[2024] WASC 508
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JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION : RE COPPER RESOURCES AUSTRALIA PTY LTD (ADMINISTRATORS APPOINTED) (ABN 641 083 445) & ORS; EX PARTE THOMAS DONALD BIRCH AS JOINT AND SEVERAL ADMINISTRATOR OF COPPER RESOURCES AUSTRALIA PTY LTD (ADMINISTRATORS APPOINTED) (ABN 641 083 445) & ORS [No 2] [2024] WASC 508
CORAM : HILL J
HEARD : 19 DECEMBER 2024
DELIVERED : 19 DECEMBER 2024
PUBLISHED : 6 JANUARY 2025
FILE NO/S : COR 195 of 2024
MATTER : IN THE MATTER OF COPPER RESOURCES AUSTRALIA PTY LTD (ADMINISTRATORS APPOINTED) (ABN 641 083 445) & ORS
EX PARTE
THOMAS DONALD BIRCH as joint and several administrator of COPPER RESOURCES AUSTRALIA PTY LTD (ADMINISTRATORS APPOINTED) (ABN 641 083 445)
First named First Plaintiff
JEREMY JOSEPH NIPPS as joint and several administrator of COPPER RESOURCES AUSTRALIA PTY LTD (ADMINISTRATORS APPOINTED) (ABN 641 083 445)
Second named First Plaintiff
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STEPHEN PHILLIP EAREL as joint and several administrator of COPPER RESOURCES AUSTRALIA PTY LTD (ADMINISTRATORS APPOINTED) (ABN 641 083 445)
Third named First Plaintiff
VICTORY BRIGHT RESOURCES PTE LTD
Interested Party
Catchwords:
Corporations – Administration – Where funding agreement entered between administrators – Application for order relieving administrators of personal liability – Turns on own facts
Corporations – Insolvency – Security interest over personal property – Where security interest securing obligations of funding agreement arose after appointment of administrators – Application for directions under s 90-15 of Sch 2 of the Corporations Act 2001 (Cth) that the administrators are justified in not seeking relief under s 588FL(2)(b)(iv) of the Corporations Act 2001 (Cth) – Application to the extent necessary to extend time for registration of security interest – Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 443A, s 443D, s 447A, s 588FL, s 588FM
Result:
Application granted
Directions made
Category: B
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Representation:
Counsel:
First named First Plaintiff
:
C Spencer
Second named First Plaintiff
:
C Spencer
Third named First Plaintiff
:
C Spencer
Interested Party
:
No appearance
Solicitors:
First named First Plaintiff
:
Thomson Geer – Perth
Second named First Plaintiff
:
Thomson Geer – Perth
Third named First Plaintiff
:
Thomson Geer – Perth
Interested Party
:
No appearance
Case(s) referred to in decision(s):
Mentha, Re Griffin Coal Mining Company Pty Ltd (Administrators Appointed) [2010] FCA 1469; (2010) 82 ACSR 142
Re Antquip Hire Pty Ltd (in liq) [2021] NSWSC 1122
Re Cubic Interiors NSW Pty Ltd (in liq) [2023] FCA 694
Re One Steel Manufacturing Pty Ltd (Administrators Appointed) [2017] NSWSC 21; (2017) 93 NSWLR 611
Re Yeeda Pastoral Company Pty Ltd (Administrators Appointed); Ex parte Tucker [2024] WASC 120
Secatore, Re Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493
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HILL J
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HILL J:
(This judgment was delivered extemporaneously and has been edited from the transcript to include references, headings and to correct matters of grammar and expression.)
1
By originating process filed on 10 December 2024, the plaintiffs, who are the joint and several administrators of Copper Resources Australia Pty Ltd (Company), seek a series of orders in relation to the conduct of the administration.
2
Specifically, the application before me today is for:
(a) directions that they would be justified in acting reasonably in entering into and drawing down on a funding agreement;
(b) orders for relief from personal liability for debts incurred during the administration; and
(c) ancillary orders, including orders in relation to whether an extension of time is required under s 588FM of the Corporations Act 2001 (Cth) (Act) for the registration of the security interest that is required by the funding agreement.
3
In support of the application, the plaintiff relied on five affidavits at the hearing before me today. They are four affidavits of Thomas Donald Birch, two filed 10 December 2024 (one open and one confidential); a supplementary affidavit filed 16 December 2024; and a further supplementary affidavit filed today. I have also had the benefit of an affidavit of Carole Cecilie Spencer, filed 17 December 2024, attesting to service of the application and affidavits on the Australian Securities and Investments Commission (ASIC), as well as submissions from both the plaintiffs and the Funder.
Factual background
4
The plaintiffs were appointed as joint and several administrators of the Company on 21 November 2024.
5
The Company’s primary asset and business is the open pit Rocklands copper mine in Queensland, together with the associated plant and infrastructure. At present, the Rocklands mine is on care and
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maintenance
, and was transitioned into that state prior to the appointment of the plaintiffs.1
6
The evidence of Mr Birch is that the administrators intend to undertake a sale process of the assets and interests of the Company, and that this is likely to take approximately six months.2 However, in order for this to occur, it is necessary for the plaintiffs to continue to maintain the assets on care and maintenance. At present, there is very little cash available to the plaintiffs to pay for this and, as a consequence, the plaintiffs approached various parties to provide funding for the administration. Earlier this month, the plaintiffs negotiated and have now agreed to the terms of a funding agreement with Victory Bright Resources Pte Ltd (Funder) (Loan Agreement).
Should directions be given for approval to enter in the Loan Agreement and to relieve the plaintiffs from personal liability?
7
Pursuant to s 443A of the Act, an administrator is personally liable for any debts they incur in the performance or exercise or purported performance or exercise of their functions and powers as administrators.
8
Pursuant to s 443D of the Act, an administrator is entitled to be indemnified out of the company’s property for the debts for which they are liable under s 443A.
9
If an administrator enters into a loan agreement with a financier, the loan and the interest payable on it are not considered to be a debt falling within the terms of s 443A of the Act and the indemnity that is contained in s 443D. For this reason, unless an order is made by the court modifying the operation of pt 5.3A of the Act, the administrators will be personally liable for the loan and any interest that is payable.
10
Section 447A of the Act empowers the court to make orders which limit the personal liability of an administrator where it is satisfied that the loan agreement is made for the purpose of allowing the company in administration to trade or to continue operating for the benefit of creditors.
1 Affidavit of Thomas Donald Birch filed 10 December 2024 [16].
2 Affidavit of Thomas Donald Birch filed 10 December 2024 [52].
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11
In Secatore, Re Fletcher Jones and Staff Pty Ltd (Administrators Appointed), Gordon J stated:3
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. (citations omitted)
12
Where these circumstances arise, courts have generally expressed the view that administrators should not be expected to expose themselves to substantial personal liabilities. Where orders are made relieving administrators from personal liabilities in respect of borrowings, the orders will permit the administrators to make commercial decisions about the ongoing operations of the company under administration by focusing on what is in the best interest of creditors, without any influence of the concern as to their personal liability.
13
The factors that the court will take into account on an application under s 447A of the Act to vary the liability of administrators under s 443A were summarised by Gilmour J in Mentha, Re Griffin Coal Mining Company Pty Ltd (Administrators Appointed) as follows:4
(a) 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;
(b) whether the arrangements proposed are to enable the company’s business to continue to trade for the benefit of the company’s creditors;
(c) whether creditors of the company are prejudiced or disadvantaged by the types of orders sought or whether they stand to benefit from the arrangement; and
(d) whether notice has been given to those who may be affected by the order.
3 Secatore, Re Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493 [23].
4 Mentha, Re Griffin Coal Mining Company Pty Ltd (Administrators Appointed) [2010] FCA 1469; (2010) 82 ACSR 142 [30].
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14
In this case, the key terms of the Loan Agreement can be summarised as follows.
(a) It is proposed that the plaintiffs enter into the Loan Agreement in their capacity as joint and several administrators of the Company, and the Company will be a party to the Loan Agreement.
(b) The Funder will make available to the plaintiffs a loan facility of $5 million.
(c) The terms of the Loan Agreement set out the time, the timing for how the loan facility can be accessed, as well as provisions for its repayment, the interest rate, as well as an establishment fee.
15
On the evidence before me, I am satisfied it is appropriate to make the orders sought for two primary reasons.
16
First, I accept that the purpose of the funding is to provide working capital for the administration and to fund the necessary care and maintenance of the assets of the Company. Without the continuing provision of care and maintenance services, I accept there is a significant risk that the value of the Company’s assets will be diminished.
17
Second, the plaintiffs’ proposed orders are, in my view, consistent with the interests of unsecured creditors, whose interests can be adequately preserved through an order permitting creditors to apply to vary or discharge the order. This is provided for in the plaintiffs’ minute of proposed orders dated 19 December 2024 (Minute).
Is relief required under s 588FM of the Act in relation to the registration of security interest required by the Loan Agreement?
18
The other orders that are sought by the plaintiffs today concern the question as to whether relief is required under s 588FM of the Act in relation to the registration of the security interest on the Personal Property Securities Register (PPSR), as required by the terms of the Loan Agreement.
19
This issue arises because of the question as to whether, by operation of s 588FL of the Act, the security interest created by the Loan Agreement, namely the general security agreement, which occurred after the appointment of the plaintiffs as external
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administrators
, vests in the Company. This issue arises because the general security agreement will not be registered until after the ‘critical time’ referred to in s 588FL(7)(a) of the Act, being the appointment of external administrators.
20
In this case, there is no question that the general security agreement which is proposed to be entered into is a security interest within the meaning of s 12 of the Personal Property Securities Act 2009 (Cth) (PPSA) as it secures payment of the obligations under the Loan Agreement.
21
Where a security interest is not perfected in the manner prescribed by the PPSA prior to the appointment of an external administrator, the security interest vests in the grantor.5 This vesting is irreversible.6
22
A security interest is perfected if it has attached to collateral, is enforceable against third parties, and certain extra steps (such as possession or control of the collateral or registration on the PPSR) have been taken to protect the interest.7
23
Pursuant to s 588FL of the Act, a security interest under the PPSA vests in the company on the appointment of a voluntary administrator if:
(a) the security interest is enforceable and was perfected by registration;
(b) it was registered within the six months preceding the administration or liquidation; but
(c) it was not registered within 20 business days after the grant, unless it was registered within such later time as is ordered by the court under s 588FM of the Act.
24
At present, as acknowledged in the submissions filed by the plaintiffs, there is a divergence on the authorities as the extent to which s 588FL of the Act applies to security interests that arise after the ‘critical time’ and before the company is no longer the subject of external administration.
5 Personal Property Securities Act 2009 (Cth) s 267.
6 Re One Steel Manufacturing Pty Ltd (Administrators Appointed) [2017] NSWSC 21; (2017) 93 NSWLR 611 [82] (Brereton J).
7 Personal Property Securities Act 2009 (Cth) s 21.
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25
In my reasons for decision in Re Yeeda Pastoral Company Pty Ltd (Administrators Appointed); Ex parte Tucker,8 I summarised this divergence as well as the basis upon which I concluded that the preferable construction was that of Brereton JA in Re Antquip Hire Pty Ltd (in liq)9 for the reasons given by Cheeseman J in Re Cubic Interiors NSW Pty Ltd (in liq).10 That decision represents my views on the matter. On this basis, I consider it is appropriate to make the order sought in paragraph 4 of the Minute.
26
That said, I accept there is utility in making the additional orders sought by the plaintiffs in order 5 of the Minute. This is because at the present, there is no intermediate appellate authority on the proper construction of s 588FL of the Act. The order sought by the plaintiff is conditional on there being a requirement for an extension of time for registration under s 588FM of the Act. I consider that the orders sought are practical and are an appropriate resolution of the issue confronted by the plaintiffs.
27
In my view, it would be just and equitable to make the orders sought by the plaintiffs as required by s 588FM(2)(b) of the Act. This is because the security interests granted by the plaintiffs form part of a transaction that has been entered into to enable the Company to maintain its assets on care and maintenance during the period it is under external administration. In my view, this will maximise the potential return to creditors and, on this basis, I consider it is just and equitable to make the orders sought.11
8 Re Yeeda Pastoral Company Pty Ltd (Administrators Appointed); Ex parte Tucker [2024] WASC 120.
9 Re Antquip Hire Pty Ltd (in liq) [2021] NSWSC 1122 [41] – [63].
10 Re Cubic Interiors NSW Pty Ltd (in liq) [2023] FCA 694 [49] – [81].
11 At the conclusion of the hearing, I made orders in terms of Annexure ‘A’.
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Annexure A
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I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KC
Associate to the Honourable Justice Hill
6 JANUARY 2025