Deppeler, in the matter of Moulamein Grain Co-Operative Limited (administrators appointed) [2022] FCA 1154

Including pursuant to s 90-15 of Schedule 2 Insolvency Practice Schedule (Corporations) to the Corporations Act 2001 (Cth) (IPS), that the first and second plaintiffs (Administrators), including in their capacity as the Court-appointed receivers of the Consignment Grain (as defined in the orders made on 13 September 2022), are justified and acting reasonably in realising the grain stored with the third plaintiff (Co-Operative) (including the Consignment Grain) in accordance with the process identified as "Option 3" in the affidavit of Nathan Deppeler sworn on 27 September 2022.
Pursuant to s 90-15 of the IPS, that the Administrators are justified and acting reasonably in causing the Co-Operative to complete the sale of assets of the Co-Operative on the terms identified in confidential annexure NLD-1 to the confidential affidavit of Nathan Lee Deppeler sworn on 27 September 2022 (Proposed Conveyance), in circumstances where: (a) the Administrators have not publicly advertised the assets the subject of the Proposed Conveyance (Assets) for sale; (b) the period in which the Assets have been offered for sale has been limited; (c) the purchaser of the Assets is a company whose Associates (as that term is defined in the Corporations Act) include a Board member of the Co-Operative; (d) the Administrators have not put the Proposed Conveyance to the Co-Operative's creditors for a vote; and (e) the Proposed Conveyance is not proposed as part of a deed of company arrangement.
Subject to the order sought in paragraph 4 below, pursuant to ss 37AF(1)(b), 37AG(1)(a), and 37AJ of the Federal Court of Australia Act 1976 (Cth), on the ground that the order is necessary to prevent prejudice to the proper administration of justice, the following documents (Documents) are to be marked "confidential" on the electronic Court file and are not to be published or accessed, except pursuant to an order of the Court, until such time as the Proposed Conveyance is completed: (a) the confidential affidavit of Nathan Lee Deppeler sworn on 27 September 2022; and (b) confidential annexures to the confidential affidavit referred to above.

O'CALLAGHAN J: 1 The first and second plaintiffs (the Administrators) are the: (a) administrators appointed to the third plaintiff, Moulamein Grain Co-Operative Limited (the Co-Operative); and (b) receivers appointed by the court, by orders made on 13 September 2022, to certain grain that is stored at premises controlled by the Co-Operative (Consignment Grain). 2 By an Interlocutory Process filed yesterday, relief is sought in respect of two issues, namely: (a) the process for realisation of the grain held by the Co-Operative, primarily comprising the Consignment Grain; and (b) the sale of assets of the Co-Operative, which are proposed to be sold via an abridged process that has not entailed the assets being publicly advertised for sale. 3 The plaintiffs rely on three affidavits of one of the Administrators, Mr Deppeler, each dated 27 September 2022. 4 The application to be appointed as receivers was made in circumstances where approximately 5,700 tonnes of grain was held at the Co-Operative's two sites. A relatively modest amount of the grain is the property of the Co-Operative or has vested in the Co-Operative upon the appointment of the Administrators. The remaining grain is the property of growers who have arranged to have their grain stored at the sites managed by the Co-Operative. 5 The Administrators were appointed to the Co-Operative on 15 August 2022. The Co-Operative was established over 20 years ago for the purpose of storing grain for farmers located in the Moulamein area. The objects of the Co-Operative are recorded at clause 9 of its Rules: "To construct a purpose built grain facility and/or lease such a facility to provide members the opportunity to store and/or market grain". 6 The court appointed the Administrators as receivers of the Consignment Grain on 13 September 2022. At a meeting on 20 September 2022, the Administrators presented to attendees regarding the options for realising the Consignment Grain. Of those options, the Administrators recommended what was described as "Option 3", which was one of four offers solicited by the Administrators. It is premised on an estimated timeframe of four weeks to "outturn" the grain held by the Co-Operative. Estimated net realisation proceeds (before receivership costs) are between $1,661,012 and $1,655,512. The reasons for recommending this option include the anticipated timeframe for outturning the grain (in light of the upcoming harvest), the quantum of the estimated realisations and the relative certainty and lack of complexity and cost. Mr Deppeler has confirmed on oath that it remains his assessment that Option 3 is in the best interests of the parties having an interest in the grain that is to be realised (including the Consignment Grain). At the meeting on 20 September 2022, no objection was raised to the recommended option, nor was any alternative raised. 7 The Co-Operative has material assets, comprising real property situated in regional New South Wales (at Moulamein and Burraboi) and in regional Victoria (at Beverford), along with vehicles, machinery, an office building and related assets. In their capacity as administrators of the Co-Operative, the Administrators have been exploring the realisation of those assets. 8 The Administrators have now entered into an in-principle agreement with the prospective purchaser. While administrators do not require court approval to dispose of company property (being empowered to do so by s 437A(1)(c) of the Corporations Act 2001 (Cth) and s 382 of the Appendix to the Co-Operatives (Adoption of National Law) Act 2012 (NSW)), in the present case the Administrators seek judicial direction in respect of the sale. 9 Courts generally refrain from giving directions to liquidators or administrators where the direction sought relates to the making of a business decision. But they may do so where there is potential for issues of "propriety or reasonableness" to be raised with respect to the making of the decision. See by way of example only, Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409 at 428-429 [66]. 10 The evidence of Mr Deppeler includes details of the sale (including by way of providing commercial justification for it) and an explanation for the sale process that was undertaken. Prominent among the considerations dictating the method of sale was the prospect of the Moulamein site being available for use by growers in connection with the upcoming harvest (which is scheduled to commence in three to five weeks). The benefits of a "straightforward and early realisation", including costs savings, are also identified in Mr Deppeler's evidence. Further, the prospect of an "off-market sale" was raised with creditors and interested parties at meetings convened by the Administrators, without objection being raised. 11 Order 2(c) refers to the fact that the purchaser of the assets is a company whose associates include a board member of the Co-Operative. As I understand the submission, the Administrators' case is that the best course available to them happens to involve a purchaser whose associates include such a board member, but that in all the circumstances, including the sale price and the urgency of the matter given the proximity of the upcoming harvest, the Administrators decided that it was preferable to proceed nonetheless. In that regard, the Administrators relied on the decision of Yates J in Goyal, in the matter of Cape Technologies Pty Ltd (administrators appointed) [2021] FCA 1654, in particular at [25] where his Honour reasoned as follows: Although the administrators would have preferred to negotiate with arms-length purchasers, this was also not possible. In the unusual circumstances that confronted them, the administrators decided that the best - in fact, the only reasonable - course available to them was to try to sell the business to the company's directors and shareholders because those parties were best placed to appreciate and understand the value of the business, and they were necessary stakeholders for the business' continued operation. 12 Similar considerations apply here, in my view. 13 One of Mr Deppeler's 27 September 2022 affidavits deposed to the fact that written notice of the interlocutory application had been given to all interested parties, and that no request or enquiry from any such party in response to that notice had been received. I was told at the hearing this morning that the Administrators had received one email, a copy of which I was shown, but it was not relevantly responsive to the notice. 14 Having regard to the explanation provided by Mr Deppeler in his affidavits, I am satisfied that the decision taken by the Administrators to sell the relevant assets at the present time, and the steps taken by them in relation to the sale process, given the particular circumstances confronting them, was reasonable and justified, and that it is appropriate to make the order they seek under s 90-15 of Schedule 2 Insolvency Practice Schedule (Corporations) to the Corporations Act 2001 (Cth). 15 As counsel for the Administrators submitted, it is also appropriate to make orders in the form of orders 5 and 6 set out above, for reasons that are self-evident. 16 I am also satisfied that the costs order proffered is an appropriate one. 17 Where the sale has not yet been completed, the Administrators seek to preserve the commercial confidentiality pertaining to those aspects of the transaction that are the subject of Mr Deppeler's confidential affidavit. I am satisfied that it is necessary to prevent prejudice to the proper administration of justice to do so, and I will make the order sought. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Callaghan.

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