Federal Court Allows Coal Supply Agreement for Griffin Coal Mining Company

OUTCOME: Allowed

FEDERAL COURT OF AUSTRALIA

[NAME], in the matter of The [COMPANY] ([NAME]) [2011] FCA 104 Citation: [NAME], in the matter of The [COMPANY] ([NAME]) [2011] FCA 104

Parties: [NAME], [NAME], [NAME] AND [NAME] [NAME] [NAME], IN THEIR CAPACITIES AS JOINT AND SEVERAL ADMINISTRATORS OF THE [COMPANY] ([NAME]) (ACN [PHONE]) and THE [COMPANY] ([NAME]) (ACN [PHONE])

File number: WAD 31 of 2011

Judge: GILMOUR J

Date of judgment: 14 February 2011

Legislation: Corporations Act 2001 (Cth) ss 443A 443D, 443E, 443F, 447A(1), 447D

Cases cited: [NAME]; in the matter of The [COMPANY] ([NAME]) [2010] FCA 30 [NAME]; in the matter of The [COMPANY] (No 2) ([NAME]) [2010] FCA 499 [NAME]; in the matter of The [COMPANY] ([NAME]) [2010] FCA 764 [NAME]; in the matter of [COMPANY] ([NAME]) (No 3) [2010] FCA 1087 [NAME]; in the matter of [COMPANY] ([NAME]) [2010] FCA 1469 [NAME]; in the matter of The [COMPANY] ([NAME]) (No 2) [2010] FCA 1470

Date of hearing: 8 February 2011

Place: Perth

Division: GENERAL DIVISION

Category: No catchwords

Number of paragraphs: 13

Counsel for the First & [NAME] [NAME]: Mr [COUNSEL]

Solicitor for the First & [NAME] [NAME] [NAME]

IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 31 of 2011

IN THE MATTER OF [COMPANY] ([NAME]) (ACN [PHONE]) BETWEEN: [NAME], [NAME], [NAME] AND [NAME], IN THEIR CAPACITIES AS JOINT AND SEVERAL ADMINISTRATORS OF THE [COMPANY] ([NAME]) (ACN [PHONE])

First Plaintiff

THE [COMPANY] ([NAME]) (ACN [PHONE])

[NAME]

JUDGE: GILMOUR J DATE OF ORDER: 8 FEBRUARY 2011 WHERE MADE: PERTH

THE COURT ORDERS THAT:

1. Directs pursuant to s 447D of the Corporations Act that the [NAME] were justified in causing the [NAME], The [COMPANY] ([NAME]) (ACN [PHONE]) ([NAME]), to enter into a coal supply agreement dated 21 December 2010 with [COMPANY] Ld ([NAME]) (Coal Supply Agreement).

2. Pursuant to s 447A(1) of the Corporations Act that Part 5.3A of the Corporations Act is to operate in relation to [NAME]: (a) so that any personal liability of the [NAME] pursuant to s 443A of the Corporations Act arising out of or in connection with the Coal Supply Agreement will only apply in respect of debts or liabilities accruing during the period of the voluntary administration of [NAME] and shall not extend to any liability that accrues or may be attributable to the period after the voluntary administration of [NAME] ends; (b) as if s 443A(1) of the Corporations Act provided that the debts and liabilities incurred by [NAME] pursuant to the Coal Supply Agreement and which accrue during the period of voluntary administration of [NAME] are debts incurred by the [NAME] in the performance and exercise of their functions and powers as administrators of [NAME] and are the subject of the right of indemnity referred to in s 443D for the purposes of s 443E and 443F; and (c) such that, notwithstanding paragraph (a), if the indemnity of the [NAME] under s 443D of the Corporations Act is insufficient to meet any amount for which the [NAME] may be liable arising out of or in connection with the Coal Supply Agreement, the [NAME] will not be personally liable to repay such amount to the extent of that insufficiency.

3. That Confidential Exhibit "BKM-10" to the affidavit of [NAME] affirmed on 15 December 2010 for proceeding WAD 399 of 2010 and Confidential Exhibit "BKM-12" to the affidavit of [NAME] affirmed on 1 February 2011 be kept confidential in the court file in these proceedings and not be accessed (other than by the [NAME]) without order of the Court on at least 48 hours' prior notice to the [NAME]' solicitors on any application seeking such an order.

4. The costs of this application be costs in the administration of [NAME]. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

First Plaintiff

THE [COMPANY] ([NAME]) (ACN [PHONE])

[NAME]

JUDGE: GILMOUR J DATE: 8 FEBRUARY 2011 PLACE: PERTH

REASONS FOR

JUDGMENT 1 I made orders in this matter on 8 February 2011. These are my reasons for so doing. 2 The [NAME] are administrators of various companies in the [COMPANY], including, the [NAME], [COMPANY] [COMPANY]. Each of the [NAME] is a partner of [NAME], an accounting firm. 3 The history of the various administrations is described in earlier decisions of the Court: [NAME]; in the matter of The [COMPANY] ([NAME]) [2010] FCA 30; [NAME]; in the matter of The [COMPANY] ([NAME]) (No 2) [2010] FCA 499; [NAME]; in the matter of The [COMPANY] ([NAME]) [2010] FCA 764; [NAME]; in the matter of The [COMPANY] ([NAME]) (No 3) [2010] FCA 1087; [NAME]; in the matter of The [COMPANY] ([NAME]) [2010] FCA 1469 and [NAME]; in the matter of The [COMPANY] ([NAME]) (No 2) [2010] FCA 1470. 4 The present application is similar to the application in [NAME]; in the matter of The [COMPANY] [NAME]) [2010] FCA 1469. It is supported by an affidavit of the [NAME] sworn on 1 February 2011. The administrators also rely on certain of the affidavit material read in this earlier decision. The administrators seek orders and directions pursuant to s 447A and s 447D of the Corporations Act 2001 (Cth) stating that they were justified in causing [COMPANY] to enter a particular long term coal supply contract, and to limit their liability as administrators under that contract in respect of any liabilities which might arise after they retire. The contract itself contains a provision with the desired limiting effect: cl 1A.2 of the coal supply agreement. 5 However, s 443A of the Corporations Act imposes personal liability upon the administrators in respect of liabilities to which it applies, despite any agreement to the contrary: s 443A(2). The only way to alter this is by way of orders modifying the operation of Pt 5.3A pursuant to s 447A of the Corporations Act. [ADDRESS] has the power to make orders of the type sought. I referred, in this regard, to the statutory provisions and the relevant authorities in [NAME]; in the matter of The [COMPANY] ([NAME]) [2010] FCA 1469 at [23]-[38]. 7 The administrators are of the view that it was and is in the best interests of the creditors of [COMPANY] for it to enter the coal supply contract. This is for two reasons. First, the agreement represented a valuable business opportunity for [COMPANY] to sell its coal product to a purchaser. [NAME], the administrators were concerned that a failure to enter such an agreement might lead to the company losing the opportunity to sell coal to this particular purchaser and that they would be placed in breach of a previously agreed heads of agreement. 8 The proposed orders limiting the administrators' liability are consistent with the agreed contractual position. Hence, the purchaser under the coal supply contract will suffer no prejudice, compared to what they consensually agreed, by the contemplated orders or the limitation of the administrators' liability. 9 The [COMPANY] unanimously support the application. 10 The only secured creditor, which is [NAME] [COMPANY], has acknowledged in correspondence with the first plaintiff, in effect, that it does not approve or disapprove of the proposed limitation orders. 11 In my view, the creditors will not be prejudiced by the orders limiting the liability of the administrators to exclude liabilities which arise after the administrators' retirement. I set out, in principle, the reasons for this previously in [NAME]; in the matter of The [COMPANY] ([NAME]) [2010] FCA 1469 at [45]-[46]. These reasons are apt also to this application. Indeed, it is, to the contrary, in the creditors interests that the orders be made. I accept the view to that effect expressed by the administrators. 12 I am also satisfied that there is a sound basis for making the confidentiality orders sought.

Conclusion 13 For all these reasons, I will make orders as sought in the application. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour.

Associate: Dated: 14 February 2011