrew Marsden affirmed 31 March 2025 is not to be published or disclosed to any person until the conclusion of the administration of the Company.

14.    Liberty to apply to any person who can demonstrate sufficient interest, to apply on 48 hours’ written notice to the plaintiffs and the Court for an order discharging or varying any orders made in relation to Orders 1 to 13 above.

15.    The Administrators’ costs of and incidental to this application be costs and expenses in the administration of the Company and be paid out of the assets of the Company.

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

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    These are the amended and revised reasons for judgment given on 31 March 2025. Whilst the following reasons refine and develop those that were delivered ex tempore, the substance of what was said on 31 March has not been changed nor has any other material change been made: Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v AAM17 (2021) 272 CLR 329, 344 – 345 [30] – [31].

2    Messrs Sam Andrew Marsden and Salvatore Algeri are the joint and several administrators of Brindabella Christian Education Limited (Administrators Appointed) (the Administrators and the Company, respectively). The Company operates a Christian school in the Australian Capital Territory (the ACT). It is fair to observe that the pedagogical nature of that business has rendered the administration a relatively complex undertaking, for the Administrators must deal with a great number of stakeholders – including members of staff and students (and their families) – as well as the litany of statutory regulation imposed upon education-providers.

3    The Administrators now approach the Court seeking a number of orders, all of which, it might be added, are quite appropriate in the circumstances. The relief which is sought is said to align with the objects of Part 5.3A of the Act: see s 435A of the Act: and is to the following effect:

(1)    the Administrators are justified in:

(a)    engaging in, and causing the Company to engage in, certain funding transactions which either have occurred or are proposed to occur;

(b)    making payments to members of staff of the School where there exists a concern that they have previously been underpaid; and

(c)    appointing a committee of inspection (COI) that deviates from the requirements imposed by s 436E(1)(b) of the Corporations Act 2001 (Cth) (the Act),

(collectively, the s 90-15 Relief).

(2)    the Administrators are relieved of any personal liability that may arise out of entry into any of the relevant funding transactions (the s 447A(1) Relief).

(3)    despite the force of s 80-55 of the Insolvency Practice Schedule (Corporations) (being Schedule 2 to the Act) (the IPS), members of the COI are entitled to derive a “profit or advantage” from the relevant funding transactions (the s 80-55 Relief).

(4)    the convening period for the second meeting of creditors of the Company is extended from 3 April 2025 up to, and including, 3 August 2025 (the s 439A(6) Relief).

4    The Administrators and their legal advisors have, quite properly, taken care to notify all major creditors and stakeholders of the Company of their intention to bring the present application. Those entities include the Commonwealth Department of Education, the ACT Department of Education, the National Australia Bank Limited (the NAB), the Fair Entitlements Guarantee Branch of the Department of Employment and Workplace Relations, and the Deputy Commissioner of Taxation of the Australian Taxation Office (ATO). To date, no opposition has been raised by those parties to the relief that the Administrators now press before the Court.

Background

The School

5    The Company conducts a school in the ACT that provides education from Early Learning years to Year 12 based upon Christian values and beliefs (the School). The School commenced in 1980. The Company took over the School from the Uniting Church in 1998. The School operates out of two ACT campuses. At 7 March 2025, the primary campus (“Central Campus”) recorded an enrolment of 970 students and an employment of 123 teachers and 49 support staff; the secondary campus (“Norwest Campus”) recorded an enrolment of 42 students and an employment of 23 teachers and four support staff.

The financial position of the Company

6    Mr Marsden has filed a detailed affidavit (the Marsden Affidavit) in which he notes, inter alia, that the financial information contained within the available records of the Company does not reconcile and, accordingly, cautions reliance upon it.

7    In broad terms, the Company, as at 31 December 2024, reported current assets of $13.2 million. At 14 March 2025, the Company owed approximately $23.8 million to creditors, comprising some $1.4 million to employees, $9.5 million to secured creditors, $4.1 million to parents (for tuition fees paid upfront), $6.1 million to the ATO and $2.7 million to suppliers.

8    Relevantly, the Company holds four facilities with the NAB, three of which appear to be secured by both (a) a charge over all present and future rights, property and undertaking of the Company; and (b) a registered mortgage over the property of the Central Campus. Under the facilities, the Company is indebted to the NAB in the sum of $9.3 million. It must be kept steadily in mind that that is a very significant portion of the secured credit of the Company.

Operational costs of the School

9    The cost of running the School is not insignificant. The Marsden Affidavit forecasts that, in order for the School to operate until 1 June 2025, a total of some $9.8 million will be required. Presently, the Company holds $38,273.74 in available cash, although the Administrators expect to receive approximately $7.6 million from a range of sources (including, for example, tuition fees, government grants and café sales) in the near future.

10    In the course of the administration, an issue has arisen as to whether the staff of the School have been paid correctly. In his affidavit, Mr Marsden deposes to having commenced investigations into the matter and outlines his belief, shared by Mr Algeri, that it is critical for staff to continue to be paid in order for the School to remain open. To this end, they have expressed an intention, albeit with a modicum of hesitation noting the apparent unreliability of the available financial records (and the associated potential for liability), to continue to pay School staff based upon the information contained in the records pending further investigation as to their accuracy and veracity.

External funding arrangements – the NAB

11    Given the prevailing financial circumstances faced by the Company, the Administrators have very properly sought to secure funding in order to allow them to pay for employee entitlements and the services necessary to ensure the continued operation of the School. In that respect, on 10 March 2025, they executed, and caused the Company to execute, an advance for the payment of wages and other employee entitlements with the NAB (the Section 560 Loan). Under the terms of that agreement, the Company may only use the advanced funds for payments that are referred to in s 560 of the Act, such as the payment of wages, superannuation contributions and the like.

12    It is noted the NAB has also provided a further advance in the sum of approximately $598,000 pursuant to a funding deed (the Funding Deed), which is intended to allow the Administrators to meet the ongoing expenses that are anticipated to be incurred over the next 13 weeks.

13    Mr Marsden also deposes to the reasonableness and necessity of both the Section 560 Loan and the Funding Deed. He believes that they were commensurate with readily available alternative options and, ultimately, in the best interests of the creditors of the Company. That view can be readily accepted in circumstances where the only realistic alternative would be to close the School, which would not only torpedo its value and not deliver an optimal return for creditors, but it would also adversely affect the education of the students.

External funding arrangements – government assistance

14    Beyond both the Section 560 Loan and the Funding Deed, the Company also receives funding pursuant to the provisions of the Australian Education Act 2013 (Cth) and the Education Act 2004 (ACT) as well as pre-existing arrangements between the Company and ACT government.

15    Relevantly, on 19 March 2025, the Commonwealth Department of Education wrote to the NAB. It noted, amongst other things, that the Commonwealth “currently pays recurrent funding for [the Company] in monthly instalments” and indicated that “[s]ubject to NAB meeting its commitments to provide additional funds, [the Commonwealth] is willing to bring forward the recurrent funding payments for May and June to provide approximately $1.7 million excluding GST paid late April [2025]”.

16    On 25 March 2025, the ACT government paid approximately $440,000 to the Company and have since agreed in-principle, alongside the Commonwealth, to allow those funds (as well as any other form of government funding provided to the Company) to be used by the Administrators towards the costs of the administration.

First meeting of creditors and proposed COI

17    The first meeting of creditors occurred on 17 March 2025. The creditors voted in favour of appointing a COI and resolved to determine the constitution of that committee by subsequent ballot. That ballot concluded on 24 March 2025.

18    Mr Marsden has given evidence that, based upon both industry guidance and his experience in administrations of similar size and complexity to that presently before the Court, and having regard to the number and classes of creditors of the Company, that an appropriate COI would be constituted by five to seven persons. To that end, the Administrators now propose, in light of the result returned by the ballot, that seven creditors assume a position upon the COI.

19    It is also proposed that the second meeting of creditors (to be convened by 3 April 2025: see s 439A(2) of the Act) be extended by four months given the inherent complexity that undergirds the administration. Importantly, no objection has been made to that proposal.

The s 90-15 Relief

20    Section 90-15(1) of the IPS empowers the Court, upon the petition of a person with a financial interest in the external administration of a company (amongst other things), to “make such orders as it thinks fit” in relation to that administration: see also ss 90-15(2)(b) and 90-20(1)(a) of the IPS. Here, the Company is in external administration: s 5-15(c) of the IPS. The present application is pressed by the Administrators who, by dint of ss 5-30(a)(iii) and 5-20(c) of the IPS, hold a financial interest. That being so, the power under s 90-15(1) of the IPS is enlivened.

21    That power “is, in its terms, unconstrained”: GDK Projects Pty Ltd, Re Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541, [33]; see also Kelly, in the matter of Halifax Investment Services Pty Ltd (in liq) (No 8) (2020) 144 ACSR 292, 300 [51]. Relevantly, it has been understood to:

… include[] a power to give directions about a matter arising in connection with the performance or exercise of an administrator’s functions or powers. …

The function of a judicial direction of this kind is not to determine rights and liabilities arising out of a particular transaction, but to confer a level of protection on the administrator. …

(Citations omitted.)

(Krejci, Re Union Standard International Group Pty Ltd (Administrator Appointed) (No 2) [2020] FCA 1111, [8] – [9]).

22    The substance of that proposition was developed in the careful and thoughtful submissions that were prepared by counsel for the Administrators, Mr Hynes and Mr Di Lizia, which I gratefully adopt:

22.    The principles set out by Brereton J in In the matter of One.Tel Limited [2014] NSWSC 457 have been widely applied in the determination of applications for directions in the nature of judicial advice: see Pirina, in the matter of Fund Options (Australia) Pty Ltd (in liq) [2020] FCA 1256 (Farrell J). At [32], Brereton J stated that the effect of such a direction “is to sanction a course of conduct on the part of the liquidator so that he or she may adopt that course free from risk of personal liability for breach of duty”. His Honour continued at [33]:

While the ability of a liquidator to approach the Court for directions is intended to facilitate the liquidator's functions and should be interpreted widely to give effect to that intention … it is insufficient to justify giving such directions that the liquidator wants reassurance about a commercial decision; some such issue as a question of law or procedure, of power, propriety or reasonableness, is required to justify approaching the court for directions…

23.    In Rubix Investments Group Pty Ltd [2018] NSWSC 1184 Gleeson JA had regard to the predecessor provision in s 479(3) of the Act and said at [31]-[32] citing Re HIH Insurance and related matters [2004] NSWSC 5 and Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83:

[31] The authorities on the predecessor provision in s 479(3) of the Corporations Act again emphasise that it is not the function of the Court to pass an opinion on the liquidators’ commercial judgment. In Re HIH Insurance, Barrett J said at [19], “generally speaking, such directions are appropriate only where there is some doubt or difficulty going beyond the question of what is commercially desirable”. His Honour cited with approval the statement by Goldberg J (in the context of a voluntary administrator’s application for directions under s 447D) in Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409; [2002] FCA 90 at [65]:

“There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised. It is insufficient to attract an order giving directions that the liquidator or administrator has a feeling of apprehension or unease about the business decision made and wants reassurance. There must be some issue which arises in relation to the decision. A court should not give its imprimatur to a business decision simply to alleviate a liquidator’s or administrator’s unease. There must be an issue calling for the exercise of legal judgment.”

[32] In Re Spedley Securities Ltd (in liq), after noting that a court will not make a liquidator’s commercial decision for him, Giles J said at 85, “it is nonetheless common for a liquidator to seek directions as to whether he is justified in entering into a particular compromise”.

24.    Although the Court will be less inclined to give a direction where the matter relates to the making or implementation of a commercial decision, it will commonly do so where there is a prospect of criticism being levelled at the external administrator by giving a direction as to whether he or she is justified in agreeing to a proposal, notwithstanding that a commercial judgement may be involved: see for example Re Octaviar Administration Pty Ltd (in liq) (2015) 107 ACSR 1; [2015] NSWSC 516 at [13]. Such a direction will be appropriate where the “liquidator’s proposed decision risks being subjected to criticism by a particular creditor or creditors as being unreasonable or made in bad faith”: Octaviar Administration at [13], citing Re Great Southern Managers Australia Ltd (in liq) [2014] WASC 312 at [61].

Justification (1): Entry into the Section 560 Loan and the Funding Deed

23    Mr Marsden deposes that the Section 560 Loan was entered into having regard to the then-known financial position of the Company. By its terms, the funds advanced under that loan are for a single purpose – the making of payments of a kind referred to in s 560 of the Act. Given the size of the undertaking that is operated by the Company, those amounts would, necessarily, be rather significant.

24    The benefits of the Section 560 Loan to the Company are self-evident. It maintains the possibility of a Deed of Company Arrangement (DOCA) being entered into or a sale of the Company occurring and minimises disruption to members of the School. Indeed, were such funding not to be put in place, the School would be forced to close. That is a result which would not seem to advance the interests of any interested entity including, most importantly, the creditors. In those circumstances, I accept that entry into the Section 560 Loan is in the best interest of the creditors, and is on reasonable and commercial terms.

25    Similar considerations apply to the Funding Deed. Again, Mr Marsden’s evidence, based upon his experience, is that the deed is on commercial terms and comparable to what is otherwise available on the market. Its purpose, again, is to ensure the ongoing operation of the School for the next 13 weeks and that, of course, will inure to the benefit of the creditors.

26    That being so, relief is now sought under s 90-15 of the IPS to the effect that entry into the aforementioned arrangements was warranted, given the Administrators’ concern that the reasonableness of their conduct may be called into question at some later date. That is particularly so where both the Section 560 Loan and the Funding Deed were entered into during the course of the short period following the Administrators’ appointment on 5 March 2025. On the evidence before the Court, there can be no criticism whatsoever of the Administrators in taking that very reasonable and responsible action immediately and only seeking relief in relation to it ex post facto. In fact, they are to be commended in taking the action which they did, which has, to date, preserved the position of the Company and of the School’s operation from the outset. In that regard, the relief sought is entirely appropriate and should be granted.

Justification (2): Manner in which staff of the School are to be paid

27    The Administrators seek further relief under s 90-15 of the IPS to the effect that they are justified in paying the wages of the employees of the School until conclusion of the administration (or their investigations regarding wages, if completed earlier) on the basis of the available financial records. Such relief is sought in light of the Administrators’ present concern that (a) certain members of School staff have been underpaid; (b) the financial records of the Company are unreliable; and (c) the correctness and reasonableness of any remuneration paid to Staff in the course of the administration may be disputed. It is plain from the content of Mr Marsden’s affidavit that those concerns are both genuine and real. So too is the fact that the Administrators are desirous to pay all staff of the School that to which they are legally entitled.

28    The difficulty, of course, is that the Administrators simply have insufficient information to know what they are paying is, in fact, the correct amount at this point in time. That unfortunate reality informs their proposal to pay staff that which they have previously been paid (in order to ensure their retention and, with it, the vitality of the School) and then, in the course of the administration, take steps to investigate allegations of underpayment. That is a slightly unusual order, though, in the universal variability of corporate affairs, perhaps it is not unsurprising that such an issue would arise. Mr Marsden is obviously acutely aware of the importance of paying all employees their lawful entitlements, and it is clear he has no intention to do other than that.

29    In those circumstances, and given the Administrators’ proposal that is the subject of the relief presently sought is designed to maximise the chances of the School (and the Company) continuing in existence, it is appropriate to make the orders sought.

Justification (3): Manner in which COI to be appointed

30    Relief is also sought under s 90-15 of the IPS justifying the manner in which the Administrators have approached the appointment of a COI. There does not seem to be, at least to me, any great difficulty on the issue, and perhaps it is out of an abundance of caution that the Administrators seek the relief they do.

31    At the first meeting of creditors (of the Company) on 17 March 2025, it was resolved, amongst other things, that (a) a COI was to be appointed; and (b) the constituent members of the COI would be determined by later ballot. That ballot concluded on 24 March 2025. By that time, 155 votes had been cast by “eligible creditors” who, in the result, selected seven preferred members from a total of 19 nominations. Mr Marsden has given evidence that, based upon his experience within the insolvency industry, a COI of seven members would be appropriate.

32    As appears in the written submissions provided to the Court, the Administrators’ concern is that the manner in which the appointment of the COI has been approached is inconsistent with the terms of s 436E(1) of the Act. That section defines, in short compass, the objects of a first meeting of creditors – participants are to determine “(a) whether to appoint a committee of inspection; and (b) if so, who are to be the committee’s members”. In this instance, the first meeting did not determine those creditors that would constitute the COI; instead, they resolved to select those creditors from a pool of nominees by way of subsequent ballot.

33    The relief sought is, in effect, to obviate any criticism of the Administrators as to that approach. It is true that the aforementioned course derogates from the procedural conditions imposed by s 436E(1)(b) and, in some sense, the need for the efficient carriage of administrations that underlies Part 5.3A of the Act: see Britax Childcare Pty Ltd (ACN 006 773 600) v Infa Products Pty Ltd (ACN 092 222 994) (admins apptd) (2016) 115 ACSR 322, 340 – 341 [86] – [87]. But that is not to say that no COI will be formed (so as to render s 436(1)(a) otiose in the present context), merely that its constitution will be settled at some time shortly after the first meeting of creditors: see, eg, Freeman, in the matter of Regional Express Holdings Limited (administrators appointed) [2024] FCA 929, [50] – [64]; Re Strawbridge, in the matter of Virgin Australia Holdings Ltd (admins apptd) (2020) 144 ACSR 310, 318 – 319 [33] – [38]. That approach is said to ensure (a) the ordered and considered operation of the administration; and (b) the equitable representation of different classes of creditors in the committee, which, necessarily, inheres to the benefit of the Company and its creditors (and, indeed, to those persons with a direct interest in the continued operation of the School, including parents, staff and, perhaps most importantly, students). So much can be accepted, and given the expediency with which the Administrators have sought to constitute the COI, the only available conclusion is that they have acted properly and in accordance with the express objects of Part 5.3 of the Act: see s 435A of the Act.

34    No criticism can be levelled at the Administrators for their technical disregard of s 436E(1)(b) of the Act and it is appropriate that the orders sought under s 90-15 of the IPS now be made.

The s 447A(1) Relief

35    The Administrators seek relief under s 447A(1) of the Act from any personal liability that may arise, pursuant to s 443A of the Act, vis-à-vis the Section 560 Loan, the Funding Deed or any other funding provided by a government entity.

36    The principles that govern the circumstances in which a court will limit liability of that nature are well known. While there is no need to recant them ad nauseam, the observations of Gilmour J in Mentha, Re Griffin Coal Mining Company Pty Ltd (admins apptd) (2010) 82 ACSR 142 (at 146 [30]) provide a convenient summary of some of what must be borne in mind:

The principles governing the granting of an application for orders under s 447A to vary the liability of administrators under s 443A can be summarised as follows:

(a)    the proposed arrangements are in the interests of the company’s creditors and consistent with the objectives of Pt 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.)

The Section 560 Loan and the Funding Deed

37    In short, it is appropriate to grant the relief sought for the following reasons:

(1)    First, the Section 560 Loan and the Funding Deed preserve the subsistence of the School. Were it otherwise, there would be no capacity for a DOCA to be passed or for recapitalisation of the Company to occur, which would, of course, undermine the potential for the Company to continue in existence: cf s 435A(a) of the Act: and likely diminish the possibility of any return to creditors: cf s 435(b) of the Act.

(2)    Second, the Section 560 Loan guarantees payment of the employees of the Company and, in turn, allows the Company to continue to operate and trade. As noted by Messrs Hynes and Di Lizia, that is to the benefit of the creditors because it allows the Administrators to conduct extant investigations (for example, into the School's finances), seek the potential entry into a DOCA (if available) and to undertake the sale or recapitalisation process of the Company. That proposition applies with equal force to the Funding Deed, albeit advances under that agreement can be used for a broader suite of purposes.

(3)    Third, it is Mr Marsden’s view that the loan arrangements are (a) in the bests interests of the Company and its creditors; and (b) consistent with the objectives of Part 5.3A.

(4)    Fourth, at the first meeting of creditors, notice was given (a) that the Company had entered into the Section 560 Loan; and (b) of the proposal to enter into the Funding Agreement. No objection was, or has been, raised.

The government funding

38    It is said by the Administrators that the considerations canvassed above apply equally to the funding provided by the ACT and federal governments. That submission can be accepted – those funds provide further support to allow the School to continue to operate which, in turn, improves the chances of a better return to creditors.

39    In sum, it is appropriate to make the orders sought under s 447A(1) of the Act.

The s 80-55 Relief

40    The Administrators’ written submissions raise a further issue as to the COI going, not to the manner in which it is proposed to be constituted, but the constitution of the committee itself. The NAB is proposed to be represented on the COI. Indeed, it has an entitlement to be so represented, given that it holds in excess of 10% of the value of all creditors: s 80–20(1) of the IPS. In that capacity, the NAB is precluded from, amongst other things, “directly or indirectly deriv[ing] any profit or advantage from the external administration of the [C]ompany”: s 80-55(1) of the IPS; see also ss 80-55(2) and 80-55(7) of the IPS: without leave of the Court: s 80-55(5)(b) of the IPS. The object of that prohibition is to restrain members of committees of inspection, who occupy a fiduciary position relative to creditors, from entertaining a conflict of interest and duty: Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) (2020) 144 ACSR 347, 406 [179] (Strawbridge (No 2)).

41    Relevantly, the NAB is financier of both the Section 560 Loan and the Funding Deed. In those premises, the Administrators express concern that participation by the NAB in the COI (as is proposed) will fall afoul of s 80-55(1) of the IPS. As such, and to avoid stalling the efficient carriage of the administration, leave is now sought for the NAB, should it participate in the COI, to derive “profit or advantage” under the Section 560 Loan and/or the Funding Deed.

42    That issue bears homogeny with that which confronted Middleton J in Strawbridge (No 2) (at 406 – 407 [176] – [188]), where his Honour considered circumstances in which members of a COI were likely to be counterparties to sale negotiations with the administrators. As was conveniently summarised by Banks-Smith J in Algeri (administrator), in the matter of Murray & Roberts Pty Ltd (admins apptd) (No 2) [2022] FCA 1563 at [46]:

… His Honour explained the reasons for restrictions on members of a committee of inspection receiving profits, based on their prevenance in committees in liquidations, where because of the nature of a liquidation a company usually no longer trades. In contrast, in an administration, it is not uncommon for trading to continue in the interests of creditors, and such trading may involve committee members. …

43    With that distinction in mind, Middleton J was content to grant leave for the members of a COI to transact with the relevant companies that were in administration noting that (a) such course was viewed, by the relevant administrators, to be in the interests of the creditors: Strawbridge (No 2), 407 [185]; and (b) were it otherwise, “the Administrators’ flexibility to carry on the Business [of the companies] may be hampered” given the likelihood that several COI members “will be counterparties as part of ongoing arrangements during the administrations (and/or parties to any agreement reached in connection with a sale of the business …”: Strawbridge (No 2), 407 [183] – [184]. Of course, the present circumstances are not precisely aligned with those before his Honour. In Strawbridge (No 2), the relevant “profit or advantage” was said to flow from agreements that were “likely” to be entered into by certain members of a COI (at 407 [183]); here, somewhat uniquely, the relevant “profit or advantage” is said to derive, at least in part, from certain existing agreements in which one counterparty (the NAB) is proposed to be represented in a COI (yet to be constituted). That distinction is neither here nor there, but nevertheless informs the appropriate perspective by which to view the present request for leave.

44    Here, the NAB is an important stakeholder in the administration. It is a counterparty to several agreements which, on any view, are necessary for the continued trade and operation of the Company. It is also the largest secured creditor of the Company and, in turn, entitled to representation upon the COI: s 80-20(1) of the IPS. If the NAB were to be excluded from the COI, it would not have its interests reflected in that forum. Indeed, such a result might also impact its willingness to continue to fund the operation of the School (and with it, the Company). It is unlikely that the NAB’s presence on the COI would operate to the prejudice of creditors; in fact, it is more likely that its presence will enhance the potential return for the creditors. That is at least the broad view adopted in the Marsden Affidavit, which is unopposed.

45    In those circumstances, it is appropriate to grant the relief sought by the Administrators under s 80-55(5)(b) of the IPS.

The s 439A(6) Relief

46    The Administrators seek an extension for the holding of the second meeting of creditors from 3 April 2035 to 3 August 2025, pursuant to s 439A(6) of the Act. That provision provides:

(6)    The Court may extend the convening period on an application made during or after the period referred to in paragraph (5)(a) or (b), as the case requires.

47    In exercising such power, the Court is to have regard to the objects of Part 5.3A of the Act: see Algeri, Re WBHO Australia Pty Ltd (Admins apptd) (No 2) [2022] FCA 234, [16]: and ought:

… to strike an appropriate balance between, on the one hand, the expectation that administration will be a relatively speedy and summary matter and, on the other, the requirement that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders.

(Mighty River International Ltd v Hughes (2018) 265 CLR 480, 512 [73] (Mighty River), quoting Re Diamond Press Australia Pty Ltd [2001] NSWSC 313, [10]).

48    There are many “factors” that have been said to bear upon the exercise of the discretion that is conveyed by s 439A(6) of the Act: see Colley, Re PF Group Holdings Pty Ltd (Admins Apptd) [2024] FCA 792, [26]; Mighty River, 512 [73]; see also Pleash, in the matter of Consolidated Tin Mines Ltd (Administrators Appointed) [2016] FCA 931, [2] – [8]. In the present case, the following considerations are of relevance:

(1)    First, the Administrators are dealing with a complex set of contentious and significant matters. In particular, and as outlined in the Marsden Affidavit, they are “attempting to navigate the various issues arising from the substantial media interest and public scrutiny in the School, while attempting to ensure that it stays open and retains staff and students to allow the business to remain an attractive sale proposition”.

(2)    Second, Mr Marsden has deposed to his concern as to the veracity of the financial books and records of the Company. That is a matter which he and Mr Algeri ought investigate to the fullest extent possible which will, no doubt, take some time.

(3)    Third, the Administrators have prepared, and are actively running, a clear and detailed sales or recapitalisation campaign for the Company. That is a reasonable approach, and indeed, one to be expected having regard to the fact that the nature of the business of the Company is a large school. Any resultant sale or recapitalisation process cannot be done quickly; indeed, it will involve the preparation of substantial documents, and that necessarily requires an extension of time in which to do that. It is not controversial that the aforementioned process(es) enhances the prospects of a better return to creditors.

(4)    Fourth, an extension of the time in which the second meeting of creditors is to be convened will provide a greater opportunity for a DOCA to be progressed: see, eg, Albarran, Re Bonza Aviation Pty Ltd (Admins Apptd) [2024] FCA 575, [12].

(5)    Fifth, notice has been afforded to creditors of the Administrators’ intention to apply for an extension of the convening period by three to four months and no objection has been raised.

49    In those circumstances, it is appropriate to make the orders sought under s 439A(6) of the Act.

50    Ancillary “Daisytek” orders are also sought to enable the Administrators to hold, if they see fit, the second meeting of creditors at any time during or within five business days after the end of the convening period (as extended by the Court): Re Daisytek Australia Pty Ltd (admin apptd) (2003) 45 ACSR 446, 448 [10] – [14]. It has long been said that such orders are “sensible and now almost routine”: Re LED Builders Pty Ltd (admins apptd) [2008] NSWSC 633, [2]. There is no reason why, having granted an extension to the convening period of the second meeting of creditors, that the proposed Daisytek orders should not be made.

51    In sum, and for the reasons canvassed above, the orders proposed in the draft provided by the Administrators should be made.

Associate:    

Dated:    7 May 2025