Federal Court of Australia

Gammel v Strong Room Technology Pty Ltd (Receiver and Manager Appointed) (Administrators Appointed) [2025] FCA 1117

ORDERS

THE COURT ORDERS THAT:

Interlocutory Application

1.    The interlocutory process filed 12 May 2025 (the Application) be dismissed.

2.    The plaintiffs pay the costs of Intervalley Ventures Pty Ltd of the Application.

3.    The plaintiffs’ costs of the Application be costs in the administration of the defendant.

Confidentiality

4.    The Confidential Affidavit of Todd Andrew Gammel (affirmed 9 May 2025) (the Confidential Affidavit) and Exhibit CTAG-1 to the Confidential Affidavit be kept confidential until 4:00 pm AEST on 28 May 2025 or until further order by the Court.

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

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    On 28 March 2025, Messrs Todd Gammel, Matthew Levesque-Hocking and Barry Taylor (the Administrators) were appointed as the joint and several administrators of the defendant, Strong Room Technology Pty Ltd (SRT), under s 436A of the Corporations Act 2001 (Cth) (the Act).

2    The Administrators now seek to move on an Interlocutory Application filed 12 May 2025 (the Application), by which they seek directions, pursuant to s 90-15(1) of the Insolvency Practice Schedule (Corporations) (the IPSC), that they are justified in entering into, and giving effect to the substance of, two agreements found within binding term sheets. They also seek ancillary relief as to the making of confidentiality orders under the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) in respect of certain aspects of the material filed before the Court.

The relevant context

3    SRT develops and sells software to pharmacies and aged care facilities.

4    It was placed into voluntary administration on 28 March 2025. Some three days later, a creditor of SRT, EVP Opportunities Master Pty Ltd (EVP), obtained interlocutory freezing orders (the Freezing Orders) against SRT and the Administrators (as administrators of that company): see EVP Opportunities Master Pty Ltd as trustee for The EVP Opportunities Master Fund v Strong Room Technology Pty Ltd (Receiver and Manager Appointed) (Administrators Appointed) [2025] FCA 548 (EVP Opportunities (No 1)). Those orders were made in light of a series of serious allegations that pertained to a $10.4m equity investment, made by EVP in SRT, in early 2025: see also EVP Opportunities Master Pty Ltd as trustee for the EVP Opportunities Master Fund v Strong Room Technology Pty Ltd (Administrators Appointed) [2025] FCA 594.

5    On 11 April 2025, the Administrators filed an Originating Process that sought orders that they were justified in both “entering into and performing” a binding term sheet. As summarised by Mr Gammel in an affidavit filed 12 May 2025 (the Gammel Affidavit), that term sheet:

… allowed [the Administrators] to use the cash in the Company Account – which was, and remains, the subject of the Freezing Orders – to trade on the business of the Company with a view to effecting a sale of its business, or some or all of its assets, as a going concern.

The orders sought by the Administrators, as well as ancillary confidentiality orders, were made by Justice Markovic (as Commercial and Corporations Duty Judge) on 11 April 2025.

6    Since then, the Administrators have, relevantly, negotiated and executed certain agreements (the Sale and Facilitation Agreements) which (a) seek to cause, in effect, the sale of the business and assets of SRT to SRSPV Pty Ltd (SRSPV); (b) will not take effect “unless and until” the directions sought by the Application are made; and (c) are, in some respects, price-sensitive and confidential (see infra [41]). Those agreements have been carefully considered by the Administrators, who have issued a Report to Creditors and indicated that, in their view, entry into the Sale and Facilitation Agreements (and the subsequent liquidation of SRT) would enure to the benefit of the creditors of SRT “more so” than other proposals – including, relevantly, entry into a deed of company arrangement (DOCA) proposed by InterValley Ventures Pty Ltd (InterValley) on 5 May 2025. This is said to be because, inter alia, the proposed transactions will bring certainty and speed to the resolution of the claim that underlies the Freezing Orders.

7    Several peripheral observations may be added at this juncture:

(1)    the Application is opposed by InterValley, a creditor of SRT.

(2)    the Application came before Justice Lee, as Commercial and Corporations Duty Judge, on 13 May 2025. His Honour declined to grant the relief sought on that occasion, and the Application was adjourned to today, 21 May 2025.

(3)    the Administrators, having traded the business of SRT, have depleted the funds that are available to them. As made clear in the Gammel Affidavit:

If we [the Administrators] do not effect the sale of the Company’s assets, the Company would have to immediately cease to trade and terminate employees, unless further funding becoming available. …

Such lack of funding provides at least some general reason for the manner in which the Application has come before the Court and the nature of evidence adduced.

(4)    for reasons which are not entirely clear, a Second Meeting of Creditors was held on 13 May 2025 (and immediately adjourned by the Administrators for up to 45 business days (that is, until 15 July 2025) pursuant to s 70-140 of the IPSC).

That which has occurred since 13 May 2025

8    Mr Gammel deposes, in an affidavit filed 20 May 2025, to those events which have transpired since 13 May 2025. It is a fair comment to say that there is not a great deal of variation in the circumstances that were before Lee J and those before the Court today. The underlying facts remain largely the same. The Administrators still seek orders that they are justified in entering into and performing the Sale and Facilitation Agreements. The creditors of SRT have not been further informed of the nature of such agreements. As such, a question arises as to whether it is appropriate to grant the Application where the circumstances before the Court largely mirror those in which Lee J considered it inappropriate to do so. That is not an easy question.

The relevant principles

9    On the petition of a person with a financial interest in the external administration of a company, the Court may, inter alia, make such orders “as it thinks fit” in relation to the administration: ss 90-15(1), 90-15(2)(b) and 90-20(1)(a) of the IPSC. Here, SRT is in external administration: s 5-15(c) of the IPSC. The Application is pressed by the Administrators who, by reason of ss 5-30(a)(iii) and 5-20(a) of the IPSC, hold a “financial interest” in that administration.

10    The Court should not be reluctant to assist administrators where it is appropriate to do so. Such sentiment is reflected in the breadth of the statutory power conferred by s 90-15(1) of the IPSC: see, eg, 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]. The circumstances in which it has been considered to be appropriate to exercise such power were articulated in the parties’ written submissions and are well known to the Court: see, eg, Re One.tel Ltd (2014) 99 ACSR 247, 255 – 256 [32] – [35]; In the matter of Rubix Investments Group Pty Ltd (in liq) [2018] NSWSC 1184 [31] – [32]; Re Octaviar Administration Pty Ltd (in liq) (2015) 107 ACSR 1, 3 [13]; Krejci, in the matter of Union Standard International Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 1111 [7] – [10]; Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409, 428 [65].

11    In In the matter of KSK Holdings (Australia) Pty Ltd (in liquidation) [2019] NSWSC 1463, Rees J observed (at [18]) that:

… The Court will not generally give a direction where the matter relates to the making or implementation of a business or commercial decision or when no legal issue is raised, or where there is no attack on the propriety or reasonableness of the liquidator’s decision, but it may do so where there is the prospect of such an attack …

(citing Re Dungowan Manly Pty Ltd (in liq) [2018] NSWSC 1083 [17] and In the Matter of 7 Steel Distribution Pty Ltd (in liq) (Receivers and Managers Appointed) [2013] NSWSC 669 [20]; see also Re Aerison Group Ltd (Administrators Appointed) [2023] WASC 274 [47]).

12    I note the application of this proposition appears to have been a forefront concern in the hearing before Lee J last week. Today, Mr Mirzai for the Administrators submits that:

… the Plaintiffs seek the guidance of the Court on account of the reasonableness of them entering, and causing the Defendant to enter, the interrelated Term Sheets.

and:

… the Plaintiffs envisage that their entry, and them causing the Defendant’s entry, into [the Sale and Facilitation Agreements] may give rise to criticism being levelled at them …

13    Against this, Mr Robertson for InterValley suggested no question vis-à-vis the reasonableness or propriety of the Administrators’ conduct had arisen: “the Administrators do not require, and should not be given, the Court’s imprimatur to enter into the Sale Agreement and/or the Facilitation Agreement, which is a commercial decision for the Administrators and not a matter for the Court”. Nonetheless, a fundamental tenet of InterValley’s opposition to the Application appears to be, in substance, that the Administrators acted unreasonably in failing to address all issues which might be ventilated in relation to the appropriateness of the Sale and Facilitation Agreements. For instance, it was said in the written outline of submissions for InterValley that:

… based on the evidence, the Court cannot be satisfied that the Administrators’ decision to enter into the Sale Agreement and the Facilitation Agreement is, in all the circumstances, a proper one …

14    In other words, it appears that InterValley would like to have it both ways.

15    Ultimately, on the material before the Court, the power in s 90-15(1) of the IPSC is sufficiently enlivened. The Court has jurisdiction to exercise such power (see supra [9]) and, having regard to the allegations raised by InterValley as to the propriety of the Administrators’ entry into, and pursuit of, the Sale and Facilitation Agreements, there appears to exist a fair basis on which the Court may give its imprimatur. InterValley have certainly raised sufficient concern for the Administrators to take a prudent course to seek the endorsement of the Court.

16    That being so, the question nevertheless remains: should the Court give such imprimatur? In this, it is necessary to deal with the objections raised by InterValley and ascertain whether they are sufficient to dissuade the Court from exercising the s 90-15 power without further inquiry.

17    I add “without further inquiry” because of the manner in which the matter has come before the Court. It has been brought, as a matter of urgency, on the Commercial and Corporations List. That is entirely proper. However, it necessarily raises some concern that, owing to the urgency of the matter, there has been little time in which to hear and address the considerations relevant to the resolution of the Application and, in turn, reach a reasoned and concluded determination as to the appropriateness of the Administrators’ conduct. That urgency, it should be added, is somewhat self-inflicted, for the Sale Agreement contains the following condition precedent:

… [various operative provisions] of this Term Sheet will not take effect unless and until the Administrators have obtained directions from the Court under s 90-15(1) of the Insolvency Practice Schedule (Corporations) that the Administrators are justified in entering into this Term Sheet and the Transaction Documents … which must be obtained no later than 7 days from [6 May 2025].

(Emphasis added).

18    It is also noted that the Court has very little time to deal with these matters if they are set down, and have to be dealt with, as a matter of urgency. The reality of such is that, generally speaking, the Court should be reluctant to act upon an application such as the present if there is sufficient doubt as to its merit, even if, upon closer and better inspection, that doubt might be ameliorated.

Are the objections raised by InterValley sufficient to dissuade the Court from exercising the power conferred by s 90-15(1) of the IPSC without further inquiry?

19    InterValley offered three general reasons as to why the Application should be refused.

20    First, it was said that (a) the decision to enter into an agreement to sell the assets of SRT is, in effect, a “business and commercial decision”; and (b) the Court should not exercise the power under s 90-15(1) of the IPSC to give advice and directions to the Administrators which “does no more than sanction the making and implementation of a business or commercial decision in respect of which no particular legal issue is raised or in respect of which there is no potential to bring into question the propriety or reasonableness of the decision”. That should be rejected. As borne out below, InterValley themselves make sure that that is not the case by raising a host of issues which strike at the propriety and reasonableness of the Administrators’ decisions.

21    Second, it was said that the Administrators had not identified any “good reasons” as to why the Court should approve their entry into the Sale and/or Facilitation Agreements in circumstances where the company’s creditors were yet to be afforded the opportunity to decide upon the future of SRT at a Second Meeting of Creditors. There is, with respect, some force in that submission.

22    It is, of course, not inappropriate for administrators to sell the assets of a company’s business for the purposes of facilitating the conclusion of the administration (and, particularly, if it was to restore the company to a position of liquidity and solvency). In that vein, the Administrators’ decision to sell the assets of SRT’s business outside of any DOCA is not one that, by its nature, ought to be criticised; indeed, the evidence tendered before the Court shows that they undertook a competitive, open market sale process and have identified a preferred bidder (SRSPV) who appears to have the support of EVP for the purposes of the sale. It is noted that that bidder is responsible for the business operations of SRT (pursuant to an Operations Licence Agreement) and is, thereby, in the best position to tender for the sale. There is nothing inherently wrong with that at all; indeed, on any objective view, it is sensible that they would seek to pursue such a course.

23    Though it may be ostensibly reasonable for the Administrators to enter into the Facilitation and Sale Agreements, that does not mean such a decision ought to be taken out of creditors’ hands (or their position otherwise ignored), particularly if, as here, there is a countervailing proposal.

24    As best as can be ascertained, the DOCA proposed by InterValley will likely extinguish a series of allegedly valuable claims (e.g., for insolvent trading, unfair preferences) that may be pursued by SRT for the benefit of its creditors. The weight that is to be accorded to such a “deficiency” in any assessment of the future of a company in administration is, in the usual course, a question for the relevant creditors. That being so, there was, with respect, a lack of evidence that sought to rationalise the Administrators’ desire to circumvent such a process and deny the creditors of SRT an opportunity to be heard vis-à-vis the fate of the company at a second meeting.

25    In this context, it is noted that the Administrators perceived, and gave evidence, that entry into the Sale Agreement (and ensuing liquidation of SRT) “was and remains in the best of interests of the Company’s creditors, more so than the DOCA Proposal”. If that be so, it is slightly curious that they do not wish to put such a proposal and recommendation to the creditors for their consideration. The reason for doing so was not made clear. It may be that, to some extent, other creditors control the second meeting and/or what is likely to occur in it. I do not know. That uncertainty does little to satisfy the Court of the propriety of the Administrators’ actions.

26    Third, it was said that there were aspects of the Administrators’ treatment of EVP and its claims against the Company which were “unusual and require[d] close scrutiny”.

27    There was some faint suggestion of inappropriateness in the appointment of the Administrators. Such point was, however, not pressed and it does not bear much, if any, relevance.

28    Another concern raised was that the Administrators had failed to have the Freezing Orders set aside or otherwise discharged. That might have been prudent in the circumstances; however, it is not of significance here, even if the consequence is that it affords EVP, a shareholder of SRT, the opportunity, in a way, to influence the outcome of the administration.

29    It was further suggested that the creditors were not given the sufficient opportunity to be heard about the Administrators’ entry into the relevant agreements. That is a matter which may be relevant in some circumstances; here, however, where the Administrators have pursued open-market bids in respect of the sale, I do not apprehend that they needed to tell the creditors absolutely everything they did or the results of such. That is not to say that they did not do so on this occasion. Indeed, the evidence before the Court makes clear that the Administrators have been up-front with the outcome of their actions. To that, it might be added that although the creditors have not been served with all the material for the purposes of today’s application, the orders sought by the Administrators afford them an opportunity to come to the Court to set aside the orders if they are dissatisfied with them. Whilst that is an ameliorating factor, it is certainly no panacea for the Court making the orders in the first instance and then requiring creditors to attend the Court and try to set aside an order that has already been made.

30    Another point of significance raised was the Administrators’ failure to obtain “experienced counsel” in relation to certain sale aspects (citing, inter alia, Re Spedley Securities Ltd (In liq) (1992) 9 ACSR 83; Re Windsor Development Co Pty Ltd (in liq) (No 2) [2024] VSC 297 [92] – [94]). Mr Mirzai characterised such a submission as irrelevant: the cases cited “concern s 477(2B) of the Corporations Act, which are strictly applications for approval of settlements. … It does not concern a proposed injection of funds into the company from a sale of the business as a going concern, for example, and the basis upon which that sale is to occur”. That, with respect, understates the importance of what is sought to be done by the Sale Agreement.

31    The Sale Agreement, as it exists, contemplates the resolution of EVP’s extant and (substantial) claim. That claim is framed, as best as can be understood, as a proprietary claim; prima facie, there is some substance in that, though whether it can be maintained is presently unknown: see EVP Opportunities (No 1) [10] – [13]. All that needs to be said is that the claim is significant and not uncomplicated, and one might reasonably have thought that the Administrators would have sought appropriate legal counsel before seeking to resolve it as they have. They claim to have done so. However, all that is said in their affidavit material is really mere assertion of the obtaining of advice. As such, the Court is unable to consider its veracity, nature or extent. That is not insignificant in these circumstances, for it leaves not trivial questions to be answered.

32    Mr Robertson also raised concern as to the operation of s 563A of the Act and, in particular, whether EVP’s claims against SRT are subordinate to the claims of its creditors (“by reason of the fact that EVP’s claims arise from the buying, holding, selling or otherwise dealing in shares in the Company”). If it is, that is not insignificant and would, perhaps, render the way in which the claims are dealt with in the Sale and Facilitation Agreements as open to comment.

Conclusion

33    The evidence available on this Application is perhaps not as strong as it could have been. While I suspect that is owing to the fact that the Administrators have not been entirely well funded in this matter, I must decide the Application upon the basis it is put before the Court. As it stands, the evidence suggests the Administrators have acted as best they can to pursue a good outcome in the administration of SRT. That is a view which is adopted only at a very general level.

34    It also seems (again, at a high level) that InterValley is motivated by its self-interest rather than seeking to ensure that the Administrators secure the best outcome for the company. That is not a criticism. InterValley is entitled to pursue that course which it perceives to be the best for it. It does, however, give colour to their submissions. While they were put upon the basis that the Court should act in the interests of the creditors of SRT, the reality instead appears to be that it is acting in its own interests and it does not have any real desire to see that the best outcome of the administration, for the benefit of the unsecured creditors, is ultimately achieved.

35    That being said, I am not in a position on today’s application to conclude that I have sufficient information to accept the Facilitation and Sale Agreements as appropriate in the circumstances. That is because of the matters to which I have referred to as being missing in terms of evidence, and I think that questions must remain as to whether or not the Sale Agreement is as good as it could be. I am also of the opinion that, in the circumstances where I cannot second-guess the outcome of the second creditors meeting, where no doubt the creditors will act in their interests, and there is no evidence to suggest that one person or entity has a dominating form of control over such meeting, ultimately the matter should be left to the creditors of SRT to decide their own future and the benefits which they might receive from a DOCA or a sale.

36    Part of that conclusion is the product of the fact that I simply do not have sufficient information or, in the circumstances of urgency, sufficient time to analyse and consider where the merits lie on each of those issues. A different outcome might arise in other circumstances were the issues more easily defined and more easily established, but that is not this case.

37    Thus, in the circumstances of this case, though I accept that the power exists to give a direction under s 90-15(1) of the IPSC, I am unable to do so. On that basis, I dismiss the Application.

Costs

38    Costs normally follow the outcome. Here, InterValley successfully opposed the Application.

39    Issues had been raised by InterValley as to the propriety of the Administrators’ conduct. The Administrators were, therefore, put in the position of having to either not make the Application or not pursue the Sale and Facilitation Agreements. That is, undoubtedly, a difficult position. They have opted to make the Application. As noted, that was not inappropriate, for there is an avenue available under s 90-15 of the IPSC for administrators to make applications of this ilk.

40    In this case, the appropriate orders are that InterValley should have its costs of the Application, and the Administrators’ costs should be their costs in the administration of SRT. I am not privy to any circumstance that might prevent the Administrators recovering their costs from SRT or its assets in due course. Though one might perceive, perhaps, a higher level of unfairness about such orders, they seem to be appropriate according to what is, ultimately, the justice of the case.

Confidentiality orders

41    The orders for confidentiality should still be made. I am prepared to make orders protecting, in the interim, the confidentiality of documents identified by Mr Mirzai as being confidential. The legal representatives for the Administrators should promptly see to the redaction of those documents of only the truly sensitive parts, which should, in due course, be filed with the Court.

Note

42    These are the amended and revised reasons for judgment given on 21 May 2025. Whilst the reasons given above refine and develop those that were delivered ex tempore, the substance of what was said on 21 May has not been changed nor has any other material change been made.

Associate:    

Dated:    10 September 2025

SCHEDULE OF PARTIES