Federal Court Allows Sale of Company Property Subject to Security Interests

OUTCOME: Allowed

FEDERAL [COMPANY_1] (Administrators Appointed), in the [COMPANY_1] (Administrators Appointed) [2019] FCA 1861 File number: NSD 612 of 2019

Judge: MARKOVIC J

Date of judgment: 8 May 2019

Date of publication of reasons: 14 November 2019

Legislation: Corporations Act 2001 (Cth) ss 442C, 443B(2)(a), (3); 447A, Sch 2 s 90-15

Cases cited: [COMPANY_2], in the matter of [COMPANY_3] (in liq) v [COMPANY_3] (in liq) [2018] FCA 541 [NAME_4], in the matter of [COMPANY_5] (Administrators Appointed) [2017] FCA 486

Date of hearing: 26 April 2019 8 May 2019

Registry: New South Wales

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Category: No Catchwords

Number of paragraphs: 40

Solicitor for the Plaintiffs: [redacted]

Solicitor for the Plaintiffs: [redacted]

Counsel for Electrolux, Mitsubishi and BSH: [NAME_8] of [NAME_8] 612 of 2019 IN THE [COMPANY_1] (ADMINISTRATORS APPOINTED) ACN [PHONE] BETWEEN: [NAME_9], [NAME_9] AND [NAME_9] IN THEIR CAPACITIES AS [COMPANY_9] (ADMINISTRATORS APPOINTED) ACN [PHONE] IN ITS OWN CAPACITY AND AS TRUSTEE OF THE TRUSTS LISTED IN THE SCHEDULE

[COMPANY_1] (ADMINISTRATORS APPOINTED) ACN [PHONE]

Second Plaintiff

JUDGE: MARKOVIC J DATE OF ORDER: 26 APRIL 2019

THE COURT ORDERS THAT:

1. The first plaintiff (Administrators) has leave pursuant to s 442C(2)(c) of the Corporations Act 2001 (Cth) (Act) to dispose of such property of [COMPANY_1] (Administrators Appointed) ACN [PHONE] (Company) that is subject to a security interest under the Personal Property Securities Act 2009 (Cth).

2. In relation to any proceeds realised from the sale of the property pursuant to Order 1 (Proceeds), the Proceeds are to be deposited into a separate controlled monies account operated by the Administrators and which may only be accessed by the Administrators for the purpose of: (a) the payment of the Administrators' reasonable costs and expenses incurred in the care, protection, preservation and/or realisation of the property referred to in Order 1 which includes the Administrators' costs of this proceeding, the identification of potential security interests and the identification and sale of property as may be subject to such potential security interests (Administrators' Fees); (b) paying the sum of $43,000 into a separate account of the Administrators (to be held until further order of the Court) for the purpose of meeting any claim that might be made by any of the Landlords; (c) the distribution of the balance of the Proceeds to the entitled parties, which may only occur: (i) after payment of the Administrators' Fees; (ii) after such time that the Administrators and the [COMPANY_10] have reached agreement as between them as to the distribution of the balance of the Proceeds; or (iii) absent such agreement being reached between the Administrators and the [COMPANY_10] by 29 June 2019, as directed by the Court.

3. Pursuant to s 447A of the Act, Pt 5.3 of the Act is to operate in relation to the Company as if, notwithstanding: (a) section 442C(7) of the Act; and (b) the payment of the Administrators Fees from the Proceeds, the rights of the [COMPANY_10] between one another including in relation to the balance of the Proceeds are preserved as if the property was not disposed of pursuant to Order 1.

4. Pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) (FCA Act), the Administrators be appointed as court-appointed receivers of the trust property owned by the Company as trustee for the [COMPANY_11] with all the powers under s 420 of the Act as if the reference to a "corporation" in that section were a reference to the Company as trustee for the [COMPANY_11].

5. Pursuant to s 57 of the FCA Act, the Administrators be appointed as court-appointed receivers of the trust property owned by the Company as trustee for the P.R. & K.M.[COMPANY_18] Family Trust with all the powers under s 420 of the Act as if the reference to a "corporation" in that section were a reference to the Company as trustee for the P.R. & K.M.[COMPANY_18] Family Trust.

6. Save in relation to any proceeds (in respect of which the Administrators' entitlements as to costs and expenses are set out in Order 2), any other costs, disbursements and expenses incurred by the Administrators as receivers of the trust property referred to in Orders 4 and 5 shall be paid in priority from the property of the relevant trust.

7. The plaintiffs to serve a copy of these Orders on the [COMPANY_10] (as set out at p 11 of Ex MJR-1), the Landlords and the directors of the Company by way of email to the addresses notified to the Administrators by those creditors and persons with service to be effected by 5.00 pm on Monday, 29 April 2019.

8. The plaintiffs and any person affected by these Orders, including any of the Landlords, any secured creditor, or beneficiary of any trust (the subject of Orders 4 and 5) has liberty to restore on 24 hours' notice.

9. The proceeding be listed for case management hearing before Markovic J on 8 May 2019 at 9.30 am. For the purpose of these Orders, Landlords mean: 10. [COMPANY_12], being the lessor in respect of the premises located at 321 [ADDRESS] [POSTCODE] 11. [COMPANY_13], being the lessor in respect of the premises located at 158-160 [ADDRESS] [POSTCODE] 12. [COMPANY_14], being the lessor in respect of the premises located at 5 Koonya Circuit, Caringbah NSW [POSTCODE] 13. [COMPANY_15], being the lessor in respect of the premises located at 7 Koonya Circuit, Caringbah NSW [POSTCODE] 14. [NAME_16], being the lessor in respect of the premises located at 6 [ADDRESS] [POSTCODE] 15. [COMPANY_17], being the lessor in respect of the premises located at 233-237 [ADDRESS] [POSTCODE] 16. [COMPANY_17], being the lessor in respect of the premises located at 241 [ADDRESS] [POSTCODE] Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS NSD 612 of 2019 IN THE [COMPANY_1] (ADMINISTRATORS APPOINTED) ACN [PHONE] BETWEEN: [NAME_9], [NAME_9] AND [NAME_9] IN THEIR CAPACITIES AS [COMPANY_9] (ADMINISTRATORS APPOINTED) ACN [PHONE] IN ITS OWN CAPACITY AND AS TRUSTEE OF THE TRUSTS LISTED IN THE SCHEDULE

[COMPANY_1] (ADMINISTRATORS APPOINTED) ACN [PHONE]

Second Plaintiff

JUDGE: MARKOVIC J DATE OF ORDER: 8 MAY 2019

THE COURT ORDERS THAT:

1. Order 1 of the Court's Orders made on 26 April 2019 (26 April Orders) is vacated.

2. The first plaintiff (Administrators) has leave nunc pro tunc pursuant to s 442C(2)(c) of the Corporations Act 2001 (Cth) (Act) to dispose of such property of [COMPANY_1] (Administrators Appointed) ACN [PHONE] (Company) that is subject to a security interest under the Personal Property Securities Act 2009 (Cth) whether that property is held by the Company in its own right or as trustee of any of the trusts listed in the schedule to these Orders.

3. In relation to any proceeds realised from the sale of the property pursuant to Order 2 (Proceeds), the Proceeds are to be dealt with in accordance with Order 2 of the 26 April Orders.

4. Pursuant to s 90-15 of the Insolvency Practice Schedule, the Administrators would be justified in: (a) disposing of the property of the Company under Order 2; (b) disposing of the property of the Company in their capacity as administrators of the Company; and (c) dealing with the Proceeds in accordance with Order 3.

5. The plaintiffs are to serve a copy of these Orders on the [COMPANY_10] (as set out at p 11 of Ex MJR-1), the Landlords (as defined in the 26 April Orders) and the Directors of the Company by way of email to the addresses notified to the Administrators by those creditors and persons with service to be effected by 5.00 pm on 9 May 2019.

6. The proceeding be listed for case management hearing on 18 July 2019 at 9.30 am before the Commercial and Corporations Duty Judge or a docket Judge to be allocated by the National Operations Registrar. THE COURT NOTES THAT:

7. The plaintiffs intend to retire from their appointment as receivers of the trust property owned by the Company as trustee for the P.R & K.M [COMPANY_18] Family Trust and as trustee for the [COMPANY_11]. The solicitors for the plaintiffs will provide draft orders to be made in Chambers to give effect to that retirement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MARKOVIC J: 1 This proceeding first came before me on 24 April 2019 in my capacity as Commercial and Corporations Duty Judge. Relevantly, the first plaintiffs are [NAME_9], [NAME_9] and [NAME_9] in their capacity as joint and several administrators (Administrators) of [COMPANY_1] (administrators appointed) ([NAME_1]). The proceeding came back before me on further occasions. Relevantly: (1) on 24 April 2019 I made orders pursuant to s 447A of the Corporations Act 2001 (Cth) (Act) in relation to subss 443B(2)(a) and (3) of the Act, in respect of [NAME_1], the effect of which was to extend the period during which the Administrators would not be liable for rent and other amounts for property used by [NAME_1]; (2) on 26 April 2019 (26 April Orders) I made a number of orders including orders pursuant to ss 442C and 447A of the Act and orders pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) appointing the Administrators as receivers of the trust property owned by [NAME_1] as trustee for each of the [COMPANY_11] ([NAME_11]) and the P.R. & K.M.[COMPANY_18] Family Trust ([COMPANY_18]); (3) on 8 May 2019 I made orders varying the April Orders by vacating the order that had been made pursuant to s 442C(2)(c) of the Act and making a further order pursuant to that section to operate nunc pro tunc and made further orders including an order pursuant to s 90-15 of the Insolvency Practice Schedule, being Sch 2 to the Act (IPS); and (4) on 10 May 2019 I made orders retiring the court-appointed receivers of the trust property owned by [NAME_1] as trustee for the [NAME_11] and for the [COMPANY_18]. 2 These are my reasons for making Orders 1, 2 and 3 on 26 April 2019 as varied by Orders 1, 2 and 3 made on 8 May 2019 and for making Order 4 on 8 May 2019. 3 As noted above, orders were made retiring the court-appointed receivers shortly after their appointment when the Administrators had, with the assistance of a director of [NAME_1], identified the terms of the relevant trust deeds and ascertained the current terms of the trust deeds for each of the [NAME_11] and the [COMPANY_18] and that the relevant deeds did not contain an ipso facto clause which would terminate [NAME_1]'s appointment as trustee upon appointment of a voluntary administrator.

background 4 [NAME_1] operated a business known as "Seconds World" which sold electrical goods from five different leased locations across Sydney. The business also leased a warehouse in Auburn. The Administrators were appointed to [NAME_1] on 15 April 2019. 5 In the period following their appointment to 24 April 2019 the Administrators undertook a number of tasks including general administrative tasks such as holding discussions with [NAME_1]'s directors, securing the books and records of [NAME_1] and reviewing those records; complying with their statutory obligations; liaising with [NAME_1]'s employees and its creditors; arranging for the businesses and assets of [NAME_1] to be advertised for sale; and conducting preliminary investigations as required by s 438A of the Act. 6 Based on their investigations, the Administrators had identified that as at 24 April 2019 [NAME_1] appeared to owe creditors approximately $7m.

Stock 7 As at the date of the Administrators' appointment [NAME_1]'s books and records indicated that [NAME_1] held stock with an at cost value of approximately $2m. Based on a stocktake undertaken following the Administrators' appointment, there were approximately 10,000 items of stock primarily consisting of different kinds of electrical goods of different brands. 8 A search of the Personal Property Securities Register ([NAME_19]) conducted on 28 March 2019 showed that there were 213 security interests registered against the ACN of [NAME_1] and three securities registered against the ABN of [NAME_1], including 126 Purchase Money Security Interests (PMSI) against the ACN of [NAME_1] and two PMSIs against the ABN of [NAME_1], in favour of a total of 47 secured parties. 9 Based on a search of [NAME_1]'s books and records undertaken at the request of [NAME_9], one of the Administrators, [NAME_9] identified 32 secured parties who appeared to have amounts owing to them, for whom it was possible that [NAME_1] was holding unsold stock and who had PMSI registrations in their favour (Potential PMSI Holders). 10 On 16 April 2019 [NAME_9] sent two emails to the Potential PMSI Holders in which he invited them to: (1) confirm whether [NAME_1] had any debt owing to them and whether they asserted any security interest over [NAME_1]'s assets; and (2) attend [NAME_1]'s premises and identify any stock in which they claimed a security interest. 11 On 18 April 2019 [NAME_9] was contacted by [NAME_20] of [COMPANY_21] ([NAME_21]), which according to [NAME_9] held several PPS registrations against [NAME_1]. [NAME_20]' email included: We hereby instruct that NO stock should be released back to vendors/suppliers (as we have paid for a significant portion of that stock) and that stock is subject to our PPSR registrations. Please refer attached invoices related to our PMSI interests. In the absence of identification from others, it is safe to assume that all stock branded as per the invoices/statements is ours as we have paid the suppliers(s) in full. 12 [NAME_20]' email, [NAME_9] notified the Potential PMSI Holders of [NAME_21]'s position and informed them that, in light of that, he would not be in a position to allow property to be collected by parties asserting PMSIs. 13 On 23 April 2019 [NAME_9] met with a representative of [NAME_22]. In that meeting [NAME_9] was informed that [NAME_22] was owed approximately $1m by [NAME_1] and that [NAME_22] had identified stock of approximately $35,000 at cost to which it believed its PMSIs attached. 14 Also on 23 April 2019 [NAME_9] met with [NAME_23] from [NAME_21]. During that meeting [NAME_9] was informed that [NAME_1] owed [NAME_21] approximately $500,000 and that [NAME_21] had no objection to the Administrators selling the stock in which they claimed an interest provided that its claim was converted into a claim against the proceeds of sale of the stock. 15 As at 24 April 2019: (1) [NAME_9] had not yet received responses from many of the Potential PMSI Holders and was of the opinion that there may be further instances of competing claims to stock beyond those already known to him; (2) 15 Potential PMSI Holders had attended [NAME_1]'s premises to attempt to identify stock that may be subject to their asserted PMSIs; (3) only three to four of the Potential PMSI Holders had confirmed that they were no longer creditors of [NAME_1]; and (4) critically, with the exception of [NAME_22], none of the secured creditors had provided [NAME_9] with a list of stock in which they claimed a security interest which included the unique serial number identifiers of those stock items. Rather, the claims of other secured parties referred to stock by brand and model number. In light of that [NAME_9] believed that it would be extremely difficult, if not impossible, to determine whether there were multiple claims over the same stock. 16 [NAME_9] had intended to move the stock to a central location for processing of PMSIs and secured claims against it, provided that the secured parties agreed to bear the costs of that exercise. However, upon making the relevant inquiries not all secured parties responded or agreed to the proposal. According to [NAME_9] the Administrators had no funding available to them to move the stock and, in the absence of consent from all interested secured parties, it would not be possible for them to identify stock owned outright by [NAME_1] which they may be entitled to sell for the benefit of [NAME_1]'s creditors generally. 17 Between 26 April 2019 and 7 May 2019 the Administrators had further communications with three further suppliers of stock and/or Potential PMSI Holders and a further conversation with [NAME_23] from [NAME_21].

Leased premises 18 On 18 April 2019 [NAME_9] wrote to the landlords of the six premises leased by [NAME_1] (Landlords). In that correspondence [NAME_9] sought an extension of time for which the Administrators would not be personally liable to pay rent pursuant to s 443B of the Act until 3 May 2019. A summary of the correspondence that was sent and responses received compiled by [NAME_9] appears below: 19 Between 26 April and 7 May 2019 there was further communication with a number of the Landlords. Relevantly, on 3 May 2019 the Administrators gave up possession of the Auburn warehouse. 20 The Administrators did not hold sufficient cash or other readily realisable assets in the name of [NAME_1] to fund the rent payable under the leases to the Landlords. [NAME_9]'s evidence was that if the Court was not minded to extend the time available to the Administrators to disclaim leases without incurring personal liability under s 443B of the Act, they would have no option but to disclaim the leases. This would likely result in the Landlords exercising a lien over any stock located at the various premises and an increase in the amounts owing to the creditors of [NAME_1], such as suppliers and holders of security interests. [NAME_9] also noted that potential priority disputes in relation to abandoned stock would cause inconvenience and cost to suppliers and secured parties.

Potential sale of stock and other assets of [NAME_1] 21 On 17 April 2019 the Administrators caused the business of [NAME_1] to be advertised for sale in the Australian Financial Review. 22 Based on the responses received as at 24 April 2019 [NAME_9] believed that: (1) there was a prospect of the Administrators being in a position to sell [NAME_1]'s stock in one line to an interested party or otherwise in piecemeal fashion on a break-up basis; (2) there was a prospect of finding a purchaser to take an assignment of some of the leases, which if achieved would result in a possible realisation of the value of any fixtures in the leased premises and a possibility that the Landlords may have lower creditor claims against [NAME_1] upon disclaimer of the leases; and (3) there was a prospect of selling certain other assets of [NAME_1] such as intellectual property. 23 [NAME_9]'s preliminary view was that the interests of [NAME_1]'s creditors would benefit from a sale of [NAME_1]'s stock in a single line as that would minimise holding, transport and storage costs for the stock, including rent payable to the Landlords. It was also [NAME_9]'s preliminary view that the Administrators would be in a position to complete a sale of [NAME_1]'s stock in one line by 3 May 2019 unless that stock became inaccessible to the Administrators because it was retained in leased premises to which they had lost their right of access. 24 On 2 May 2019 the Administrators accepted an offer from Harvey Norman to acquire certain assets of [NAME_1]. As part of the arrangements with Harvey Norman a non-refundable sum was paid to the Administrators without any obligation for it to be deducted from the ultimate sale price. The Administrators notified the Landlords of their intention to pay rent on a daily basis for their occupation of the premises from 4 May 2019.

Administrators' proposal in relation to sale proceeds from sale of stock 25 In the event that the Court was minded to authorise the Administrators to sell [NAME_1]'s stock, [NAME_9] proposed that the following should occur in relation to the sale proceeds: (1) the Administrators' costs and disbursements of this proceeding be paid out of the sale proceeds; (2) the Administrators' costs and disbursements, including legal fees and stocktake costs, in dealing with and selling the stock the subject of security interests be paid out of the sale proceeds in an amount agreed between the secured parties and the Administrators or approved by the Court; (3) any amounts which the Court sees fit to order are paid out of the proceeds of sale to the Landlords; and (4) the balance of the sale proceeds be held by the Administrators in a controlled monies account pending agreement between the secured parties and the Administrators or determination by the Court as to respective entitlements to those sale proceeds of those parties having an interest in the stock or its proceeds.

consideration

Sale of [NAME_1]'s stock 26 As was apparent from the evidence before me there was a contest between the secured creditors as to their interests in the stock and it was not clear to the Administrators, based on the [NAME_19], whose interest attached to which item of stock.

Accordingly, the Administrators sought an order pursuant to s 442C(2)(c) of the Act to sell the entirety of the stock and create a fund in order that the parties' respective interests could subsequently be determined. 27 Section 442C of the Act relevantly provides: (1) The administrator of a company under administration or of a deed of company arrangement must not dispose of: (a) property of the company that is subject to a security interest; or (b) property (other than PPSA retention of title property) that is used or occupied by, or is in the possession of, the company but of which someone else is the owner or lessor. (2) Subsection (1) does not prevent a disposal: (a) in the ordinary course of the company's business; or (b) with the written consent of the secured party, owner or lessor, as the case may be; or (c) with the leave of the Court. (3) [ADDRESS] may only give leave under paragraph (2)(c) if satisfied that arrangements have been made to protect adequately the interests of the secured party, owner or lessor, as the case may be. … (7) If: (a) a company is under administration or is subject to a deed of company arrangement; and (b) property of the company is subject to a security interest; and (c) the administrator disposes of the property; the disposal extinguishes the security interest. (Notes omitted.) 28 Based on the evidence before me I was satisfied that the order sought by the Administrators pursuant to s 442C(2)(c) of the Act should be made. That was so for the following reasons: (1) it appeared from the state of the [NAME_19] that a substantial quantity of [NAME_1]'s stock was encumbered; (2) the Administrators and, indeed, the secured creditors were unable to identify the stock to which particular secured creditors' interests attached; (3) the Administrators had advertised the business for sale in one line or otherwise in a piecemeal fashion. [NAME_9] was of the opinion that [NAME_1]'s creditors would benefit from a sale of the stock of [NAME_1] in a single line and, if sold, the balance of the sale proceeds, after payment of various costs associated with their sale, would be held in a controlled monies account pending agreement between the secured parties and the Administrators or determination by the Court as to their respective entitlements; (4) those proposed arrangements for the preservation of the proceeds of sale provided adequate protection for the secured parties' interests; and (5) to proceed to sell the stock in the absence of such an order may have exposed the Administrators to a claim for damages for having disposed of property contrary to s 442C of the Act: see THC Holding Pty Ltd v CMA Recycling Pty Ltd (Administrators Appointed) (2014) 101 ACSR 202; [2014] NSWSC 1136. 29 I note two further matters. First, the order initially made on 26 April 2019 pursuant to s 442C(2)(c) of the Act was subsequently vacated on 8 May 2019 and a new order made which operated nunc pro tunc pursuant to that section. That was because the order when first made did not refer to the different capacities in which [NAME_1] might hold the stock. The order made on 26 April 2019 permitted the Administrators to dispose of the relevant property while the subsequent order made on 8 May 2019 permitted the Administrators to dispose of the relevant property whether held by [NAME_1] in its own right or in its capacity as trustee of any of the identified trusts. 30 Secondly, consequential orders were sought in relation to the payment of costs of this proceeding and of the sale process, including preserving a fund for payment to Landlords if a valid substantiated claim was made, from the proceeds of sale and in relation to the way in which the net proceeds of sale were to be held pending the resolution of the competing claims to those proceeds. I was satisfied that the orders sought were appropriate in the circumstances and should be made.

Order under s 447A of the Act 31 Section 447A of the Act relevantly provides: (1) [ADDRESS] may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company. … (3) An order may be made subject to conditions. (4) An order may be made on the application of: (a) the company; or (b) a creditor of the company; or (c) in the case of a company under administration—the administrator of the company; or (d) in the case of a company that has executed a deed of company arrangement—the deed's administrator; or (e) ASIC; or (f) any other interested person. 32 The power conferred by s 447A is broad. 33 The Administrators sought an order under s 447A in relation to the operation of s 442C(7) of the Act (see [27] above) to preserve the rights of security holders despite the sale of the stock. In that regard, the Administrators submitted that the order was sought to avoid any doubt and to give effect to the Administrators' proposal that the respective positions and rights of the creditors as against one another are preserved pending the determination of each secured creditor's interest in the property. The Administrators said that was so because most, if not all, of the PMSI holder registrations referred to proceeds and would therefore remain secured for the purpose of s 32 of the Personal Property Securities Act 2009 (Cth), notwithstanding a sale of the underlying property. 34 Having regard to the Administrators' submissions and the evidence before me, I was satisfied that the order sought by the Administrators pursuant to s 447A of the Act should be made.

Order under s 90-15 of the IPS 35 On 8 May 2019 the Administrators also sought an order pursuant to s 90-15 of the IPS that they would be justified in disposing of [NAME_1]'s stock and dealing with the proceeds of that sale in accordance with their proposal. The Administrators sought that order because their decision related to encumbered stock, there had been some pushback from secured creditors about the proposal to sell and they were selling in their capacity as administrators. They submitted that, while they were satisfied with their decision to sell the stock and the steps they had taken to notify secured creditors of their proposal and satisfy themselves that they could sell in their capacity as administrators, the decision was not entirely uncontroversial. 36 Section 90-15(1) of the IPS empowers the court to make such orders as it thinks fit in relation to the external administration of a company. Section 90-15(4) sets out a non-exhaustive list of the matters which the court may take into account in exercising the discretion under s 90-15(1). 37 [COMPANY_2], in the matter of [COMPANY_3] (in liq) v [COMPANY_3] (in liq) [2018] FCA 541 at [33] Farrell J said the following about the operation of s 90-15(1): The power to make orders conferred by s 90-15(1) contains no equivalent of s 511(2) which permitted the Court to accede to an application "if satisfied that … the exercise of power will be just and beneficial". The power is, in its terms, unconstrained. Section 90-15(4) lists some matters the Court is entitled to take into account but that list is expressed to be "[w]ithout limiting the matters which the Court may take into account when making orders". In [NAME_4], in the matter of [COMPANY_5] (Administrators Appointed) [2017] FCA 486, Gleeson J observed at [41] that the question of whether to exercise the power under s 90-15 of Sch 2 can be answered by reference to principles that applied to the exercise of the discretion under the provisions previously contained in ss 479(3) and 511. I agree that those cases can be a useful guide. Despite the breadth of the power conferred by s 90-15(1), it is difficult to envisage circumstances where the power would be exercised if the Court could not be satisfied that it would be just and unless the applicant had demonstrated sufficient utility to the external administration. 38 In [NAME_4], in the matter of [COMPANY_5] (Administrators Appointed) [2017] FCA 486 at [35]-[36], in considering a submission that the Court's supervisory powers under the then newly introduced s 90-15 of the IPS were as broad or broader than under previous provisions including s 479(3), Gleeson J observed that: 35 [COMPANY_24] [2002] FCA 90; 115 FCR 409, concerning s 479(3), Goldberg J explained at [44]: When liquidators and administrators seek directions from the Court in relation to any decision they have made, or propose to make, or in relation to any conduct they have undertaken, or propose to undertake, they are not seeking to determine rights and liabilities arising out of particular transactions, but are rather seeking protection against claims that they have acted unreasonably or inappropriately or in breach of their duty in making the decision or undertaking the conduct. They can obtain that protection if they make full and fair disclosure of all relevant facts and circumstances to the Court. In Re [COMPANY_25] (1991) 24 NSWLR 674, McLelland J said at 679-680: The historical antecedents of s 479(3) …, the terms of that subsection and the provisions of s 479 as a whole combine to lead to the conclusion that the only proper subject of a liquidator's application for directions is the manner in which the liquidator should act in carrying out his functions as such, and that the only binding effect of, or arising from, a direction given in pursuance of such an application (other than rendering the liquidator liable to appropriate sanctions if a direction in mandatory or prohibitrary form is disobeyed) is that the liquidator, if he has made full and fair disclosure to the court of the material facts, will be protected from liability for any alleged breach of duty as liquidator to a creditor or contributory or to the company in respect of anything done by him in accordance with the direction. ... Modern Australian authority confirms the view that s 479(3) 'does not enable the court to make binding orders in the nature of judgments' and that the function of a liquidator's application for directions 'is to give him advice as to his proper course of action in the liquidation; it is not to determine the rights and liabilities arising from the company's transactions before the liquidation': [cases cited omitted]. 36 At [65], Goldberg J concluded: [T]he prevailing principle adopted by the courts, when asked by liquidators and administrators to give directions, is to refrain from doing so where the direction sought relates to the making and implementation of a business or commercial decision, either committed specifically to the liquidator or administrator or well within his or her discretion, in circumstances where there is no particular legal issue raised for consideration or attack on the propriety or reasonableness of the decision in respect of which the directions are sought. 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. 39 The Administrators submitted that they were seeking protection from claims that they had acted unreasonably or inappropriately in the circumstances, that the evidence shows that the decision to sell the stock was not unreasonable or inappropriate and that the Administrators did not seek to protect a commercial decision but sought protection from a claim of impropriety on their part. I accepted those submissions and was satisfied that I could make the order sought.

conclusion 40 For those reasons I made the orders referred to at [2] above on 26 April 2019 and 8 May 2019. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic.

Associate: Dated: 14 November 2019

SCHEDULE NSD 612 of 2019 1 [COMPANY_11] 83 [PHONE] 2 [COMPANY_11] 18 902 495 787 3 [COMPANY_11] 28 499 430 658 4 [COMPANY_11] 62 710 376 637 5 [COMPANY_26] 89 470 390 196 6 [COMPANY_27] 64 950 077 894 7 [COMPANY_11] 73 132 635 471 8 [COMPANY_28] 19 943 691 502 9 P.R & K.M.[COMPANY_18] Family Trust ABN 39 832 104 571