Bluewaters Power 1 Pty Ltd v Donnelly, in the matter of Griffin Coal Mining... [2024] FCA 596 | Case summary

Federal Court of Australia|2024-06-07|Before: Feutrill J

Introduction 1 This is an application under s 423 of the Corporations Act 2001 (Cth) for orders for an inquiry into the alleged misconduct of receivers and managers of the property of The Griffin Coal Mining Company Pty Ltd. 2 Certane CT Pty Ltd (formerly named AET Structured Finance Services Pty Ltd) as trustee of certain security instruments, appointed Mr Matthew Donnelly, Mr Sean Holmes and Mr Grant Sparkes, as joint and several receivers and managers of all the property of Griffin Coal (Receivers). Bluewaters Power 1 Pty Ltd and Bluewaters Power 2 Pty Ltd are beneficiaries of the security instruments of which Certane CT is trustee. Liquidators have also been appointed pursuant to a creditors' voluntary winding up of Griffin Coal. By resolution of the creditors, the initial liquidators, Mr Thomas Birch and Mr Jeremy Nipps (former Liquidators), were removed and replaced by Mr Glenn Livingstone and Mr Scott Pascoe (new Liquidators). 3 In accordance with the terms of their appointment and the security instruments the Receivers, as agents of the company, are obliged to perform and observe the obligations of Griffin Coal under long-term coal supply agreements (CSAs) that the company made with each of Bluewaters Power 1 and Bluewaters Power 2 (collectively, Bluewaters Power). The Receivers are of the view that the CSAs are unprofitable and the continuing existence of them adversely affects the value of Griffin Coal's property and, consequently, their ability to realise the secured property to perform and discharge Griffin Coal's obligations to its financiers which are also beneficiaries under the security instruments. As a result of performing the CSAs, the Receivers require funding. Part of that funding has been advanced by Bluewaters Power and part, has evidently been provided by the State of Western Australia. Under the terms of the security instruments, repayment of Bluewaters Power's advances are to be made in priority to repayment of the principal and interest on the loans advanced by Griffin Coal's financiers. 4 In these circumstances, the Receivers, and no doubt Griffin Coal's financiers, would like to see Griffin Coal liberated from its obligation to perform the CSAs. To that end, the Receivers encouraged the former Liquidators to disclaim the CSAs under s 568 of the Act in the belief and on the understanding that, if disclaimed, Griffin Coal's obligations under the contracts would be terminated and so too would the Receivers' obligation to continue performing those obligations. When the former Liquidators, evidently acting on legal advice, proposed taking a less robust approach to disclaimer than that which the Receivers and Griffin Coal's financiers advocated, steps were taken to have the former Liquidators removed and replaced with the new Liquidators. The Receivers appear to have played a role in that affair. 5 The principal issue in the proceedings is whether the Receivers' conduct aimed at bringing about disclaimer of the CSAs falls within the Receivers' power, under s 420(1) of the Act, to do all things necessary or convenient to be done for or in connection with, or as incidental to, the attainment of the objectives for which they were appointed. Bluewaters Power contends it was not because the purposes for which the Receivers were appointed include performance of Griffin Coal's obligations under the CSAs as secured obligations under the security instruments. Bluewaters Power also contends that the objectives for which the Receivers were appointed include preservation of the secured property and the CSAs form part of the secured property. The Receivers contend that their obligation to perform the CSAs, as Griffin Coal's agent, depends on the continued existence of the agreements and they have no obligation to preserve the agreements on the proper construction of the security instruments. The questions that flow from the dispute concerning the principal issue within the framework of s 423 are whether: (1) is there a sufficient basis for ordering an inquiry; and, if so (2) an inquiry should be ordered in the exercise of the Court's discretion. 6 For the reasons which follow, while I am satisfied that the conduct of which Bluewaters Power complains is sufficient to enliven the Court's discretion to order an inquiry, in the circumstances of this case, the discretion should not be exercised to order an inquiry at this time. No order will be made on the application, but the proceedings will not be dismissed. I will allow Bluewaters Power an opportunity to commence other proceedings and, depending on the outcome of any proceedings commenced, the application may be renewed. I will hear the parties on the question of costs.

Coal supply agreements 7 Bluewaters Power 1 was formerly named Griffin Power Pty Ltd and Bluewaters Power 2 was formerly named Griffin Power 2 Pty Ltd. I infer from the contents of the instruments described below that, as of 15 February 2013, Bluewaters Power 1 and Bluewaters Power 2 were related parties of Griffin Coal. I infer from other documents in evidence that Griffin Coal is no longer related to Bluewaters Power. 8 Bluewaters Power operates a coal-fired power station which supplies approximately 10 - 20% of the electricity demand in the South-West Interconnected System. The SWIS is the main electricity grid in Western Australia by which electricity is supplied throughout the South-West of the State. The power station has two generator units known as Unit 1 and Unit 2. Bluewaters Power is committed to supplying electricity under certain energy sales contracts regulated under the Wholesale Electricity Market Rules (the rules made from time to time under s 6(2) of the Electricity Industry (Wholesale Electricity Market) Regulations 2004 (WA)). 9 Griffin Coal operates a coal mine known as the Ewington Mine. Griffin Coal supplies coal to Bluewaters Power used for the generation of electricity at the power station under CSAs with each of Bluewaters Power 1 and Bluewaters Power 2. The coal supply agreement with Bluewaters Power 1 was originally made on 17 October 2006. The coal supply agreement with Bluewaters Power 2 was originally made on 14 February 2008. 10 Griffin Coal, Bluewaters Power 1, KPIC Netherlands B.V., Summit Southern Cross Power Holdings Pty Ltd and Griffin Energy Group Pty Ltd made a deed styled 'Deed of amendment, restatement and accession' dated 15 February 2013. That deed had the effect of amending a coal supply agreement between Griffin Coal and Bluewaters Power 1 in terms of the document annexed to that deed as Schedule 1 (CSA 1). 11 Griffin Coal, Bluewaters Power 2, KPIC Netherlands B.V., Summit Southern Cross Power Holdings Pty Ltd and Griffin Energy Group Pty Ltd made a deed styled 'Deed of amendment, restatement and accession' dated 15 February 2013. That deed had the effect of amending a coal supply agreement between Griffin Coal and Bluewaters Power 1 in terms of the document annexed to that deed as Schedule 1 (CSA 2). 12 CSA 1 and CSA 2 are in materially the same terms. (Capitalised terms are defined in the CSAs and used in the description of the terms of the CSAs.) Each is a long-term (30 years plus a 10 year option for renewal) contract for the exclusive supply of coal to Bluewaters Power: cll 2, 3.1, 3.2, 3.3, 3.5 and cl 1.1 (definitions) of the CSAs. The rights of Bluewaters Power include certain rights (defined as Step-in Rights) to enter on and take possession of all plant, material, equipment, documents and information of Griffin Coal as it reasonably considers are necessary or advisable to operate, maintain and manage the Ewington Mine for the purpose or remedying a 'Step-in Event' as soon as practicable. Step-in Events are defined to include the failure to deliver coal in accordance with the agreement that has a material adverse effect on Bluewaters Power's ability to comply with its obligation to supply power under any Energy Sale Contract or an Insolvency Event with respect to Griffin Coal: cll 17.1, 17.6, 17.7, 17.8, 17.9 and cl 1.1 (definitions). Griffin Coal's performance of its obligations, which must include giving effect to the Step-in Rights, are secured by the Mining Act Mortgage, and the Intercreditor Deed described later: cl 21.1(a), cl 21.3 and cl 1.1 (definitions). If Bluewaters Power exercises its right to appoint a controller under cl 4.2 of the Intercreditor Deed, then cl 4 of that deed applies and the Step-in Rights under the agreement do not apply: cl 17.10 and cl 1.1 (definitions). 13 The CSAs also included terms that made provision for a mechanism for notification of the coal requirements of Bluewaters Power, delivery by Griffin Coal of the nominated quantities of coal and for Griffin Coal to establish and replenish the Griffin Power Stockpile consistently with the Stockpile Plan (as those terms are defined in the CSAs): cl 4.3, cl 4.4 and cl 1.1 (definitions). 14 On 15 February 2013 Griffin Coal and Bluewaters Power made a number of other deeds. (Capitalised terms are defined in the deeds and are used in the description of the terms of the deeds as defined.)

Security Trust Deed 15 Griffin Coal, Bluewaters Power 1, Bluewaters Power 2, ICICI Bank Ltd and Certane CT made a deed styled 'Security Trust Deed' dated 15 February 2013. Under the terms of the Security Trust Deed, Certane CT (as Security Trustee) declares that it holds on trust for the Beneficiaries (defined to include Bluewaters Power and ICICI Bank) the sum of $10 and any other assets which the Security Trustee acquires as trustee under the deed, including any Security, other Security Interest, Guarantee, or right of the Security Trustee or obligation to the Security Trustee, and any proceeds of them or any investment of the proceeds: cl 2.1 and cl 1.1 (definitions). The term Security is defined to include the Mining Act Mortgage and Security Deed: cl 1.1 (incorporated definitions); and Intercreditor Deed, cl 1.1 (definitions). The Security Trustee may enforce its rights under the deed and proceed against Griffin Coal in the manner, order and at the times the Security Trustee determines as required by the Intercreditor Deed or as instructed by the Senior Beneficiaries, the Majority Beneficiaries, all Beneficiaries or Bluewaters Power 1 or Bluewaters Power 2 (as the case may be) in accordance with the Intercreditor Deed: cl 1.8 and cl 1.1 (definitions).

Security Deed 16 Griffin Coal and Certane CT made a deed styled 'Security Deed' dated 15 February 2013. Under the terms of the Security Deed, as security for the due and punctual payment and satisfaction of the Secured Money and due and punctual performance of the Secured Obligations, Griffin Coal (as Debtor) granted Certane CT (as Secured Party) a security interests in all and any Secured Property to which the Personal Property Securities Act 2009 (Cth) applies and a fixed charge over all and any Secured Property to which the PPSA does not apply: cl 2.1 and cl 1.1 (definitions). The Secured Property means all of the property rights and undertaking of Griffin Coal irrespective of whether it is present or future, real or personal, tangible or intangible and where it is located: cl 1.1 (definitions). The terms Secured Money and Secured Obligations are as defined in the Intercreditor Deed: cl 1.7.

Mining Act Mortgage 17 Griffin Coal and Certane CT made a deed styled 'Mortgage of Mining Tenements in Respect of the Ewington Mine' dated 15 February 2013. By the Mining Act Mortgage, Griffin Coal (Mortgagor) as legal and beneficial owner, mortgages the Mortgaged Property to Certane CT (Mortgagee) as security for the due and punctual performance of the Secured Obligations and the payment of the Secured Money. The 'Mortgaged Property' means all of the present and future right, title, benefit and interest of the Mortgagor in and to the Mining Tenements and any renewal, extension, addition, modification, substitution, amalgamation, sub-division or variation of any of the foregoing: cl 1.1 (definitions). The 'Mining Tenements' are defined separately and include mining tenements described in Annexure A to the Mortgage: cl 1.1 (definitions). The Mortgage is collateral to the Security Deed and secures the same obligations (the Secured Obligations) as are secured by the Security Deed: cl 2.4. The rights and obligations of the parties under the Mortgage are subject to the terms of the Intercreditor Deed: cl 2.5.

Intercreditor Deed 18 Griffin Coal, Bluewaters Power 1, Bluewaters Power 2, ICICI Bank, Certane CT and AET SPV Management Pty Limited made a deed styled 'Intercreditor Deed' dated 15 February 2013. The recitals to the Intercreditor Deed recite that Griffin Coal had granted Certane CT (Security Trustee) the Securities (defined to include the Security Deed and Mining Act Mortgage) to secure its obligations (including those of its Related Bodies Corporate) under the Finance Documents from time to time and certain of Griffin Coal's obligations under each CSA: recital D. Further, that the 'parties have agreed to regulate the priorities between [Bluewaters Power 1, Bluewaters Power 2] and Griffin Coal's financiers in respect of the Securities': recital E. 19 The Intercreditor Deed defines many of the terms used in the Security Trust Deed, Security Deed and Mining Act Mortgage. These include the terms 'Secured Moneys' and 'Secured Obligation'. Secured Moneys largely cover funds advanced, interest, fees and other charges of Griffin Coal's financiers, but it also covers money advanced by Bluewaters Power in accordance with cl 4.5 of the Intercreditor Deed. Secured Obligations covers all obligations to Griffin Coal's financiers and Bluewaters Power's Step-in Rights under the CSAs (defined as CSA Step-in Rights) as well as the right to be repaid money advanced under cl 4.5 of the deed. 20 Broadly, subject to cl 4.5, the Secured Obligations owed to Griffin Coal's financiers rank in priority ahead of the Secured Obligations owed to Bluewaters Power: cl 3.1. However, in the case of money advanced by Bluewaters Power under cl 4.5, the Security Trustee is to reimburse Bluewaters Power in priority to repayment of Griffin Coal's financiers: cl 8.1. 21 Bluewaters Power may exercise Step-in Rights by directing the Security Trustee to appoint a Controller (defined as a GP Controller) in certain circumstances. Bluewaters Power cannot appoint a Controller and, otherwise, cannot exercise Step-in Rights under the CSAs if the Senior Beneficiaries (Griffin Coal's financiers) have appointed a Controller (defined as a Financier's Controller): cl 4.1 and cl 4.2. Where a Finance Default is subsisting the Senior Beneficiaries may by notice in writing to the Security Trustee appoint a Controller: cl 7.2. If a Financier's Controller is appointed the Senior Beneficiaries irrevocably instruct the Security Trustee to direct the Financier's Controller to perform and observe the obligations of Griffin Coal under each CSA arising after the appointment: cl 4.3(c). Further, the terms of the appointment of a Controller will require the Controller to comply with the obligations of a Controller under the deed, including cl 4.3(c): cl 4.3(d)(vii). 22 A Controller may request the Beneficiaries (including Bluewaters Power) to advance funds for the costs of a Controllership. Neither the Security Trustee nor any other Beneficiary is obliged to advance such funds, but a Controller's obligations under the deed are subject to being advanced the necessary funds. Any funds advanced by Bluewaters Power form part of the Secured Moneys and are repayable in accordance with cl 8: cl 4.5. 23 This dispute between Bluewaters Power and the Receivers largely turns on the proper construction of cl 4.3 of the Intercreditor Deed, the nature of Bluewaters Power's Secured Obligations and the manner in which these provisions affect the functions and powers of the Receivers.

Appointment of the receivers 24 In the middle of 2022 Griffin Coal and Bluewaters Power were in dispute concerning Griffin Coal's obligations to deliver coal under the terms of the CSAs. On 29 August 2022 Griffin Coal issued a writ of summons in the Supreme Court of Western Australia in which it sought injunctive relief against Bluewaters Power that would, if granted, restrain Bluewaters Power from exercising the Step-in Rights and instructing Certane CT to appoint a GP Controller under the terms of the Intercreditor Deed. On 31 August 2022 ICICI Bank issued a notice to Certane CT, as Security Trustee, directing it to appoint a Financier's Controller under the terms of the Intercreditor Deed. 25 Certane CT in its capacity as Security Trustee under the Security Trust Deed and the Receivers made a deed styled 'Deed of Appointment of Receivers and Managers' dated 13 September 2022. The Deed of Appointment recites that the Security Trustee appoints the Receivers as joint and several receivers and managers of the Secured Property, that the Receivers agreed to accept the appointment and that the Security Trustee entered into the deed on instructions from the Senior Beneficiaries: recitals C, D and E. 26 By cl 2(a) the Security Trustee appoints the Receivers jointly and severally as receivers and mangers of the Secured Property as agents of Griffin Coal and the Receivers accept that appointment on the terms of Deed of Appointment and Documents. 'Secured Property' is defined to have the meaning of that term in the Security Deed. 'Documents' is defined to mean the Griffin Coal Common Terms Deed, the Intercreditor Deed, the Security Deed and the Security Trust Deed: cl 1.2 (definitions). (The document referred to as the Griffin Coal Common Terms Deed was not tendered.) By cl 8 the Receivers are agents of Griffin Coal. 27 By cl 3.1, subject to certain limitations on the Receivers' powers set out in cl 4 and cl 5, the Receivers have all the powers and rights of receivers and managers including but not limited to those available under any Security and the Documents; those provided in the Act; and at general law and equity. Consistently with cl 4.3 of the Intercreditor Deed, cl 5 of the Deed of Appointment provides: 5 lntercreditor Deed 5.1 Financier's Controllers The parties acknowledge and agree that, to the extent it is necessary to categorise the Receivers for the purpose of the lntercreditor Deed, the Receivers are Financier's Controllers in the sense that they are not GP Controllers. 5.2 Obligations of the Receivers (a) The Security Trustee directs the Receivers to, in accordance with clause 4.3(c) of the lntercreditor Deed, perform and observe the obligations of the Company under each CSA and each Existing CSA Related Document arising after the appointment of the Receivers; and (b) the Security Trustee requires the Receivers, in accordance with clause 4.3(d)(vii) of the lntercreditor Deed to: (i) comply with the obligations of a Financier's Controller under the lntercreditor Deed; and (ii) on at least a monthly basis or upon reasonable request report to the Security Trustee as to its compliance with those obligations. 5.3 No adoption The Receivers do not by the terms this document personally adopt any contract to which the Company is party to and in force at the date of this document, including, without limitation, each CSA, each CSA Related Document and each Existing CSA Related Document. The Receivers will perform and observe the obligations of the Company under each CSA and each Existing CSA Related Document only as agents for the Company.

Appointment of liquidators 28 On 13 September 2022 the former Liquidators were appointed joint and several liquidators of Griffin Coal under a creditors' voluntary winding up, within the meaning of s 9 of the Act, pursuant to a special resolution of the company's members under s 491 of the Act. The special resolution was passed by Lanco Resources Australia Pty Ltd as Griffin Coal's sole member. 29 It is not clear on the evidence whether the Receivers were appointed before or after the former Liquidators. Nonetheless, on 14 September 2022 the former Liquidators granted the Receivers written approval pursuant to s 420C(1)(a) of the Act to carry on the business of Griffin Coal generally and do whatever is necessarily incidental to carrying on that business as agents for the company, notwithstanding the appointment of the former Liquidators.

Liquidators' investigation of disclaimer of CSAs 30 On 14 September 2022 the injunction proceedings Griffin Coal had brought against Bluewaters Power were dismissed by consent. 31 In correspondence to Bluewaters Power dated 4 October 2022 the Receivers asserted that they had received correspondence from the former Liquidators noting that Griffin Coal had incurred losses on the CSAs for August 2022 on a gross profit basis and losses in the period from April to August 2022. The Receivers requested Bluewaters Power to agree to a short-term increase in the price per tonne of coal sold to Bluewaters Power to enable the company to cover its operating costs and related overheads. Bluewaters Power refused, but indicated that it was willing to provide funding to the Receivers in accordance with cl 4.5 of the Intercreditor Deed. 32 Thereafter, Bluewaters Power and the Receivers made a series of funding agreements pursuant to which Bluewaters Power advanced approximately $29.7 million in aggregate for the purposes of cl 4.5 between 31 October 2022 and 2 February 2023. It appears that thereafter the Receivers secured funding for the costs of the receivership from the State on terms that are confidential and have not been tendered in evidence. 33 By letter dated 25 January 2023 from the former Liquidators' solicitors (HWL Ebsworth) to Bluewaters Power's solicitors (Allens), the former Liquidators asserted that 'the CSAs are (and will continue to be) financially unprofitable and they impose on [Griffin Coal] continuing financial obligations which are detrimental to [Griffin Coal] and its creditors because, amongst other things, there are not sufficient reciprocal benefits for [Griffin Coal]'. Further, given the appointment of the Receivers and the ongoing performance of the CSAs by the Receivers, the former Liquidators considered it appropriate to make an application to the Court for orders that they have leave to disclaim the CSAs pursuant to s 568(1A) of the Act, alternatively for directions under s 90-15 of Sch 2 - Insolvency Practice Schedule (Corporations) (IPSC) that they would be justified in disclaiming each of the CSAs without leave. By responsive correspondence dated 7 February 2023, Bluewaters Power, through Allens, disputed the former Liquidators' ability to disclaim the CSAs, in substance, because the former Liquidators are not involved in the performance of the CSAs under the terms of the various security instruments and the secured parties sit outside the liquidation of the company. 34 By letter dated 7 February 2023 Bluewaters Power, through Allens, also requested the Receivers to oppose any application by the former Liquidators to disclaim the CSAs on the grounds that such an application would interfere with the Receivers' performance of Griffin Coal's obligations. Bluewaters Power also sought assurance that the Receivers were not funding the former Liquidators. A similar letter was sent to the solicitors for the Security Trustee (Norton Rose Fulbright) requesting the Security Trustee to oppose any application by the former Liquidators to disclaim. By letter dated 10 February 2023 from their solicitors (Johnson Winter Slattery) the Receivers indicated that they did not consider there was any utility in them participating in any application by the former Liquidators to disclaim and that they would abide by the outcome. They also confirmed that they were not 'currently funding the [former] Liquidators and have not entered into an agreement to fund the [former] Liquidators in the future'. 35 By letter dated 17 February 2023 from HWL Ebsworth to Allens, the former Liquidators represented that they had received funding from Lanco to enable them to consider and, if appropriate, seek relief from the Court regarding disclaimer of the CSAs. By letter dated 9 May 2023 from Lanco's solicitors (Tottle Partners) to HWL Ebsworth and copied to Allens, Lanco sought to answer Bluewaters Power's contentions regarding the reasons that the former Liquidators were not able to disclaim the CSAs. By letter dated 30 May 2023 Allens responded to the assertions in Tottle Partners' letter. In substance, Bluewaters Power contended that the former Liquidators were not able to disclaim the CSAs, because, due to the security interest Griffin Coal granted the Security Trustee in those contracts, the contractual rights under them are not 'property of the company' for the purposes of s 568 of the Act. 36 On 11 August 2023 the former Liquidators provided a circular to creditors, a notice of meeting and report to creditors. The report indicates that its purpose was to provide the creditors with an update on the status of the liquidation and the key tasks the former Liquidators had completed since their appointment and to convene a meeting of creditors for the purpose of considering, amongst others, a resolution to remove Mr Birch and Mr Nipps as liquidators and that Mr Bryan Hughes and Mr Christopher Pattinson be appointed as liquidators. 37 Mr Birch signed the report to creditors. In the report he said that as the Receivers were in control of Griffin Coal and solely responsible for the operations, including continued performance of the CSAs, and were appointed over all the assets of the company, the role of the former Liquidators was limited to statutory investigations and reporting and examining the CSAs for the purpose of considering if the former Liquidators could disclaim them under s 568 of the Act. The report indicates that the examination was initially undertaken 'at the request of the Receivers and then subsequently at the request of Lanco'. The report indicates that there was conferral with Bluewaters Power, the Receivers and the State in relation to the CSAs prior to finalising and filing an application in the Court for leave to disclaim the CSAs. Also, there was engagement with Lanco and ICICI Bank in relation to disclaimer of the CSAs. 38 Mr Birch said: … Examination upon the request of the Receivers Our assessment of the CSA's commenced on 14 September 2022 when the Receivers: 1. advised the [former] Liquidators that they had concerns there might be uncommercial arrangements with customers which, on their initial review, appeared to structurally generate losses, and that GCM may not have the financial capacity to perform those arrangements; and 2. requested the [former] Liquidators consider those matters as they reviewed GCM's records. In light of the above request, and given that the [former] Liquidators were without funds, the [former] Liquidators requested funding from the Receivers to undertake an initial legal and financial review of the CSAs. While the Receivers agreed to provide limited funding, that funding was never ultimately provided to the [former] Liquidators. Despite being unfunded, in September 2022 the [former] Liquidators undertook an analysis of the contracts GCM had with its customers, including the Bluewaters CSAs and sought advice in respect of the same. Between 30 September 2022 and 27 October 2022, the [former] Liquidators engaged with the Receivers in relation to a request for funding for the purposes of enabling the [former] Liquidators to make an application to Court, on terms the [former] Liquidators considered appropriate at that time, regarding the Bluewaters CSAs. The Receivers did not agree with the approach proposed by the [former] Liquidators and declined to provide the requested funding on 27 October 2022. Examination upon the request of Lanco On 22 December 2022, Lanco wrote to the [former] Liquidators noting that it was concerned about the potentially adverse consequences, in terms of both time and money, of the continuation of the Bluewaters CSAs. Lanco offered to provide funding of $550k to enable the Liquidators to take advice and apply to Court to seek directions on terms the [former] Liquidators considered appropriate with respect of the disclaimer of those contracts with the Bluewaters Companies (Lanco Funding). The [former] Liquidators accepted the Lanco Funding on 23 December 2022 and received the funding on 10 January 2023. After receipt of the Lanco Funding the [former] Liquidators' solicitors wrote to the Bluewaters Companies, the State and the Receivers on 25 January 2023 for the purpose of conferral on the question of whether the Bluewaters CSAs were 'unprofitable' within the meaning of section 568 of the Act and the issue of the potential disclaimer of the Bluewaters CSAs (the Disclaimers). In addition, and as parties of interest, the [former] Liquidators have also engaged with ICICI, Lanco and Oceania and their respective advisors as to their position on those matters. Between 25 January 2023 and 19 May 2023, the [former] Liquidators conferred with the parties on the [former] Liquidators' position regarding the issue of unprofitability and any potential disclaimer of the Bluewaters CSAs and received written responses on each of their respective positions from Bluewaters Companies, Lanco, Oceania and ICICI (or their respective advisors on their behalf). No written response was received from the State. The Receivers who operate the Bluewater CSAs did not adopt, in writing, a position regarding the Disclaimers but noted that they would comply with the Act. Having exhaustively and independently considered the responses received from the various parties, the [former] Liquidators formed a view as to the most appropriate way in which to address the status of the Bluewaters CSAs and commenced taking steps to update and finalise their application (and supporting affidavit) to seek directions regarding the Bluewaters CSAs in the week commencing 22 May 2023. … 39 Mr Birch's summary of the Receiver's request to investigate disclaiming the CSAs is consistent with email correspondence between Mr Donnelly and Mr Birch from 14 September 2022 to 27 October 2022. In that correspondence the Receivers proposed funding the former Liquidators for two options for disclaimer of the CSAs: first by the former Liquidators issuing a disclaimer notice; and second, by the former Liquidators applying to the Court for leave to disclaim. The funding was to be paid out of funds of the company as a cost of the receivership. Ultimately, the Receivers refused to provide funding because they did not accept the former Liquidators' proposal to apply to the Court for leave to disclaim or in the alternative that the former Liquidators would be justified in disclaiming without leave of the Court.

Replacement of liquidators 40 Mr Birch also records in the report that a dispute arose between the former Liquidators and Lanco concerning the nature and extent of Lanco's funding of the former Liquidators. Mr Birch then said, under the heading 'Events leading to request to replace [former] Liquidators': Between 2 June 2023 and 27 June 2023, the [former] Liquidators had three (3) separate meetings/discussions with Matthew Donnelly, one of the Receivers. The key matters raised across these meetings were: 1. The position the [former] Liquidators had adopted to date in relation to the issue of the potential disclaimer of the Bluewaters CSAs. 2. The alternative form of directions that the [former] Liquidators considered appropriate in respect of the Bluewaters CSAs. 3. The [former] Liquidators' proposal that Lanco would not object to the proposed application. 4. The Lanco Funding dispute. 5. The views expressed by key stakeholders of the [former] Liquidators conduct to date. 6. Our potential replacement as Liquidator. On 28 June 2023, the [former] Liquidators attended a meeting at Deloitte's offices. Those in attendance included the Receivers, ICICI and other representatives of the Senior Beneficiaries, Oceania, Lanco / GCM Management and legal representatives of ICICI. At that meeting, which was conducted / led by the Receivers, we discussed the abovementioned matters. At the conclusion of the meeting, the Receivers advised that they (presumably on behalf of all of those in attendance) had lost confidence in the [former] Liquidators and that, given our conduct to date, would be taking steps to remove us. We note that our main task and interaction with the above parties to date has been in relation to the potential 'unprofitability' of the Bluewaters CSAs within the meaning of section 568 of the Act and the way in which that issue should be addressed. On 7 July 2023, Lanco wrote to the [former] Liquidators and requested we convene a meeting of creditors for the purpose of considering a resolution that we be removed as Liquidators and that the Replacements Liquidators be appointed. We consider that the request from Lanco is unreasonable, unwarranted and may substantially prejudice the interests of one or more creditors or a third party. The [former] Liquidators reserve their rights in this regard. 41 Again, Mr Birch's summary is consistent with the correspondence and other documents in evidence. On 22 December 2022 Lanco sent a letter to the former Liquidators offering to provide funding for the legal costs and disbursements associated with taking advice and applying to the Court to seek directions with respect to disclaiming the CSAs. The former Liquidators accepted the offer and made a funding request on 23 December 2022. 42 A handwritten note of a meeting on 2 May 2023 involving the former Liquidators, ICICI Bank, Oceania Resources and Deloitte Touche Tohmatsu Limited records that TB, which I infer to be Mr Birch, said, amongst other things, that the former Liquidators could apply that they were justified in not disclaiming or justified in disclaiming and (or) for leave to disclaim. On 9 May 2023 Lanco's solicitors contacted Mr Hughes regarding his interest to act as a replacement for the former Liquidators. On 22 May 2023 Lanco sent a letter to the former Liquidators recording its understanding that the former Liquidators were prepared to seek directions from the Court to the effect that they were justified in not disclaiming the CSAs, stating that it was not prepared to have its funds used for that purpose and requested the return of the funds previously provided. The former Liquidators responded by letter dated 25 May 2023 disputing any obligation to return the funds or that the funds had not been used for the purpose for which they had been provided. Subsequently, a meeting was arranged between the former Liquidators and Griffin Coal's financiers. 43 An email from Mr Birch to himself records a summary of a meeting with the Receivers on 28 June 2023. It records that 'Matt D', which I infer is Mr Donnelly, 'noted that the contract should be disclaimed'. It records '[r]esponse [of Mr Birch] was all our advice was consistent and we will not ignore it but was willing to explore with Lanco other means by which to seek directions at court'. It records that 'MD', which I infer is Mr Donnelly, expressed the view that the former Liquidators 'wouldn't have nerve to continue and see through application and we would frustrate the application and find every way to avoid the hard position'. It records that there was a 25-minute break while the Receivers talked to the lenders and Oceania. The former Liquidators were then asked if they would 'go quietly'. Mr Birch then records that 'MD stated that they had lost confidence in us and given our conduct to date will be seeking to remove us'. 44 On 21 August 2023 Bluewaters Power commenced proceedings in this Court seeking injunctive relief concerning the proposed resolution at the creditors' meeting to remove Mr Birch and Mr Nipps and replace them with Mr Hughes and Mr Pattinson. On 28 August 2023 the Court made orders for an interlocutory injunction on certain terms. Later, consistent with the orders of the Court a meeting of creditors was convened to consider a proposed resolution to remove Mr Birch and Mr Nipps and appoint Mr Livingstone and Mr Pascoe of WLP Restructuring Pty Ltd as joint and several liquidators of the company. At that meeting the creditors resolved to remove Mr Birch and Mr Nipps and appoint Mr Livingstone and Mr Pasce. 45 There are documents that suggest that the Receivers played an instrumental role in bringing about the replacement of the former Liquidators with the new Liquidators. For example, prior to their appointment, the new Liquidators were contacted by Mr Robert True of Quinn Emanuel who represented that he acted for 'Senior Lenders including ICICI [Bank]'. A series of texts exchanged between Mr True and Mr Livingstone were in evidence. In one text Mr True said that 'Deloitte Perth (receivers) are in the client's ear on this one and will want to make it their referral …'. 46 At the time of the hearing, evidently no application had been made by the new Liquidators to the Court concerning the disclaimer of the CSAs and they had not otherwise purported to disclaim the agreements.

Originating application 47 Against that background, Bluewaters Power apply under s 423(1) of the Act for: (1) an order that the Court inquire into the following matters: (a) the circumstances and propriety of the Receivers' conduct seeking to procure the Liquidators of Griffin Coal to terminate the CSAs, by disclaimer under s 568 of the Act, and thereby attempt to destroy rights the subject of the secured obligation they were appointed to perform and observe as receivers and managers under the relevant instruments; (b) other conduct of the Receivers in connection with attempts to procure the Liquidators to terminate the CSAs, involving any failure to faithfully (and in good faith) perform and exercise their functions and powers, and observe the requirements of the instruments under which they were appointed, including: (i) their dealings with lenders of Griffin Coal (including other beneficiaries of the Griffin Coal Security Trust), Lanco and other third parties to bring about the termination of the CSAs; (ii) their proposal and any agreement to fund the Liquidators in relation to disclaiming the CSAs as costs and expenses of the receivership, and their involvement in relation to the funding (purportedly) provided by Lanco to the Liquidators in relation to disclaiming the CSAs; (c) such other related conduct or matters as the Court thinks fit; (2) based on the outcome of that inquiry, to take such action (including making orders and directions) as the Court thinks fit. 48 Before the hearing on 29 November 2023 Bluewaters Power filed a minute of proposed orders by which it sought an additional order to the effect that the Court inquire into 'the scope and content of the [Receivers'] duty and obligations to [Certane CT], including whether they must observe the terms of cl 4.3(a) of the Intercreditor Deed'. In effect, the minute of proposed order was in support of an oral application for leave to amend the originating process. That application was opposed by the Receivers. 49 Although the Receivers opposed the orders sought on the originating process, there was no real attempt to dispute that the Receivers had taken some steps, at least, to investigate and (or) encourage the former Liquidators to disclaim the CSAs. The position adopted by the Receivers was that they were obliged to perform the obligations of Griffin Coal under the CSAs for so long as those agreements remain on foot. If terminated, their obligation to perform them would end with the contracts. Further, they were not under any obligation to take steps to preserve the CSAs or under any duty not to take steps to bring about the Liquidators disclaiming the agreements.

Discretion to order an inquiry 50 Section 423(1) of the Act relevantly provides: 423 Supervision of controller (1) If: (a) it appears to the Court or to ASIC that a controller of property of a corporation has not faithfully performed, or is not faithfully performing, the controller's functions or has not observed, or is not observing, a requirement of: (i) in the case of a receiver - the order by which, or the instrument under which, the receiver was appointed; or (ii) otherwise - an instrument under which the controller entered into possession, or took control, of that property; or (iii) in any case - the Court; or (iv) in any case - this Act, the regulations or the rules of court; or (b) a person complains to the Court or to ASIC about an act or omission of a controller of property of a corporation in connection with performing or exercising any of the controller's functions and powers; the Court or ASIC, as the case may be, may inquire into the matter and, where the Court or ASIC so inquires, the Court may take such action as it thinks fit. 51 There are normally three stages to proceedings initiated under s 423. The first stage is to consider whether an inquiry is warranted. If so, the Court will undertake an inquiry, which is the second stage. Finally, after undertaking the inquiry the Court will consider whether to 'take such action as it thinks fit': Australian Securities and Investments Commission v Dunner [2013] FCA 872; (2013) 303 ALR 98 at [14]-[15] (Middleton J), citing BL & GY International Co Ltd v Hypec Electronics Pty Ltd [2010] NSWSC 959; (2010) 79 ACSR 558 at [42], [45] (Barrett J). The first stage involves two principal issues or questions: (1) whether there exists a 'matter' into which the Court may order an inquiry: and (2) if so, whether, as a matter of discretion, an inquiry should be ordered: Australian Securities and Investments Commission v Wily [2019] NSWSC 521; (2019) 137 ACSR 1 at [35] (Brereton J). See, also, CIP Group Pty Ltd v Watters in his capacity as receiver and manager of GGPG Pty Ltd [2023] FCA 329 at [16]-[17] (Downes J), affirmed in CIP Group Pty Ltd v Watters in his capacity as receiver and manager of GGPG Pty Ltd [2024] FCAFC 5 (Halley, Goodman and McElwaine JJ). 52 As to the issue of the existence of a pre-condition to exercise of the discretion, each 'matter' described in s 423(1)(a) and s 423(1)(b) is an alternative and the former does not confine the latter: Sahab Holdings Pty Ltd v Tonks [2023] NSWCA 12; (2023) 167 ACSR 560 at [12] (Kirk JA, Macfarlan and Meagher JJA agreeing); Hall v Poolman [2009] NSWCA 64; (2009) 75 NSWLR 99 at [90] (Spigelman CJ, Hodgson JA and Austin J). Further, it is now well established that the relevant test to be applied to the threshold to enliven the exercise of the discretion under s 423(1) is that there must be 'a sufficient basis for making an order', there must be 'something which requires inquiry': CIP Group FCAFC at [29], citing Leslie, in the matter of the Aboriginal Councils & Associations Act 1976 v Hennessy [2001] FCA 371 at [9] (Ryan, Dowsett and Hely JJ). 53 The 'notion of sufficiency involves some assessment of what is at stake and all the circumstances. Less might be required if there is a suggestion of serious misconduct': Sahab at [28]. '[T]he notion of "suspicion" involves a "positive feeling of actual apprehension or mistrust, as distinct from mere wondering".': Wily at [36] (citations omitted). Further, 'what is sufficient can tend to overlap with discretionary considerations.': Sahab at [18]. 54 In CIP Group FCAFC at [62] the Full Court agreed with the following observations of Kirk JA in Sahab: [22] The notion of there being a sufficient basis to warrant an inquiry both acknowledges room for uncertainty, and takes some account of the nature of what is at issue in all the circumstances. There may be uncertainty as to the facts themselves, or as to whether those facts should be characterised as involving some relevant kind of misconduct. In Hall v Poolman, for example, it appeared that the facts themselves were relatively clear (see at [44] and [82]). [23] As for the nature of what is at issue, the very notion of sufficiency involves some assessment of what is at stake and all the circumstances. Less might be required if there is a suggestion of serious misconduct. Yet the "strength and nature of the allegations" were, appropriately, listed by the Full Court in Leslie as matters potentially relevant to the exercise of the discretion. Thus there can be some artificiality in seeking to draw a rigid distinction between the issue of whether there is a sufficient basis to consider that there is something which requires inquiry and the question of whether the Court should order an inquiry in its discretion. The issues can be distinguished, but in many cases they will tend to overlap. The ultimate issue is whether the Court is persuaded that in all the circumstances an inquiry is warranted. 55 The Full Court then said at [63]: 63 We do not understand, however, that Kirk JA was suggesting by those observations that it was desirable or appropriate to proceed to determine an application for an inquiry under s 423 of the Act by focusing exclusively on whether "in all the circumstances an inquiry is warranted". In our view, it is important to distinguish between the question of whether there is a sufficient basis to consider that there is something which requires inquiry and whether the Court should order an inquiry, in its discretion. Textually, s 423 makes clear that the two inquiries are distinct. We agree that in many cases, matters relevant to the two issues will overlap but they are different inquiries, the first involving an objective determination of whether there is a sufficient basis to consider that there is something requiring inquiry and the second involving an exercise of discretion, by reference to factors relevant to that exercise, including those identified by the Full Court in Leslie at [6]. 56 When considering the issue of sufficiency, the following matters referred to in CIP Group FCA at [4]-[13], [36] and CIP Group FCAFC at [20], [44], [45], [50], [71]-[73] are relevant: (1) Section 423 'is "virtually identical" to the former s 536 of the Act, which was addressed to the conduct of liquidators likely to attract sanctions for "disciplinary reasons" and, therefore, the case law concerning s 536 can apply to s 423': CIP Group FCAFC at [20], citing Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434 at 438 (McLelland J) (considering s 420 of the Companies (New South Wales) Code as the predecessor provision to s 536); Re S&D International Pty Ltd (in liquidation) (receivers and managers appointed) [2009] VSC 225 at [210] (Robson J); Dunner at [8]; Sahab at [11]. (2) Section 423 sits within the broader regulatory system established under the Act, which exists to ensure the lawful, orderly and efficient conduct of corporations due to the central significance of corporate conduct for the economic and social life of the nation: Poolman at [53]. (3) Section 423 is not to be construed narrowly or confined by fine distinctions. Like the former s 536, it is a broadly expressed supervisory jurisdiction over the conduct of a person in control of the affairs of a corporation in circumstances where normal market forces and the exercise by shareholders of their rights are attenuated or non-existent: Dunner at [10]; Poolman at [53]-[54]. (4) The interest to be served is the public interest: Hypec Electronics at [41]. (5) The provision is designed for 'disciplinary' purposes, that is, as mechanisms for supervision by the Court of person involved in the administration of insolvent estates: Naxatu Pty Limited v Perpetual Trustee Company Ltd [2012] FCAFC 163; (2012) 207 FCR 502 at [16]-[17] (Dowsett J, Yates J agreeing), citing Northbourne Developments at 438 and the following passages from Poolman. 67 The court's supervisory role is recognised in the frequently cited observations of McLelland J in Northbourne Developments (at 438), where his Honour said of the predecessor to s 536 that it "is concerned with aspects of the conduct of liquidators which are liable to attract sanctions or control for what might broadly be described as disciplinary reasons." For subsequent applications of this approach, see, for example, Re Glowbind Pty Ltd (In Liq); Takchi v Parbery [[2003] NSWSC 1190 at [21]] per Burchett AJ; Australian Securities and Investments Commission v Forestview Nominees Pty Ltd (Receivers and Managers Appointed) (2006) 236 ALR 652 at 656 [15]; 24 ACLC 1567 at 1570 [15]; [Leslie] (at 656 [4]); Australian Securities and Investments Commission v Edge (2007) 211 FLR 137 at 152 [48], per Dodds-Streeton J; Vink v Tuckwell, per Robson J. 68 The characterisation of the basis for intervention as "disciplinary reasons" is, as McLelland J said, "broadly" apt. Particularly with respect to the unfettered power in s 536(3), it is not appropriate to limit the power to a concept of impropriety. It extends at least to the full range of "duties" referred to in s 536(1)(a). Questions of skill and diligence, as well as questions of improper conduct or improper purpose, can give rise to "disciplinary reasons" in the sense that McLelland J was applying the concept (see, for example, the duties in ss 180, 181, 182 and 183 of the Corporations Act (Cth)). The relevance of alternative remedies 69 One of the considerations relevant to the exercise of the discretion under each of the powers in s 536 is whether or not there is another appropriate remedy: see [Leslie at [6]]. Accordingly, where an issue is raised as to whether a decision made by a liquidator should be reversed or modified, the appropriate procedure is under s 1321: see Belvista Pty Ltd v Murphy [[1993] ACLR 628 at 630] per McLelland CJ in Eq; Re Glowbind (at 465 [21]), per Burchett AJ. Section 536 should not be used to assist a person engaged in litigation with a liquidator akin to discovery, at any rate where the litigation does not involve reasons": see Re Bauhaus Pyrmont Pty Ltd (In Liq) [2006] NSWSC 742 per Barrett J. The analogy with Inquiries into the conduct of trustees in bankruptcy 70 By reason of the historical origins of statutory regulation of corporate insolvency in general bankruptcy legislation, it has always been the case that the development of case law with respect to the supervision of liquidators has drawn upon the parallel case law arising in the courts' supervision of trustees in bankruptcy. Thus, the exercise of the powers in s 536 and s 423 of the Corporations Act (Cth) can be informed by the case law for s 179 of the Bankruptcy Act 1966 (Cth). (6) In conducting an inquiry, the Court is performing a regulatory role. In that setting, it is generally not appropriately employed for the purpose of vindicating private rights: Sahab at [25]. For example, a s 423 inquiry should not be the occasion for trying what is really an action for negligence or for other breach of duty by a receiver: Hypec Electronics at [35], by analogy with s 536 and liquidators. (7) While s 423 is not concerned with inquiries which are sought primarily to vindicate private rights, but there may be overlap in the supervisory function of an inquiry and the vindication of private rights. The two functions are not mutually exclusive: CIP Group FCAFC [70]. In this respect, the Full Court said in CIP Group FCAFC: 71 Nevertheless, as numerous authorities make clear, the Court's supervisory jurisdiction over external administrators is directed at the "regulation, supervision, discipline and correction" of external administrators "with a view to upholding the public interest in the honest and efficient administration" of companies in external administration: Lewis v Battery Mineral Resources Ltd (in liq) (2021) 156 ACSR 162; [2021] FCA 963 at [94] (Griffiths J). Section 423 is an integral element of the Court's supervisory jurisdiction over external administrators: Sahab at [24]. 72 As Barrett J explained in Hypec at [41], in the context of conduct of a liquidator and the former s 536 of the Act: As the several judicial statements about s 536 make clear, the emphasis is on regulation, supervision, discipline and correction of liquidators in the interests of honest and efficient administration of the estates of companies subject to winding-up. The interest to be served is a public interest. The section is not concerned in any direct way with vindication of private rights. Rather and as Steytler J said in GIS Electrical Pty Ltd v Melsom [[2003] WASCA 302] ... at [49] echoing an observation of McLelland CJ in Eq in Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434 at 438…, it "is concerned with aspects of the conduct of liquidators which are liable to attract sanctions or control for what might be broadly described as disciplinary reasons". The preoccupation is, as I put it in Re Bauhaus Pyrmont Pty Ltd [2006] NSWSC 742 at [4], with "the broader question of due administration of the winding up in the public interest". 73 This passage has been cited with approval in subsequent cases, including Sahab at [25]; Djordjevich v Rohrt (2022) 67 VR 161; [2022] VSCA 84 at [22] (Kennedy and Whelan JJA); Lewis at [94]; Australian Securities and Investments Commission v Macks (No 2) (2019) 133 SASR 251; [2019] SASC 17 at [50], [57] (Doyle J); Deputy Commissioner of Taxation v Starpicket Pty Ltd (No 2) [2013] FCA 699 at [20] (Gordon J). (8) Where the conduct of which complaint is made requires an assessment primarily of the receiver's commercial judgment in the context of complex legal and factual issues, such conduct will likely fall outside the range of conduct liable to attract disciplinary sanction or control: Oswal, in the matter of Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) v Carson, McEvoy and Theobald (Receivers and Managers) (No 3) [2013] FCA 357; (2013) 300 ALR 149 at [97] (Siopis J). 57 The supervisory and disciplinary nature of an inquiry is reinforced by s 418(1)(d) which provides, in effect, that a person is not qualified to be appointed and must not act as a receiver of property of a corporation if the person is not a registered liquidator. Part 2 of IPSC contains provisions relating to registration and discipline of registered liquidators. Those provisions include Court oversight of registered liquidators: s 45-1 of the IPSC. The Court may make such orders as it thinks fit in relation to a registered liquidator on its own initiative during proceedings before the Court or on application by the registered liquidator or the ASIC: s 45-1(1)-(3) of the IPSC . The matters which the Court may take into account when making orders do not appear to be limited or confined to circumstances in which a registered liquidator is acting as an external administrator: s 45-1(4) of the IPSC. The section does not limit the Court's powers under any other provision of the Act or under any other law: s 45-1(5) of the IPSC. Therefore, it is possible that an outcome of an inquiry under s 423 could be that the Court makes orders in relation to a receiver, as a registered liquidator, under s 45-1(1) of the IPSC. 58 As to discretionary considerations, many factors may be relevant. 'They include the strength and nature of the allegations, any answer offered by the receiver, other available remedies, the stage to which the receivership has progressed, the likely amounts of money involved, the availability of funds to pay for any inquiry, the likely benefits to be derived from it and the legitimate "interest" of the applicant in the outcome.': Leslie at [6], cited with approval in Poolman at [58]-[59], [79] and [104]; Sahab at [19]-[23]. See, also, CIP Group FCAFC at [25]-[27], noting that the list of relevant factors referred to in Leslie is, of course, not comprehensive: Poolman at [59]. 59 As already mentioned, the strength and nature of the allegations, as a discretionary factor, tends to overlap with the question of whether there is a sufficient basis to inquire. The nature of the allegations extends to the simplicity and, conversely, the complexity of the matter into which the Court may inquire. In this regard, Bryson J in GE Capital Australia v Davis [2002] NSWSC 1146; (2002) 180 FLR 250 (at [63]-[65]) expressed the view that: 63 … the discretion to award a remedy under s.423 should only be acted on where an inquiry into the conduct of the controller has revealed the existence of a liability which can be established simply and is not open to any substantial dispute. Except in clear cases it would not in my opinion be appropriate to press subs.423(1) into service to extemporise procedures and remedies against controllers of the property of corporations; except for remedies for which simple summary procedures are appropriate, the ordinary procedures of the Court should be followed. Section 423 does not empower the Court to order some remedy on the ground that the Court saw fit to do so in a case where there was not otherwise an enforceable obligation. The power although briefly stated is extensive; a court would not see fit to exercise it except in enforcement of some obligation which the law created. … 65 I do not regard Artistic Builders [Pty Ltd v Elliot and Tuthill (Mortgages) Pty Ltd [2002] NSWSC 16] [at [135]-[153] (Campbell J)] as establishing that the power of the Court should be exercised in cases where the grounds of the remedies sought are in any way complex, or that it should be readily exercised in cases where use of that power is contentious. In my opinion it is not a correct or a fair view that the hearing of these proceedings was undertaken as an inquiry under s.423 upon a complaint of kind referred to in para.(b) of subs.423(1). A trial of proceedings before the Court should not readily be interpreted as an inquiry under s.423 or as opening the possibility of remedies by such order as the court might think fit unless it is clear from the outset that such an inquiry is being undertaken and that there is a claim for exercise of the Court's power to grant remedies. In these circumstances I am not prepared to grant any remedy in exercise of the court's discretionary power under subs.423(1). 60 Downes J cited these observations of Bryson J in CIP Group FCA at [14]-[15]. Her Honour's 'additional overarching reasons' for refusing to order an inquiry in that case included that the receiver's decisions were made in circumstances that were factually and legally complicated (at [136(3)]).

Bluewaters Power's complaint 61 Bluewaters Power submits that a fundamental duty of the Receivers is to exercise their powers bona fide to serve the purposes for which they were appointed and to comply strictly with the terms of their appointment. A relevant express purpose of the receivership is to perform and observe the obligations of Griffin Coal under the CSAs as required by cl 4.3(c) and cl 4.3(d)(vii) of the Intercreditor Deed and cl 5.2 of the Deed of Appointment. The Receivers owe a duty to the Security Trustee to further that purpose. 62 Bluewaters Power's complaint centres on the facts set out earlier under the heading 'Liquidators' investigation of disclaimer of CSAs' and 'Removal of the former Liquidators'. They characterise that conduct as seeking to procure or agitating for the former Liquidators to terminate the CSAs from the outset of the receivership and acting in concert with the Griffin Coal's lenders (ICICI Finance Parties), Lanco and others to bring about disclaimer of the CSAs. That conduct was aggravated by initially agreeing to fund the former Liquidators as a cost and expense of the receivership. Further, the Receivers apparent dealings with the ICICI Finance Parties and Lanco as well as their advocacy on behalf of that group is indicative of a predisposition to prefer the interests of that group of Beneficiaries under the Security Trust Deed to Bluewaters Power as another group of Beneficiaries under that deed. In substance, that conduct is inconsistent with the Security Trustee's duties as trustee and the Receivers' appointor. 63 Bluewaters Power contends that by the Receivers' conduct of agitating for the termination of the CSAs by disclaimer they have acted outside the scope of the purpose of the receivership and in breach of the primary duties owed to the Security Trustee. Bluewaters Power contends that the Receivers' answer to their complaint, set out in more detail below, reveals that the Receivers misapprehend their duties and obligations and that is in need of 'correction' in the interests of the honest and efficient administration of the receivership. Moreover, agitating for termination of the CSAs has the potential to destroy rights and security interests of the Security Trustee (the Receivers' appointor). That conduct is incompatible with the purpose of their appointment and a breach of their duties to the Security Trustee. The Receivers' conduct warrants an inquiry. 64 Bluewaters Power submits that the discretionary factors favour ordering an inquiry. First, the complaints raise serious allegations about breaches of duty or unfaithful departure from the proper performance of those duties. The nature of the allegations and mistrust engendered raises concerns about whether the Receivers are diligently performing and observing the supply obligations under the CSAs. Second, the Receivers fundamentally misunderstand their functions and duties. Third, the receivership is likely to continue for some period of time and, therefore, 'correction' is necessary and will have utility. Fourth, there is no clear practical alternative to an inquiry. The Security Trustee has adopted a neutral position and is unwilling to intervene. Fifth, findings of fact will be of benefit to the Security Trustee for correction of the Receivers' behaviour. Sixth, there is public interest in an inquiry because the allegations relate to the faithful and efficient administration of the receivership. The complaint is not about a commercial decision of the Receivers. Further, there are broader public interest considerations connected to the continuing supply of electricity into the SWIS. Termination of the CSAs through disclaimer would have serious consequences for the supply of electricity in the State. Last, Bluewaters Power has a legitimate interest in the outcome.

The Receivers' answer 65 The Receivers submit that Bluewaters Power's complaint rests almost entirely on their construction of the Intercreditor Deed and the Deed of Appointment which the Receivers dispute. Further, on the Receivers' construction, having regard to statutory and general principles relating to the functions and powers of receivers, they submit that their conduct was consistent with the faithful performance of their functions and exercise of their powers for reasons that may be summarised as follows. (1) The primary duty the Receivers owed to their appointor is to collect and realise the assets of the company for the purpose of discharging the security. Further, they have power to do all things necessary or convenient to be done to fulfil the objectives for which they were appointed. (2) While the Security Trustee holds the Security on trust for all Beneficiaries, their obligations and rights under the Security Trust Deed are several and the Security Trustee is obliged to act on the instructions of the Beneficiaries in accordance with the Security Trust Deed, Intercreditor Deed and other securities (together, the Transaction Documents). Relevantly, in appointing the Receivers the Security Trustee was acting to enforce the rights of the Senior Beneficiaries (which excludes Bluewaters Power). (3) The purposes for which the Receivers were appointed did not include enforcement of Bluewaters Power's rights under the Transaction Documents, including the right to performance of the CSAs. The Intercreditor Deed regulates the rights of Bluewaters Power under the CSAs and Griffin Coal's financiers' rights and does not subvert the ordinary purpose of a receivership. In that context, cl 4.3(c) of the Intercreditor Deed contains a discrete obligation for the Security Trustee (and the Receivers) to perform Griffin Coal's obligations under the CSAs. That obligation is not a purpose of the receivership. (4) The Receivers are under no obligation to preserve the existence of the obligations of Griffin Coal under the CSAs. Their obligation is to cause Griffin Coal to perform them while they remain extant. Further, if the Liquidators disclaim the CSAs, the Receivers' obligation under cl 4.3(c) will be affected and the disclaimer will terminate Griffin Coal's rights, interests and liabilities in the respect of the CSAs. (5) Bluewaters Power's secured obligations under the Security Deed and Intercreditor Deed are limited to the Step-in Rights and those rights would cease to apply or be binding on Griffin Coal upon termination or expiration of the CSAs. Further, the Senior Beneficiaries' secured obligations, subject to cl 4.5, have priority over Bluewater Power's secured obligations. (6) Amongst other things, the Receivers have a statutory duty under s 530A to assist the Liquidators. The CSAs are unprofitable contracts and the Liquidators, acting reasonably, would disclaim them. The Receivers' conduct is to be understood against that background and, in particular, that Griffin Coal cannot perform the CSAs without the Receivers utilising external funding. (7) On the proper construction of cl 4.3(a) and cl 4.3(c) of the Intercreditor Deed these provisions do not: (a) limit the purpose of the Receivers' appointment to the performance and observance of Griffin Coal's obligations under the CSAs; (b) derogate from the Receivers' duty to their appointor to collect and realise the assets of Griffin Coal for the purpose of discharging the security; (c) impose an obligation on the Receivers to preserve the existence of the obligations of the CSAs; or (d) otherwise prohibit the Receivers from conferring with the Liquidators regarding the potential disclaimer of the CSAs where it was otherwise consistent with their duties and obligations to do so, and in circumstances where the CSAs were (and are) eroding Griffin Coal's remaining assets. (8) The Receivers have acted consistently with their duties. It was consistent with the performance of their duties to confer with the former Liquidators regarding the potential disclaimer of the CSAs. Further, the Receivers were not under any duty to avoid collaboration with the Senior Beneficiaries. 66 The Receivers submit that Bluewaters Power has not established a sufficient basis to justify an inquiry for the following reasons. (1) The allegations at the heart of the application are in the nature of vindication of private rights, not addressed to conduct attended with the culpability that would ordinarily give rise to disciplinary consequences. There is no real public interest to be served in an inquiry because the substance of the complaint can be addressed in proceedings for declaratory relief regarding the Receivers' obligations under the applicable instruments or, should the need arise, proceedings to challenge any disclaimer of the CSAs. (2) The 'matter' that is the subject of the proposed inquiry involves complex and disputed issues. It is not generally appropriate to utilise s 423 for the resolution of such issues. (3) Successful applications are rare. That underscores the necessity for there to be a sufficient basis for ordering an inquiry. 67 The Receivers submit that the discretionary factors are also against ordering an inquiry. They emphasise, again, that Bluewaters Power's application is primarily for the vindication of private rights that can be dealt with by other means. The complaints do not involve allegations of any misconduct in the exercise of any 'executive power' of the Receivers. Rather, it relates to ancillary conduct relating to Receivers' engagement with the former Liquidators. The broader public interest (the continued supply of electricity into the SWIS) is not a relevant consideration. There is no utility to the application in circumstance where the former Liquidators have been removed and, therefore, there is no continuing risk of influence over them and if a disclaimer took place Bluewaters Power would have the right to apply to have it set aside. There is no remedy that could be granted under s 423 relating to the potential disclaimer. There is no evidence of any loss (or harm) to Bluewaters Power. Certain conduct of Bluewaters Power by which it threatened the former Liquidators, new Liquidators and Receivers with actions of personal liability should be taken into account. Also, that no other creditor of Griffin Coal supports the proposed inquiry.

Bluewaters Power's rejoinder 68 As already mentioned, Bluewaters Power submits that the Receivers' answer reveals their misapprehension of their duties and obligations. Bluewaters Power gives five reasons in support of that submission. First, the Receivers appear to misapprehend that their appointor is the Senior Beneficiaries. Even if they correctly understand it to be the Security Trustee, the Receivers owe duties to the Security Trustee as part of the Secured Obligations to perform and observe the CSAs. Second, the duty to the Security Trustee is not limited to realising the assets. An express purpose of the receivership is to perform and observe the CSAs. Third, the Receivers' position as agent of Griffin Coal in no way diminishes the duties owed to the Security Trustee with respect to performance of the CSAs. Fourth, the conduct in question does not concern whether the Receivers have caused Griffin Coal to perform its obligations under the CSAs, but rather whether the Receivers have in the faithful performance of their function in the receivership which has, an express purpose, performance of the CSAs. Fifth, the absence of a power to disclaim on the part of the Receivers is no answer. The conduct about which the disclaimer is made is the conduct which has as its object to bring about the disclaimer of the CSAs by the former Liquidators.

The Security Trustee's position 69 Notwithstanding that Bluewaters Power contends that the Receivers have breached the duties they owe to the Security Trustee, Certane CT takes no position on the application. No relief is sought against it and it will abide the outcome.

General principles relating to receivers, liquidators and property of a company 70 As the parties' submissions draw on general principles relating to receivers, liquidators and property of a company, it is convenient to set out some of the relevant general principles before turning to consider the substance of the parties' competing contentions.

Receivers' duties, liabilities, functions and powers 71 Receivers or receivers and managers may be appointed out of court under an instrument conferring power on a secured party to appoint the receivers or by the Court in the exercise of its powers under s 23 and s 57 of the Federal Court of Australia Act 1976 (Cth). Receivers, which includes receivers and managers and other controllers, appointed in respect of property of a corporation are regulated by Pt 5.2 of the Act. (For ease of reference, 'receivers' is used in these reasons to refer to receivers, receivers and managers, or any other controller of property of a corporation.) 72 Sections 416, 417 and 418 deal with application of Pt 5.2, the property to which it applies, and persons qualified to be receivers. In general, where two or more receivers (whether receivers, receivers and managers, controllers, or managers) are appointed they may act severally: ss 434D - 434G. In general, after the appointment of receivers, third-party rights cannot be enforced against the corporation for reasons connected to the appointment of the receivers and (or) the financial position of the corporation: ss 434J - 434M. 73 Receivers generally act as agent of the company and are able to deal with its property and manage its business in that capacity. The agency is of a special character in that the receivers are not subject to the company's control. In Carey v Korda [2012] WASCA 228; (2012) 45 WAR 181 (Murphy JA, Martin CJ and Newnes JA, agreeing) summarised the principles applicable to the position of a receiver appointed out of court, relevantly, as follows: 45 The essential elements of the law of modern receivership are generally regarded as deriving from the dissenting judgment of Rigby LJ in Gaskell v Gosling [1896] 1 QB 669, which was affirmed in the House of Lords (Gosling v Gaskell [1897] AC 575), and referred to with evident approval in Australian Mutual Provident Society v George Myers & Co Ltd (in liq) (1931) 47 CLR 65 at 82, 95. Rigby LJ described the "almost penal liabilities" imposed on a mortgagee in possession at law and observed that courts favoured "any means which would enable the mortgagee to obtain the advantages of possession without its drawbacks" (at 691). In order to overcome the disadvantages, mortgagees began to include, in the mortgage, a covenant requiring the mortgagor to appoint a receiver with wide powers of management, to receive income from the mortgaged property in order to effect payments to the mortgagee. The covenant was enforceable at the suit of the mortgagee. 46 Mortgage instruments later evolved to include a stipulation that the mortgagee itself, and not the mortgagor, should have the right to appoint the receiver. Though it was the mortgagee who appointed the receiver, the object of the parties was that the receiver should act as agent of the mortgagor. It was a term of the contract that the mortgagor would not revoke the appointment of the receiver. Rigby LJ observed (at 692): Of course the mortgagor cannot of his own will revoke the appointment of a receiver, or that appointment would be useless. For valuable consideration he has committed the management of his property to an attorney whose appointment he cannot interfere with. The appointment so made will stand good against himself and all persons claiming through him, except incumbrances having priority to the mortgagee who appoints the receiver. 47 Under the general law, the existence of the agency also assisted the receiver by imposing liability in respect of his or her dealings with third parties upon the mortgagor, rather than upon the receiver personally: Sheahan v Carrier Air Conditioning Pty Ltd (1997) 189 CLR 407 at 433; cf the statutory personal liability for certain debts incurred, including for services rendered and property leased, under s 419 of the Corporations Act. 48 In Visbord v Federal Commissioner of Taxation (1943) 68 CLR 354 at 381-382, Williams J referred to this "well-established legal device" as enabling the mortgagee to obtain the benefits, but without being subject to the liabilities, of the mortgagee in possession. His Honour added: The appointment of the receiver divests the mortgagee of all powers with respect to the mortgaged property which the receiver is appointed to exercise (Woolston v Ross (1900) 1 Ch 788). The receiver takes complete control of the mortgaged property and the mortgagor is as effectively dispossessed from control as he would be if the mortgagee had entered into possession (Inland Revenue Commissioners v Thompson (1937) 1 KB 290; Meigh v Wickenden (1942) 2 KB 160, at pp 168, 169). Although the receiver is in law the agent of the mortgagor, he occupies a very special position. He is appointed to and may be removed from office by the mortgagee. 49 Reference was made by Dawson, Gaudron and Gummow JJ in Sheahan v Carrier Air Conditioning Pty Ltd (at 432-433) to the above observations of Williams J. Dawson, Gaudron and Gummow JJ continued, with respect to the true character of the agency (at 436): That character is indicated in the following passage from the judgment of Sir Raymond Evershed MR in In re B Johnson & Co (Builders) Ltd [1955] Ch 634 at 644-645: [A] person appointed as receiver and manager is concerned, not for the benefit of the company but for the benefit of the mortgagee bank, to realise the security; that is the whole purpose of his appointment; and the powers which are conferred upon him, and which I have to some extent recited, are … really ancillary to the main purpose of the appointment, which is the realisation by the mortgagee of the security. More recently, in Gomba Holdings UK Ltd v Homan [1986] 1 WLR 1301 at 1305; [1986] 3 All ER 94 at 97; affd [1988] 1 WLR 1231; [1989] 1 All ER 261, Hoffmann J, in referring to this passage, said that a receiver and manager "is no ordinary agent" and continued: Although nominally the agent of the company, his primary duty is to realise the assets in the interests of the debenture holder and his powers of management are really ancillary to that duty. 50 In that regard, there is no general fiduciary relationship between the receiver and the company in receivership: State Bank of New South Wales Ltd v Chia (2000) 50 NSWLR 587 at [869]-[870]; Bride v Freehill Hollingdale & Page [1996] ANZ ConvR 593 at 596. 51 Under the general law, a receiver's duties are, in broad terms: (a) to the mortgagee, to collect and realise the assets, in order to discharge the secured debt; (b) to the mortgagee, a duty to keep it informed about the progress of the receivership; (c) as donee of the power, to exercise the powers and duties in good faith and for proper purposes; (d) to the mortgagor, to act in good faith in the exercise of the powers of sale, in the same way that a mortgagee owes duties of good faith in that regard; and (e) to the mortgagor, to hold the balance of the proceeds of sale after discharge of the secured debt, on trust for the mortgagor. See Meagher, Gummow and Lehane's Equity: Doctrine and Remedies (4th ed, LexisNexis, 2002) [28-225]-[28-235], and the cases there cited. 52 Section 419 of the Corporations Act, relevantly provides: (1) A receiver … who, whether as agent for the corporation concerned or not, enters into possession or assumes control of any property of a corporation for the purpose of enforcing any security interest is, notwithstanding any agreement to the contrary, but without prejudice to the person's rights against the corporation or any other person, liable for debts incurred by the person in the course of the receivership, possession or control for services rendered, goods purchased or property hired, leased … used or occupied. (2) Subsection (1) does not constitute the person entitled to the security interest a mortgagee in possession. 53 As to s 419, see AGL Victoria Pty Ltd v Lockwood (2003) 10 VR 596 at [23]-[31]. 54 The general law duties have also been modified by statute to include a duty, in a sale of the property of a corporation, to exercise reasonable care to obtain market value or the best price otherwise reasonably available: s 420A of the Corporations Act, read with the definition of "controller" in s 9. There are also certain statutory duties, including duties of care and diligence and good faith, imposed under ss 180, 181, 182, 183 and 184 of the Corporations Act, read with the definition of "officer" in s 9 of that Act. 74 Regarding s 419, as a consequence of the receivers' position as agent of the company, unless the receivers adopt existing contracts with third parties, it is the company and not the receivers which is liable to third parties for performance or non-performance rather than the receivers personally: Nardell Coal Corp (in liq) v Hunter Valley Coal Processing Pty Ltd [2003] NSWSC 642; (2003) 178 FLR 400 at [69] (Campbell J). Nonetheless, in certain circumstances, receivers will become personally liable for use, occupation or possession of property of a third party under pre-existing contracts with the third party: s 419A. 75 Section 420 relevantly confers the following powers on receivers. 420 Powers of receiver (1) Subject to this section, a receiver of property of a corporation has power to do, in Australia and elsewhere, all things necessary or convenient to be done for or in connection with, or as incidental to, the attainment of the objectives for which the receiver was appointed. (2) Without limiting the generality of subsection (1), but subject to any provision of the court order by which, or the instrument under which, the receiver was appointed, being a provision that limits the receiver's powers in any way, a receiver of property of a corporation has, in addition to any powers conferred by that order or instrument, as the case may be, or by any other law, power, for the purpose of attaining the objectives for which the receiver was appointed: (a) to enter into possession and take control of property of the corporation in accordance with the terms of that order or instrument; and (b) to lease, let on hire or dispose of property of the corporation; and … (h) to carry on any business of the corporation; and … (3) The conferring by this section on a receiver of powers in relation to property of a corporation does not affect any rights in relation to that property of any other person other than the corporation. (4) In this section, a reference, in relation to a receiver, to property of a corporation is, unless the contrary intention appears, a reference to the property of the corporation in relation to which the receiver was appointed. 76 The contractual powers arising under a security agreement are also subject to an implied qualification that they are exercisable only for the purpose of attaining the objectives for which the receivers were appointed. In short, those objectives are the preservation, recovery and realisation of the secured property in order to repay the secured moneys and (or) receive performance of the secured obligations: Bank of New Zealand v Essington Developments Pty Ltd (1991) 5 ACSR 86 at 88 (McLelland J). Receivers, in the absence of a provision to the contrary in the security agreement or instrument of appointment, must be active in the protection and preservation of the secured property: Silven Properties Ltd v Royal Bank of Scotland plc [2003] EWCA Civ 1409; [2004] 1 WLR 997 at [23]. 77 The basal duty of receivers is to comply with the terms of the instrument of their appointment and to exercise the powers conferred on them for the purpose of securing or realising the appointor's security. However, an exercise of the powers of the receivers which wilfully sacrifices the interests of the grantor of the security interest or subsequent secured parties is an abuse of the powers involving bad faith: State Bank of New South Wales v Chia [2000] NSWSC 552; (2000) 50 NSWLR 587 at [879], citing Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295 at 312 (Templeman LJ); Barns v Queensland National Bank Ltd [1906] HCA 26; (1906) 3 CLR 925 at 941-945; Forsyth v Blundell; Associated Securities Ltd v Blundell [1973] HCA 20; (1973) 129 CLR 477 at 493-494, 506-507; and Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676 at 691-692, 694, 700-703. Receivers who accept an appointment not for the purpose of enforcing a security, but for the purpose of disrupting other receivers appointed by a subsequent secured party and frustrating that secured party's ability to enforce its security, also involves an exercise of the powers in bad faith for an improper purpose: Downsview Nominees at 317-318. 78 Sections 421, 421A, 422, 422A, 422B, 422C, 422D, 426, 429, 429A, 430, 431 and 434H impose certain other duties and obligations and confer certain rights on receivers relating to bank accounts, financial returns and records, books, reports and notifications. The appointer and company also have certain reporting and notification obligations: ss 427, 428 and 429. Broadly, these provisions facilitate performance and exercise and (or) supervision of the performance and exercise, of receivers' functions and powers. 79 There are a number of provisions that confer powers on the Court and (or) ASIC relating to receivers and other controllers. Again, broadly, these powers fall into one of two categories: (1) powers that facilitate performance and (or) exercises of receivers' functions and powers; or (2) powers that are supervisory or disciplinary in respect of receivers' performance and exercise of their functions or powers. 80 The Court has power to authorise receivers to dispose of property that is subject to a security interest that has priority over a security interest in that property that the receivers are enforcing: s 420B. The Court has power to declare whether a purported appointment of a receiver is valid: s 418A. Receivers may apply to the Court for directions in relation to any matter arising in connection with the performance or exercise of any of the receivers' functions and powers as controller: s 424. ASIC has power to audit returns lodged by receivers: s 432. The Court has power to make an order directing receivers to make good a default in making or lodging any return, account, other document or giving any notice, or, failed to render proper accounts and to vouch receipts and payments in circumstances in which they are required to do so: s 434. Amongst the supervisory or disciplinary powers, the Court or ASIC has power to inquire into the performance or exercise of receivers' functions and functions where it appears that there has not been faithful performance of functions or observance of requirements of their appointment or there have been complaints about their acts or omissions in connection with their performance or exercise of their powers and functions: s 423. The Court also has power to remove receivers for misconduct or redundancy: ss 434A - 434C.

Unprofitable contracts 81 In the context of receivers in the control of the business or undertaking of a company, in general, the receivers are under no obligation to bring about the company's performance of obligations under an existing contract with a third party. As a consequence of the receivers' position as agent of the company, the company, and not the receivers, would be liable to the third party for any breach of an unperformed contract. The third party would be an unsecured creditor of the company for damages for breach of contract. Subject to the proviso that the receiver must not wilfully or recklessly sacrifice the interests of the grantor or subsequent secured party by disregarding contracts that results in destruction of the value of the company's business or undertaking, as agent of the company, a receiver may ignore contracts or cause the company not to perform its obligations under contracts. In the words of McPherson J: 'The lemon may be squeezed dry': Re Diesels & Components Pty Ltd [1985] 2 Qd R 456 at 459. See, also, George Barker (Transport) Ltd v Eynon [1974] 1 WLR 462 at 471; Airlines Airspares Ltd v Handley Page Ltd [1970] Ch 193 at 198-199; Company Receivers and Administrators (looseleaf, last review 18 October 2023) Thomson Reuters at [8.4310]. 82 In re Newdigate Colliery Limited [1912] 1 Ch 468 provides an illustration of the circumstances in which ignoring existing contractual obligations, and thereby jeopardising the company's goodwill, would not be a proper exercise of a receiver's powers, at least in the case of a court appointed receiver. In that case the English Court of Appeal dismissed an appeal from the primary judge refusing to direct the receiver and manager of the company to disregard certain forward contracts for the supply of coal which the company had made before the appointment of the receiver and manager. The receiver in that case wanted to disregard the contracts so that he could enter into more profitable contracts for the sale and purchase of the coal. The receiver had been appointed by the court to the whole undertaking of the company. While it was evident that the members of the court took into account that it was not clear that the mortgagor's equity of redemption was of no real value and that to disregard the existing contracts would increase the value of the company's unsecured creditors to the disadvantage of the company and advantage of the mortgagee, all members were of the view that it was not appropriate for the receivers and managers to destroy the company's undertaking in circumstances where that formed part of the secured property the receiver had been appointed to manage. 83 Cozens-Hardy MR said that if the mortgagee 'elects to have a manager appointed and takes upon himself through the manager the duty of carrying on the business, it is his duty to do nothing which will destroy, or prejudicially damage, the goodwill of the business at a time when it is not, and cannot be, apparent that the mortgagor may not have a real interest in the equity of redemption both of the colliery itself and of the business'. Fletcher Moulton LJ said 'part of their security is also the undertaking of the company, and they have obtained the appointment of a receiver who is also to manage this undertaking. … The goodwill of the company is therefore part of that which is charged to them, and the receiver and manager has, in my opinion, to do his best to preserve the whole of the property that is put in his care. It is not his duty to do what would ultimately sacrifice the value of the undertaking and to consider it a sufficient justification that by so doing he would obtain somewhat more money from the sale of the specific assets of the company. … In my opinion it might well ruin the whole reputation of this company and destroy the value of the undertaking from the point of view of the goodwill …'. Buckley LJ said '[a] receiver and manager owes a duty to two classes of persons. The order asked for would have the effect of allowing him to do an act which would benefit one class to the injury of the other.' Further, 'the property for which the receiver and manager is responsible includes this business and undertaking, and it is his duty to do, and business to see that he does, everything reasonable and right for the protection of the property as an undertaking for the benefit of all persons interested in it. The order asked for is an order directing the receiver and manager to disregard the interests of one of his constituents, the mortgagor, in order to benefit another of his constituents, namely, the mortgagee. It seems to me that such an order is necessarily wrong.' 84 Having regard to these general principles, the terms of the Intercreditor Deed make it plain that the Receivers are not entitled to ignore Griffin Coal's obligations under the CSAs. Therefore, cl 4.3(c) and cl 4.3(d)(vii) of the Intercreditor Deed and the terms of the Receivers' appointment, remove any doubt about whether the Receivers can, consistently with the performance of their duties, sacrifice the interests of Bluewaters Power by ignoring Griffin Coal's obligations under the CSAs.

Liquidation and property of the company 85 Parts 5.4 - 5.9 of the Act deal with winding up companies and other bodies. In the case of liquidation of a company, the essential functions of a liquidator are to identify, take possession of and realise the property of the company, investigate and determine claims against the company and to apply the property of the company to the satisfaction of those claims in accordance with the priorities stipulated in the Act and, thereafter, distribute any surplus to the company's members and carry out the necessary steps to complete dissolution of the company: see, e.g., Australian Securities and Investments Commission v Edge [2007] VSC 170; (2007) 211 FLR 137 at [40]-[41] (Dodds-Streeton J). 86 In general, the appointment of a liquidator terminates the capacity of a receiver to act as agent of the company: Gosling v Gaskell; Thomas v Todd [1926] 2 KB 511; Atkins v Mercantile Credits Ltd (1985) 10 ACLR 153 at 159 (Hope JA, Glass and Samuels JJA agreeing). Nonetheless, the receiver continues to have limited authority to deal with the secured property: South Australian Management Corporation v Sheahan (1995) 16 ACSR 45 at 53 (Debelle J), and the authorities there cited. Section 420C(1) provides that a receiver may with the written approval of the corporations' liquidator or with approval of the Court carry on the business of the corporation generally or as specified in the approval and do whatever is necessary or incidental to carrying on that business. The receiver carries on business as agent of the corporation and as receiver: s 420C(3). Here, the Liquidators provided the Receivers with that written approval. 87 A secured creditor is entitled to stand outside a liquidation and rely upon its security: Re Landmark Corporation Ltd (in liq) [1968] 1 NSWR 705 at 705-706 (Street J); In Re Henry Pound, Son, & Hutchins (1889) 42 Ch D 402; South Australian Management Corporation v Sheahan at 51. Upon the liquidation of a company, the secured creditor may enforce its security, although the secured creditor may require leave pursuant to s 471B of the Act to commence or continue any action or other civil proceedings against the company. However, nothing in s 471B affects a secured creditor's right to realise or otherwise deal with the security interest: s 471C. 88 The term 'property', where used within the Act except where contrary intention appears, 'means any legal or equitable estate or interest … in real or personal property of any description': s 9. Contractual rights are a chose in action and form of personal property. An existing chose in action may consist of an existing or present contractual right to receive performance in the future. When the right to receive performance comes into existence in the future that right is then, also, a chose in action: see Norman v Commissioner of Taxation (Cth) [1963] HCA 21; (1963) 109 CLR 9 at 26 (Windeyer J). A chose in action is an asset or property and, subject to the law relating to maintenance and champerty, a chose in action may be secured in the same way as another asset or property: Gough's Garages Ltd v Pugsley [1930] 1 KB 615 at 621; Georgiadis v Australian & Overseas Telecommunications Corporation [1994] HCA 6; (1994) 179 CLR 297 at 303-305, 311-319; South Australian Management Corporation v Sheahan at 52; Owners of Strata Plan 5290 v CGS & Co Pty Ltd [2011] NSWCA 168; (2011) 81 NSWLR 285 at [43]-[44] (Sackville AJA, Giles and Campbell JJA agreeing). 89 Before the introduction of the definition of 'property' into the Corporations Law and then the Act, non-assignable contractual rights, property held on trust and property validly mortgaged or charged or subject to some other form of enforceable encumbrance was not considered an asset or property of the company available for distribution amongst a company's creditors in a winding up. Notwithstanding the width of the definition of 'property' in s 9 of the Act, property that is the subject of a valid charge is not considered to be 'property of the company' for the purposes of a winding up: Crawford v Australia & New Zealand Banking Group Ltd (1994) 14 ACSR 310 at 315; Re United Pacific Transport Pty Ltd [1968] Qd R 517 at 521; Bank of New South Wales v Federal Commissioner of Taxation [1979] HCA 64; (1979) 145 CLR 438 at 443-444. In Meadow Springs Fairway Resort Ltd (in liq) v Balanced Securities Ltd (No 3) [2008] FCA 861; (2008) 66 ACSR 649 at [7]-[15] Siopis J considered that 'property of the company' in s 512 of the Act, which then provided '[a]ll proper costs, charges and expenses of and incidental to the winding up (including the remuneration of the liquidator) are payable out of the property of the company in priority to all other claims' did not include moneys the subject of charges the company had granted in favour of secured creditors. A liquidator also does not have power under s 477(2)(c) of the Act to sell or dispose of a company's chose in action where that consists of a contractual right that is not assignable to a third party by reason of an express agreement entered into by the company where that agreement is valid and effective under the general law: Owners of Strata Plan 5290 at [59], [64] (Sackville AJA, Giles and Campbell JJA agreeing).

Disclaimer of property of the company 90 While receivers and managers have no statutory power to disclaim property or contracts, under s 568(1)(f) of the Act 'a liquidator of a company may at any time, on the company's behalf, by signed writing disclaim property of the company that consists of …a contract'. A liquidator cannot disclaim a contract (other than an unprofitable contract or a lease of land) without leave of the Court: s 568(1A). 'A disclaimer is taken to have terminated, as from the day on which it is taken because of subsection 568C(3) to take effect, the company's rights, interests, liabilities and property in or in respect of the disclaimer property, but does not affect any other person's rights or liabilities except so far as necessary in order to release the company and its property from liability': s 568D(1). A person aggrieved by the operation of a disclaimer is taken to be a creditor of the company to the extent of any loss suffered by the person because of the disclaimer and may prove such loss as a debt in the winding up: s 568D(2). An application may be made to set aside a disclaimer before or after it has taken effect: s 568B; s 568E. Upon the application of a person who claims an interest in the property, the Court may order that the disclaimed property vest in, or be delivered to: (a) a person entitled to the property; or (b) a person in or to whom it seems to the Court appropriate that the property be vested; or (c) a person as trustee for a person of the kind referred to in (a) or (b): s 568F. 91 In circumstances in which a liquidator (or trustee in bankruptcy) has disclaimed property of the company, the property does not cease to exist, but the person in whom it vests has been described as 'clear as mud'. Typically, it is considered that the disclaimer property vests in the Crown in right of the State (or Territory) in which the property is located, or possibly the Crown in right of the Commonwealth given that the disclaimer is made under a law of the Commonwealth: see, National Australia Bank Ltd v New South Wales [2009] FCA 1066; (2009) 182 FCR 52 at [23]-[28] (Rares J); Menzies v Paccar Financial Pty Ltd (No 4) [2014] NSWCA 210; (2014) 101 ACSR 25 at [15], [95]-[105] (Emmett and Leeming JJA and Sackville AJA). Where the 'property of the company' that is disclaimed consists of contractual rights, the question of what and in whom it vests is yet less clear because contractual obligations cannot be transferred or assigned: see, e.g., Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 at 668-669, 671-674 (Collins MR), 678-679 (Cozens-Hardy LJ). Therefore, it is unlikely that a company's obligations under a disclaimed contract would 'vest' with the contractual rights. Nonetheless, where a vested contractual right of a company is contingent upon the company's performance, the benefit of the vested right could not be obtained without performance of the company's obligation. But, the counterparty could neither enforce the disclaimed contract against the company nor against any person in whom the company's contractual right vested. Thus, unless the person in whom the company's contractual right vested is willing and able to perform any obligation upon which a contractual right is contingent, a disclaimed contract would, in practical terms, bring performance of the contract to an end. 92 In the case of persons claiming security interests in disclaimer property, courts have been prepared to make vesting orders that permit the secured party to obtain the benefit of the security interest in that property: e.g., National Australia Bank Ltd v New South Wales at [29]-[30] (Rares J) (mortgagee of real property); Re Empire Plant Hire Pty Ltd (In Liq) [2021] VSC 549; (2021) 64 VR 1 at [33]-[38], [41] (Gardiner ASJ) (security interest in personal property). However, where the property interest of a person depends on rights and liabilities under a disclaimed contract, subject to any application to set aside the disclaimer, the property interest ceases with the company's rights and liabilities under the disclaimed contract: Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers appointed) (in liq) [2013] HCA 51; (2013) 251 CLR 592 at [35]-[42], [54]-[56] (French CJ, Hayne and Kiefel JJ) [68]-[74], [78]-[79] (Gageler J). In that case a leasehold proprietary interest in land was terminated by disclaimer of the lease (contract) upon which that interest depended. 93 However, disclaimer of a contract upon which proprietary rights in separate property depend is to be distinguished from disclaimer of contractual rights which are themselves intangible property. Having regard to the nature of contractual rights as property and a chose in action, the 'property of the company' that consists of a contract for the purposes of s 568(1)(f) would appear to mean the contractual rights that are personal property of the company and are capable of legal or equitable assignment by the company. In accordance with general principles, where a company has granted a security interest in its rights under a contract, those rights and that contract would be encumbered by the security interest and would not generally be regarded as 'property of the company' for the purposes of s 568(1) of the Act. Nonetheless, the property of the company would include any equity of redemption in respect of the contractual rights in which it granted the security interest. In that respect, the liquidator may be able to disclaim the equity of redemption as 'property of the company' or otherwise that part of the property that is not encumbered by the security interest.

Is there a sufficient basis for ordering an inquiry? 94 Against that background of general principles, I now turn to consider the substance of the parties' contentions.

Strength and nature of the allegations 95 There is little disagreement between the parties concerning the general principles relating to the functions and powers of receivers. The main point of difference between them concerns the extent to which the obligation of the Receivers under cl 4.3(c) and cl 4.3(d)(vii) of the Intercreditor Deed and cl 5.2 of the Deed of Appointment was 'a purpose of the receivership' and, otherwise, the extent to which the Receivers were under a duty to preserve the CSAs or, at least, not to bring about destruction of the CSAs. That point of difference is largely a question of the proper construction of the relevant instruments and an application of the general principles to which reference has been made. While the resolution of these issues is of some complexity and uncertainty, these issues are relatively confined and there is no indication that an inquiry involving these issues would involve a substantial exploration of facts. Accordingly, I do not consider complexity of the issues to be a strong reason against ordering an inquiry if, otherwise, there is a sufficient basis for making such an order. 96 As to the strength of the allegations, insofar as the legal issues are concerned, the objectives for which the Receivers were appointed included bringing about Griffin Coal's discharge (or performance) of the Secured Obligations. Bluewaters Power's Secured Obligations were the Step-in Rights described in cl 1.15 of the Intercreditor Deed. For the reasons that follow, it is reasonably arguable that, in circumstances in which Receivers are appointed as a Financier's Controller, the mechanism by which the parties agreed to the discharge of Bluewaters Power's Secured Obligations was the Controller's performance and observance of Griffin Coal's obligations under the CSAs. 97 The Receivers were appointed under cl 7.2 of the Intercreditor Deed and cl 10.1 of the Security Deed. Under the Security Deed, the Receivers may do any act, matter, or thing and exercise any right, power or remedy that may be done or exercised by Certane CT, as Security Trustee and Secured Party, in relation to the Secured Property: cl 10.5. That power is in addition to the Receivers' rights, powers, or remedies conferred by law and subject to any express limitation in the Deed of Appointment: cl 10.6. The powers of the Secured Party are set out in cl 9.1. The Security Deed also provides, for the avoidance of doubt, that a GP Controller may not exercise any rights, powers or remedies that Bluewaters Power are not permitted or entitled to exercise under the Intercreditor Deed, also that the circumstances in which the Secured Party is entitled to exercise any Power or Claim (as defined in the Security Deed) or receive payment of any amount under the Security Deed are limited by the Security Trust Deed and Intercreditor Deed: cl 9.9. 98 By the Deed of Appointment, the Receivers accepted their appointment on the terms set out in that deed and the Intercreditor Deed, the Security Deed and Security Trust Deed: cl 2, cl 1.2 (definitions). Subject to cl 4 and cl 5, the Receivers have all the powers and rights of receivers and managers including, but not limited to, those available under the Intercreditor Deed, Security Deed, Security Trust Deed, Act and at general law and in equity: cl 3.1. Clause 4 limits the Receivers' powers to borrow, raise money, create any security interest or incur liabilities. Clause 5 contains, relevantly, cl 5.2 by which, in substance, the Receivers were obliged to give effect to cl 4.3(c) and cl 4.3(d)(vii) of the Intercreditor Deed. Therefore, the rights, powers and remedies that the Receivers would otherwise have had are curtailed by their obligation to perform and observe Griffin Coal's obligations under the CSAs. Consequently, any right the Receivers would otherwise have had, based on general principles, to ignore the obligations of Griffin Coal under the CSAs on the grounds that these contracts were unprofitable is not available to them under the terms of the Security Deed, Intercreditor Deed and Deed of Appointment. Otherwise, the Receivers' obligations under cl 4.3(c) and cl 4.3(d)(vii) of the Intercreditor Deed cannot be considered in isolation to the other provisions of that deed and the provisions of the Security Deed. 99 Under the Security Deed Griffin Coal grants the Security Trustee, as Secured Party, a security interest in the Secured Property as 'security for the … due and punctual performance and satisfaction of the Secured Obligations': cl 2.1. The Intercreditor Deed provides that the Secured Obligations in relation to Bluewaters Power means the obligations of Griffin Coal under the CSAs which if not performed, or the occurrence of an Insolvency Event which gives Bluewaters Power, their CSA Step-in Rights which follow a Step-in Default and the right to be repaid money advanced in accordance with cl 4.5: cl 1.15 and cl 1.1 (definitions). The relevant obligations which if not performed under the CSAs are those in cl 17.1(a) (delivery of coal that does not meet certain Specifications), cl 17.1(b) (failure to deliver coal that has a material adverse effect) and cl 17.1(e) (Insolvency Event) of the CSAs. Therefore, in substance, the obligations of Griffin Coal under the CSAs that the Receivers are to perform under cl 4.3(c) of the Intercreditor Deed are the obligations that if not performed would give rise to a CSA Step-in Right. 100 The purpose and aim of the Intercreditor Deed, as reflected in the recitals, is to regulate the priorities between the Beneficiaries. Subject to Bluewaters Power's rights under cl 4.5, the Secured Obligations owed to the Senior Beneficiaries rank in priority ahead of the other Secured Obligations: cl 3.1. Also, Bluewaters Power's ability to give effect to the Step-in Rights in cl 4 through the appointment of a GP Controller is subordinate to the appointment of a Financier's Controller: cl 4.2, cl 7.2. However, the subordination of the Step-in Rights in cl 4 is not absolute. In effect, cl 4.3(c) ensures that, in circumstance in which a Financier's Controller is appointed, the need for Bluewaters Power to exercise any Step-in Rights to cure non-performance is removed because the Financier's Controller is obliged to cause Griffin Coal to perform its obligations under the CSAs. Further, if an existing Controller is not causing Griffin Coal to perform its obligations under the CSAs, Bluewaters Power has a right to exercise its CSA Step-in Rights: cl 4.2(l). Alternatively, the Security Trustee is to terminate the Controllers' appointment and appoint a replacement Controller: cl 4.3(e), cl 4.7(a). Additionally, if and to the extent the Security Trustee does not appoint a Financier's Controller, irrespective of the priorities described in cl 3.1, Bluewaters Power may instruct the Security Trustee to appoint a GP Controller to the Mining Property and that Controller is also bound to cause Griffin Coal to perform its obligations under the CSAs: cll 4.1, 4.2, 4.3(b). 101 It is reasonably arguable that cl 4 of the Intercreditor Deed, as a whole, provides the mechanism by which performance and satisfaction of the Secured Obligations in respect of Bluewaters Power is to be attained. Thus, it is reasonably arguable that an objective of the receivership is to give effect to Bluewaters Power's Secured Obligations (as described in cl 1.15) and the mechanism by which effect is given to those obligations, where a Financiers' Controller has been appointed, is cl 4.3(c) and cl 4.3(d)(vii) of the Intercreditor Deed. Accordingly, it is reasonably arguable that taking steps intended to bring about the destruction of the agreements that are the sources of the obligations that form part of the Secured Obligations and thereby prevent performance of the part of the Secured Obligations is contrary to the Receivers' duty owed to the Secured Party and their appointor. 102 Further, the contractual rights of Griffin Coal under the CSAs form part of the Secured Property under the Security Deed. The Security Trustee as Secured Party holds a security interest in that property on trust for all Beneficiaries. Part of the Receivers' duty or function is to 'preserve' the Secured Property. It is reasonably arguable that taking steps intended to bring about the destruction or termination of contract rights that form part of the Secured Property is contrary to the Receivers' duty owed to the Secured Party to preserve that property. 103 Thus, Bluewaters Power has raised reasonably arguable claims that the Receivers have not faithfully performed their functions or properly exercised their powers for the attainment of the objectives for which they were appointed. While the Receivers have raised arguable contentions to the contrary, it is not necessary at this stage of the application to resolve the construction questions definitively. The disputed construction merely adds to the uncertainty about the outcome of any inquiry that might be ordered.

Seriousness of the allegations 104 It follows that Bluewaters Power has also raised a reasonably arguable claim that the Receivers have misconceived the nature of their functions and powers under the Security Deed, Intercreditor Deed and Deed of Appointment. Assuming misconception, there is nothing to suggest that the Receivers have acted or are acting other than with the honest, but mistaken, belief that it is within the scope of their power to attain the objectives for which they were appointed to take steps intended to bring about the destruction or termination of Griffin Coal's rights and obligations under the CSAs. Nonetheless, on the assumption of misconception, there are aspects of the Receivers' conduct that tend to be aggravating factors that render the conduct less benign that might otherwise be thought to be the case. 105 The Receivers appear to be of the view that they are not under any duty to avoid collaboration with the Senior Beneficiaries. That view may misconceive the nature of their appointment. They are appointed by the Security Trustee. The Security Trustee holds the Security on trust for all Beneficiaries (including Bluewaters Power). There are firm indications in the Security Trust Deed, Security Deed and Intercreditor Deed that the Security Trustee is required to act impartially as between the Beneficiaries and not prefer the interests of one group of Beneficiaries to another. While the rights and obligations of the Beneficiaries under the Security Trust Deed are several, the Security Trustee is bound to give effect to the division of several rights in accordance with the terms of the Security Trust Deed, Security Deed and Intercreditor Deed. In the absence of instructions from Beneficiaries when required, requested and not received or otherwise not required, requested or received, the Security Trustee is to act on the advice of an Approved Expert as it considers in the best interests of all Beneficiaries: cll 2.1, 3.3(a), 3.3(b), 3.3(d) and cl 1.1 (definitions) of the Security Trust Deed. In the absence of instructions, the Intercreditor Deed provides that the Security Trustee may act as it sees fit in the best interests of the Beneficiaries: cl 14(a). If the Security Trustee is not entitled (except where an express provision provides to the contrary) to prefer the interests of the Senior Beneficiaries to those of Bluewaters Power, it is difficult to see how the Receivers could be in any different position. 106 Attempting to bring about the destruction of Griffin Coal's rights and obligations under the CSAs is also arguably inconsistent with the obligations of ICICI Bank and Griffin Coal as parties to the Intercreditor Deed. For example, under the terms of the Intercreditor Deed Griffin Coal and each Beneficiary (other than the Security Trustee) must do anything that the Security Trustee may reasonably require to give full effect to that deed including perfect the rights and powers afforded, created or intended to be afforded or created by that deed or other to perfect or enforce the Transaction Documents: cl 2.4. In making that observation I have not overlooked that cl 1.15(b) provides that the Step-in Rights and CSA Step-in Rights will automatically cease to apply or be binding on Griffin Coal and each other party on the earlier of termination or expiration of the CSAs. However, cl 1.15(b) does not appear to be addressed to circumstances of disclaimer. Procuring disclaimer of the CSAs by the former Liquidators is arguably not consistent with the obligation of the parties in cl 2.4 of the Intercreditor Deed to take reasonable steps to give full effect to the deed.

Mitigating factors 107 The Receivers contend that their conduct is to be viewed against the background that the former Liquidators acting reasonably would likely disclaim the CSAs and disclaimer would terminate Griffin Coal's rights, interests and liabilities in respect of the CSAs. Thereby, increasing the value of Griffin Coal's Mining Property and liberating Griffin Coal (and the Receivers) from the ongoing costs associated with performance of Griffin Coal's obligations under the CSAs in accordance with the Receivers' obligations under cl 4.3(c) of the Intercreditor Deed and cl 5.2 of the Deed of Appointment. I have doubts about the veracity of the Receivers' contentions. 108 To begin with, as also already mentioned, Griffin Coal granted the Security Trustee a security interest in all its present and after acquired property. That property must include Griffin Coal's contractual rights under the CSAs. Therefore, having regard to the general principles referred to earlier in these reasons, there is good reason to doubt that the Liquidators are able to disclaim the CSAs under s 568 of the Act on the ground that the contractual rights under those contracts are not, relevantly, 'property of the company'. 109 Further, Griffin Coal gave separate and independent undertakings to the Security Trustee that it will perform and observe the relevant Secured Obligations in accordance with each CSA: cll 2.5(a), 2.5(c), 2.5(d) and cl 1.1 (definitions). Therefore, it is unlikely that disclaiming the CSAs would bring about the termination of Griffin Coal's obligation to perform the independent obligations owed to the Security Trustee. 110 Additionally, the exercise of the power of sale under the Security Deed is subject to the provisions of the Intercreditor Deed. Under the Intercreditor Deed if the Security Trustee or a Financier's Controller wishes to exercise a power of sale in respect of Mining Property, in effect, the Security cannot be released without the consent of Bluewaters Power and the power of sale cannot be exercised unless the purchaser enters into a novation agreement or deed in respect of the CSAs in favour of Bluewaters Power pursuant to which the purchaser agrees to be bound by each CSA and assumes Griffin Coal's future obligations under them: cl 5.1, cl 5.2 and cl 1.1 (definitions). Although there are no doubt arguments to the contrary, there would appear to be a good argument that these provisions would survive any purported disclaimer of the CSAs as a disclaimer would only terminate Griffin Coal's rights and obligations under the CSAs. In that case, the power of sale would remain subject to the obligation to sell to a purchaser on terms that involve a novation; that is, on terms that would result in a new agreement or deed between the purchasers and Bluewaters Power on the same terms as the CSAs. 111 While I express no concluded view on the matter, it seems to me that there is good reason to doubt that any purported disclaimer of the CSAs would achieve anything of benefit for the unsecured or other creditors of Griffin Coal. Therefore, I do not regard the Receivers' evident view about the merits of the former Liquidators disclaiming the CSAs as particularly persuasive or mitigating the seriousness of the conduct of which complaint is made. Nonetheless, the lack of evident merit is a factor that suggests that the risk of any harm to the Beneficiaries (including Bluewaters Power) resulting from the Receivers' past conduct and future conduct, should they encourage the new Liquidators to disclaim the CSAs, is quite low.

Discipline and private rights 112 There is little doubt that Bluewaters Power seeks 'correction' of the Receivers' view about the nature and exercise of their functions and powers to 'protect' the continued performance of Griffin Coal's obligations under the CSAs. That is, the vindication of private rights is at the heart of Bluewaters Power's complaints. However, as already mentioned, discipline and vindication of private rights are not mutually exclusive concepts. There is a real public interest in the Court exercising its supervisory jurisdiction directed at the 'regulation, supervision, discipline and correction' of external administrators 'with a view to upholding the public interest in the honest and efficient administration' of companies in external administration. 113 Nonetheless, it is of significance that Bluewaters Power has not sought any particular disciplinary sanction against the Receivers and there is no suggestion of dishonesty or moral culpability. For instance, Bluewaters Power has not sought removal of the Receivers. Therefore, the focus appears to be on 'correction' on the assumption that, if 'corrected', the Receivers will desist from attempting to bring about disclaimer of the CSAs and, thereafter, will faithfully perform their functions and exercise their powers as receivers.

Disposition 114 This is a borderline case. Nonetheless, having regard to the relative strength and nature of Bluewaters Power's allegations, I am satisfied that they raise matters of a disciplinary character, notwithstanding that they overlap with private rights, of sufficient seriousness to enliven the Court's discretion to order an inquiry under s 423 of the Act.

Should an inquiry be ordered in the exercise of the discretion?

Nature and seriousness of the alleged misconduct and Receivers' answer 115 While I am satisfied there is a sufficient basis to enliven the Court's discretion to order an inquiry, the alleged misconduct is of a relatively minor nature. The alleged misconduct largely turns on points of contractual interpretation and, if sustained, appears to be driven by an honest but mistaken apprehension about the nature of the Receivers' functions and powers. The consequences of the alleged misconduct are unlikely to result in real harm to the Security Trustee, as Secured Party, or any Beneficiary of the Security Trust Deed. The allegations do not raise any element of moral culpability on the part of the Receivers. They also do not really speak to matters of competence because, as already mentioned, they largely turn on points of contractual interpretation. The relatively trivial nature of the allegations is a matter that is to be taken into account as a factor weighing against the exercise of the discretion to order an inquiry.

Other factors 116 I accept the Receivers' submission to the effect that there are other remedies available to Bluewaters Power. First, it is open to them to seek declaratory relief so as to resolve the dispute between them and the Receivers about the nature of the Receivers' functions and powers. If following the resolution of that matter in favour of Bluewaters Power and the Receivers continued to agitate for the disclaimer, Bluewaters Power may then have grounds to renew its application under s 423. Second, if and to the extent the new Liquidators apply to disclaim or attempt to do so without leave of the Court, there are remedies available to Bluewaters Power. I also accept the Receivers' submission that there is limited utility in ordering an inquiry having regard to the absence of any harm done and the low risk of it being done should the Receivers continue to agitate and manage to persuade the new Liquidators to take steps to disclaim. For similar reasons, I do not consider that findings of fact about the Receivers' conduct in any inquiry would be of any significant utility. Such findings could equally be made and be of equal or greater utility in proceedings for declaratory relief. These are all matters that also weigh against the exercise of the discretion to order an inquiry. 117 I accept Bluewaters Power's submissions to the effect that the Receivers' conduct has, no doubt, engendered an element of mistrust and sense in which they have not acted impartially. However, the extent to which that would disqualify them from continuing in their role could also be the subject of declaratory or, possibly, other relief. Therefore, that factor, at this stage, is relatively neutral. As is the fact that the receivership is likely to continue for some time. 118 Otherwise, I do not accept that there is any matter of significant public interest at stake. As already mentioned, Bluewaters Power have not sought any particular order, remedy or sanction against the Receivers (e.g. removal). The underlying nature of Bluewaters Power's allegations involves vindication of private rights or the several rights of Bluewaters Power as Beneficiaries of the Security Trust Deed, Security Deed, and Intercreditor Deed. Nor do I accept that any broader public interest in connection with the supply of electricity into the SWIS is of relevance to this application. I also do not consider the absence of support of other creditors, in the context of allegations of partiality, is of any moment. Nor do I consider that the conduct of Bluewaters Power is a factor of any significance except to the extent that it is indicative of vindication of private rights rather than complaints relating to dereliction of public duty.

Disposition 119 Having regard to all the discretionary factors to which reference has been made, I am not satisfied that an order for an inquiry is warranted at this time. However, if Bluewaters Power commences proceedings in which it seeks declaratory or other relief against the Receivers and those proceedings are successful, findings may be made in the course of those proceedings that may warrant disciplinary sanction or inquiry into the conduct of the Receivers. In those circumstances, I will not make any order on the application at this time and will adjourn it to a case management hearing for further or other orders so as to allow Bluewaters Power to commence other proceedings should it wish to do so. If other proceedings are commenced, depending on the outcome and what findings are made in those proceedings, they may then renew this application.

Conclusion 120 The originating process should not be dismissed. I will hear the parties on the question of costs. I certify that the preceding one hundred and twenty (120) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill.

Corporations Act 2001(Cth)ss 9, 416, 417, 418, 418(1)(d), 418A, 419, 419A, 420, 420(1), 420B, 420C(1)(a), 420C(3), 421, 421A, 422, 422A, 422B, 422C, 422D, 423, 423(1), 423(1)(a), 423(1)(b), 424, 426, 427, 428, 429, 429A, 430, 430A, 431, 432, 434, 434A-434H, 434J-434M, 471B, 471C.

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Bluewaters Power 1 Pty Ltd v Donnelly, in the matter of Griffin Coal Mining Company Pty Ltd

At a glance

Court

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Judgment (32 paragraphs)

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Legislation Cited (5)

Cases Cited (63)