Federal Court of Australia

Fung, in the matter of VeroGuard Systems Pty Ltd (Subject to Deed of Company Arrangement) [2026] FCA 539

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to section 447A of the Corporations Act 2001 (Cth) (Act), Part 5.3A of the Act is to operate with respect to the Second Plaintiff such that:

(a)    the liabilities of the First Plaintiffs – in their capacity as the former joint and several voluntary administrators of the Second Plaintiff – under section 443A of the Act for any amounts owed by them under the Funding Deed dated 16 January 2026 entered into with the Second Plaintiff and Seppeltsfield Pty Ltd ACN 127 078 228 in its capacity as trustee of the Seppeltsfield Estate Trust ABN 90 440 728 044 (Funding Deed), are limited to the amount for which there is property of the Second Plaintiff available to indemnify the First Plaintiffs under section 443D of the Act in respect of that liability; and

(b)    if the First Plaintiffs’ indemnity under section 443D of the Act is insufficient to meet any amount for which they may be liable under or in connection with the Funding Deed, they will not be personally liable to repay the amount of any such insufficiency.

2.    The First Plaintiffs give notice of this order to creditors of the Second Plaintiff by publishing a copy of the orders on the website,

https://kordamentha.com/creditors/veroguard-systems-pty-ltd/, within three business days of the date of this order.

3.    Liberty to apply is granted to any person who can demonstrate sufficient interest to apply to discharge or vary paragraph 1 of this order upon the giving of reasonable notice to the First Plaintiffs.

4.    The First Plaintiffs’ costs of and incidental to this application be costs in the deed administration of the Second Plaintiff.

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

REASONS FOR JUDGMENT

ANDERSON J:

Introduction and background

1    This application is made by the first plaintiffs, Michael Fung and Andrew Knight of KordaMentha, in their capacity as joint and several administrators of a deed of company arrangement with respect to the second plaintiff (VeroGuard Systems) (in this capacity, Deed Administrators). In short, the Deed Administrators sought orders limiting their liability, in their capacity as the former administrators of VeroGuard Systems, in relation to debts incurred under a funding agreement, to the amount for which there is property of VeroGuard Systems available to them through their indemnity. On 24 April 2026, I made the orders sought by the Deed Administrators. These are my reasons for doing so.

2    On 16 January 2026, VeroGuard Systems was placed into voluntary administration by its directors, and Mr Fung and Mr Knight were appointed as the joint and several administrators (in this capacity, Administrators), pursuant to s 436A of the Corporations Act 2001 (Cth) (Act).

3    The Administrators determined that it was in the best interests of creditors to continue to trade the business of VeroGuard Systems during the administration as this would optimise the prospect of a successful going-concern sale.

4    The Administrators received a deed of company arrangement proposal from RWG Technology Pty Ltd (Proponent), which is related to a number of the secured creditors of VeroGuard Systems. By their second report to creditors dated 13 February 2026, the Administrators recommended that the creditors accept the proposal as it would provide a superior return to all creditors compared to any other scenario.

5    At the second meeting of creditors on 20 February 2026, the creditors resolved to accept the Proposal. Thereafter, on 27 February 2026, a deed of company arrangement was entered into to give effect to the Proposal (the DOCA), and the Deed Administrators were appointed to administer the DOCA. VeroGuard Systems and the Proponent also entered into an Asset Sale Agreement.

The Funding Agreement

6    VeroGuard Systems was in a perilous financial position immediately prior to the Administrators’ appointment. It held limited cash and readily realisable assets by which to fund the administration. Thus, prior to their appointment, the Administrators sought proposals for external funding to meet the urgent funding requirements for the administration and to support the ongoing trading of VeroGuard Systems during the administration. The Administrators did not consider they could accept the appointment in the absence of funding being secured to meet their remuneration, costs and expenses.

7    On 16 January 2026, just prior to their appointment on that day, the Administrators entered into a funding deed with Seppeltsfield Pty Ltd in its capacity as trustee of the Seppeltsfield Estate Trust (Funder) and VeroGuard Systems (Funding Deed). One of the directors of the Funder is Mr Warren Dean Randall. Mr Randall is also related to eight of the 13 secured noteholders of VeroGuard Systems (either personally or through related entities) and is a director of the Proponent.

8    The relevant terms of the Funding Deed provide as follows:

(a)    the Funder would pay the Administrators the sum of AUD$1,778,000 (excl GST) (Funding Amount) to cover the Administrators' costs and expenses of acting as administrators, including six weeks of trading costs, remuneration, legal fees and costs associated with running a sale process;

(b)    the Administrators would not be personally liable for repayment of the Funding Amount: cll 2.10 and 3.1(3);

(c)    upon liquidation, the Funder's entitlement to repayment of the Funding Amount would rank pari passu with all other liabilities of the Administrators in accordance with s 556(1)(a) of the Act, and the amount to be repaid is limited to the assets of the Company available to the Administrators, subject to the indemnity provided to the Administrators under ss 443D and 443F of the Act: cl 3.5; and

(d)    the Funder would take all reasonable steps to assist the Deed Administrators in applying for orders under section 447A of the Act to limit personal liability: cl 3.6.

(e)    the Funding Amount provided by the Funder under the Funding Deed would be provided on a 10% per annum interest basis: cl 3.4(2)(b).

9    On 27 January 2026, the Administrators drew down upon the facility provided under the Funding Deed to fund VeroGuard Systems’ operating expenses, including the continued employment of staff, the payment of employee entitlements as they fell due, and the funding of costs associated with the conduct of the administration (including their remuneration and expenses). The Funding Amount has also been, and continues to be, used for those purposes, since VeroGuard Systems has been subject to the DOCA. Any part of the Funding Amount that remains unexpended following satisfaction of those purposes, will form part of the deed fund and be dealt with in accordance with the terms of the DOCA.

10    The Funder also provided, pursuant to the Funding Deed, an additional $162,500 to cover pre-appointment employee wages and associated PAYG tax and superannuation for the period between 1 January 2026 and 15 January 2026. This was advanced on 29 January 2026.

11    By this application, the Deed Administrators seek retrospective orders under s 447A of the Act, relieving the Administrators from personal liability in respect of amounts drawn down under the Funding Deed during the administration. The Deed Administrators rely upon the affidavit of Michael Fung affirmed on 14 April 2026 and filed 15 April 2026 and the affidavit of Rhiannon Ellaine Zahra, sworn on 23 April 2026.

Provisions and Principles

Section 447A of the Act

12    This application is brought under s 447A of the Act, which is found in Part 5.3A.

13    The objects of the voluntary administration regime contained in Part 5.3A are set out in s 435A of the Act. Those objects are to enable the business, property and affairs of an insolvent company to be administered in a way that:

(a)    maximises the chances of the company, or as much as possible of its business, continuing in existence; or

(b)    where that is not possible, results in a better return for the company's creditors and members than would result from an immediate winding up.

14    Section 447A of the Act contains a general power with respect to the modification of provisions of Part 5.3A of the Act. In the case of a company that has executed a deed of company arrangement, the Deed Administrators have standing to apply for relief under the provision: Act, s 447A(4)(d).

Limitation of personal liability

15    Section 443A of the Act imposes personal liability on administrators for debts they incur in the performance, or purported performance or exercise, of any of their functions and powers as administrators, including for the repayment of money borrowed, and interest in respect of money borrowed. The corollary of the imposition of personal liability under s 443A is the right of administrators, under s 443D, to be indemnified from the company’s property for debts or liabilities incurred during the administration (subject to limitations not presently relevant). Despite this protection, administrators face the risk of exposure to personal liability where there is insufficient property available to satisfy their statutory right of indemnity.

16    “Orders are commonly sought limiting an administrator’s personal liability where a company borrows funds from an external financier to fund the ongoing trading of the business during the administration”: Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) (2020) 144 ACSR 347; [2020] FCA 717 at [90] (Middleton J) citing Korda, in the matter of Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) (2017) 35 ACLC 17-044; [2017] FCA 1144 at [42] (Markovic J).

17    In Virgin (No 2), Middleton J observed at [91]:

There can be no doubt that in the appropriate circumstances, personal liability can be excluded with respect to any arrangement where that enables the company’s business to continue to trade for the benefit of the company’s creditors. Further, s 447A can also be used to avoid liability before it is imposed: Silvia v FEA Carbot Pty Ltd (2010) 185 FCR 301; [2010] FCA 515 at [14] (Finkelstein J).

18    The principles that apply in an application for relief from personal liability were extensively summarised by Sloss J in Re Unlockd Ltd (admin apptd) [2018] VSC 345 at [60] – [64]:

60    In the leading case of Secatore, Re Fletcher Jones and Staff Pty Ltd (admins apptd) [2011] FCA 1493 (Secatore), Gordon J stated (at [23]):

Section 447A(1) of the Act empowers the Court, in an appropriate case, to modify the operation of s 443A to exclude personal liability on the part of a voluntary administrator, and to provide that a loan taken by the company via the voluntary administrator is repayable on a limited recourse basis. Orders in similar terms have frequently been made in circumstances where the Court is satisfied that an administrator has entered into a loan agreement or other arrangement to enable the company’s business to continue to trade for the benefit of the company’s creditors: see, for example, Re Ansett Australia Ltd [(No 3) (2002) 115 FCR 409] at [49]; Re Spyglass Management Group Pty Ltd (admin apptd); Mentha (as joint and several admins of Spyglass Management Group Pty Ltd (admin apptd)) (2004) 51 ACSR 432; [2004] FCA 1469 at [6]; Sims, Re Huon Corporation Pty Ltd (admins apptd) (2006) 58 ACSR 620; [2006] FCA 1201 at [12]; Re Malanos [2007] NSWSC 865 at [13].

61    In such circumstances, courts have held that it is not to be expected that the voluntary administrators should expose themselves to substantial personal liabilities: see eg Re Renex Holdings (Dandenong) 1 Pty Ltd [2015] NSWSC 2003, [13] (Black J); Preston Preston, in the matter of Hughes Drilling Limited [2016] FCA 1175 (Hughes Drilling), [18] (Yates J). See also Korda, in the matterof Ten Network Holdings Ltd [2017] FCA 1144 at [43]–[44] (Markovic J).

62    In Secatore, Gordon J also observed (at [29]) that if orders are made relieving administrators from personal liability in respect of borrowings, it will permit them to make commercial decisions about the ongoing operations by focussing on what is in the best interests of the creditors ‘uninfluenced by concerns of personal liability.’

63    In Re Great Southern Infrastructure Pty Ltd [2009] WASC 161 (Great Southern) at [13], Sanderson M observed that:

The material consideration on such an application is whether the proposed arrangements are in the interests of the company’s creditors and consistent with the objectives of Pt 5.3A of the Act. To put that proposition positively — the question is whether the court is satisfied the proposed arrangements are for the benefit of the company’s creditors. To put it negatively — the question is whether the court is satisfied the company’s creditors are not disadvantaged or prejudiced by the proposed arrangement. These principles have been confirmed in a large number of cases.

64    In Re Mentha (in their capacities as joint and several administrators of the Griffin Coal Mining Company Pty Ltd (admins apptd)) (2010) 82 ACSR 142; [2010] FCA 1469, Gilmour J summarized the principles governing the granting of an application for orders under s 447A to vary the liability of administrators under s 443A as follows (at [30]):

(a)    the proposed arrangements are in the interests of the company’s creditors and consistent with the objectives of Part 5.3A of the Corporations Act: Re Great Southern at [13].

(b)    typically the arrangements proposed are to enable the company’s business to continue to trade for the benefit of the company’s creditors: Re Malanos at [9] and Re View [Gold Pty Ltd, View Resources Ltd & View Nickel Pty Ltd; Ex Parte Saker [2008] WASC 241] at [17].

(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: Re View at [18], and also Re Application of Fincorp Group Holdings Pty Ltd [2007] NSWSC 628 at [17].

(d)    notice has been given to those who may be affected by the order: Re Great Southern at [12].

19    The above summary by Sloss J has also been endorsed in this Court in Virgin (No 2) at [89], Birch, in the matter of Geelong Fire Services Pty Ltd (Administrators Appointed) [2022] FCA 963 at [26] (Moshinsky J), and Park (Administrator), in the matter of Ellume Limited (Administrators Appointed) v Evangayle Pty Ltd (Trustee) [2022] FCA 1102 at [33] (Downes J).

20    Further, relief may be granted under s 447A of the Act retrospectively; that is, as here, after the Administrators have incurred the relevant borrowing: In the matter of Green Camel Pty Limited [2024] NSWSC 1199 at [28], [34] – [44] (Nixon J). In Re Renex Holdings (Dandenong) 1 Pty Ltd [2015] NSWSC 2003, Black J noted that the relief under s 447A was sought retrospectively and said (at [14]):

However, as I noted above, that borrowing occurred on terms which contemplated that, so far as lawfully possible, the administrators would not incur personal liability for it and, in those circumstances, what is sought to be done by the order, in respect of that previous borrowing, is to give effect under Pt 5.3A of the Act to the terms on which that borrowing took place as a matter of contract. I see no particular difficulty with that course, so far as the Court would have been prepared, on the findings that I have reached, to give effect to such an order before it were made. Plainly, in seeking such an order after the event, the administrators have been exposed to a degree of commercial risk in the interim, but the fact that that order is sought after the event is no reason not to make it if it is otherwise a proper order to be made.

Limitation of Administrators’ Personal Liability Under Funding Deed

21    The Deed Administrators submit that the Court should make orders relieving the Administrators from personal liability under the Funding Deed for the following reasons.

22    First, the Administrators made a bona fide determination that it was necessary to obtain external finance to fund the administration and that the finance provided by the Funding Deed was in the best interests of creditors. VeroGuard Systems did not have sufficient readily realisable assets to enable the Administrators to meet their remuneration, out-of-pocket expenses and disbursements or to fund continued trading during the administration. The finance under the Funding Deed was necessary to enable the Administrators to accept the appointment and to meet these expenses. Without funding, the Administrators would have needed to cease operations, which would likely have resulted in the termination of all employees and a material diminution of the saleable value of VeroGuard Systems’ business and assets. The Administrators thus considered that the Funding Deed would maximise the prospect of a successful restructure and sale via a deed of company arrangement, which could provide a better return to creditors than liquidation.

23    Second, as it transpired, the additional time and opportunity to pursue a restructure and sale afforded via the administration, which was facilitated by the finance under the Funding Deed, enabled the Proposal to be put forward and the DOCA executed. This has resulted in the following favourable outcomes as compared with those that would have resulted in the liquidation counterfactual:

(a)    all employees being transferred to the Proponent on the same employment terms, and to the extent there was no agreement to the transfer, all employee entitlements and superannuation being paid out;

(b)    secured creditors receiving either repayment of part of their secured debt or a satisfactory reallocation or compromise of that debt under the DOCA; and

(c)    unsecured creditors receiving a share of the $300,000 cash contribution provided by the Proponent as a dividend distributed pari passu.

24    Third, the Administrators formed the view that the terms of the Funding Deed — including the provision of unsecured finance at 10% interest per annum, on a limited recourse basis — were fair and reasonable, given the short-term nature of the Funding Deed and the distressed financial position of VeroGuard Systems. The Administrators determined that the terms of the Funding Deed were better than could have been obtained from a third party in the market, particularly in light of the Funder’s motivation to fund the administration on terms that would enable its related entity, the Proponent, to put forward the DOCA proposal.

25    Fourth, the terms upon which it is proposed that the Administrators’ liability is to be limited by this application accord with the bargain reached with the Funder under the Funding Deed. The Administrators’ liability is expressed to be limited to the available property of VeroGuard Systems under clause 2.10 of the Funding Deed and further limited by clause 3.1. Further, by clause 3.6, the Funder expressly agreed to take all reasonable steps to assist the Administrators in applying for orders under section 447A of the Act to limit their personal liability. The only reason that this application has been necessary is that, despite the contractual limitations of liability, the Deed Administrators are concerned that s 443A of the Act may nevertheless operate to render the Administrators personally liable in the event that there is a shortfall in the available property of VeroGuard Systems.

26    Fifth, the Administrators did not make this application during the administration (and the Deed Administrators have now made the application retrospectively), because the Administrators’ time and resources were constrained during the administration; all available resources were directed to ensuring a favourable restructure and sale; and the Administrators were not otherwise before the Court as no extension of the convening period was sought. A retrospective application in similar circumstances was granted in Green Camel and Renex Holdings .

27    Sixth, the Funder, the Proponent, the Australian Securities and Investments Commission, and the creditors of VeroGuard Systems have been notified of this application, and no objections have been received. In any event, order 3 grants liberty to apply to any person who can demonstrate sufficient interest to discharge or vary the orders on the giving of reasonable notice to the Deed Administrators.

Disposition

28    I am satisfied that the relief sought in the Originating Process is appropriate and justified for the reasons advanced by the Deed Administrators and referred to above.

Associate:

Dated:    4 May 2026