In the matter of Integrated Green Energy Solutions Ltd (administrators appointed) [2021] NSWSC 620

Applicable legal principles

1. The applicable principles were not in dispute and I was assisted by a succinct written summary prepared by counsel for the plaintiff outlining those principles with reference to key authorities.
2. Whether the Court is satisfied that it is in the interests of creditors for IGE to continue under administration rather than be wound up is to be determined by reference to the relevant circumstances. That state of satisfaction "requires a sufficient possibility, and not mere speculation" that the interests of creditors will be advantaged by the adjournment of the winding up application to facilitate the continuation of the administration: In the matter of Australian Tailings Group Pty Ltd [2020] NSWSC 1543 at [5] and [7] (Black J), and the authorities there referred to; see also Weriton Finance Pty Ltd v P.N.R Pty Ltd (in administration) [2012] NSWSC 1402 at [16]-[21] (Black J) and the authorities there referred to. If the Court reaches that state of satisfaction, then the Court must adjourn the winding up application: In the matter of Glenvine Pty Ltd [2020] NSWSC 642 at [8] (Rees J).
3. One consideration that is often relevant in determining whether the continuation of the administration is in the interests of creditors is that a liquidation typically has the advantage for creditors of triggering provisions that enable claims to be made for remedies for any insolvent trading and recovery of the proceeds of any uncommercial transactions: In the matter of Reed Constructions Australia Pty Ltd [2012] NSWSC 1045 at [9] (Brereton J, as his Honour then was).
4. Where an administrator has been appointed shortly before the hearing of the winding up application, as in this case, that may be a relevant circumstance. An application for an adjournment under s 440A(2) should be treated with scepticism where the voluntary administrator has been appointed on the eve of the hearing of the winding up application and this involves a reversal of the company's previous position that it is solvent: In the matter of Bobos Engineering Australia Pty Ltd [2015] NSWSC 2027 at [4] (Brereton J) and the authorities there referred to; In the matter of Australian Tailings Group Pty Ltd (supra) at [6] and the authorities there referred to; In the matter of Glenvine Pty Ltd (supra) at [6] and the authorities there referred to.
5. The timing of the appointment of the voluntary administrator may have deprived the administrator of an opportunity to gain any real understanding of the company's affairs. However, as Black J said In the matter of Australian Tailings Group Pty Ltd (supra) at [7]: "There is, it seems to me, no general predisposition … to adjourn a winding-up application merely because an administrator has only recently been appointed and knows little or nothing of substance as to the company's affairs. The prospects of an application for adjournment are not improved if, rather than the administrator frankly admitting his or her lack of knowledge of the Company, he or she leads evidence of information provided to him or her, which is itself not established by evidence, then disclaims any knowledge whether that information is correct. If an administrator is appointed so late that he or she has no real understanding of the company's affairs, then a winding-up will less readily be adjourned and an administration less readily extended, because the Court will less likely be satisfied that it is in fact in the interests of the company's creditors for the company to continue under voluntary administration. I recognise that, in some cases, there will be value in the continuance of voluntary administration, at least to allow further investigations to be made, but that will turn on there being sufficient evidentiary basis for the Court to conclude that the making of those investigations is itself in creditors' interests."
6. Mr Fitzpatrick, on behalf of Messrs Clark and Dickson, emphasised the last sentence of paragraph [7] of Black J's judgment set out above.

Summary of evidence

1. In support of the adjournment application, IGE relied on: 1. an affidavit of one of the administrators, Mr Trent Devine, sworn on 30 May 2021; 2. affidavits of Mr Stuart Clark, managing director of IGE, sworn on 17 May 2021 and 26 May 2021; and 3. an affidavit of Mr Paul Dickson, executive chairman of IGE, sworn on 30 May 2021.
2. The plaintiff relied on: 1. affidavits of Mr Charles McIntosh, a director of the plaintiff, sworn on 17 November 2020 and 25 May 2021; and 2. the report of Mr Whittingham filed and served by the defendant, to which I have referred above.
3. In his affidavit, Mr Devine describes the inquiries that he has been able to make concerning the financial status of the company since his appointment on the evening of Friday, 28 May 2021, as "very preliminary". [1] However, his inquiries had been sufficient to allow him to accept without hesitation in cross-examination that IGE is obviously insolvent and is likely to have been insolvent for some time. Mr Devine has not reviewed all of the historical financial records of IGE, but considers that it was insolvent as at December 2020. A list of IGE's creditors provided to Mr Devine records a total amount of approximately AUD $40.197 million owing. [2]
4. In paragraph 7 of his affidavit, Mr Devine deposes that "there appears to be a prospect" that a deed of company arrangement will be put forward by the directors of the defendant, or entities associated with the directors, "such that the creditors of the Company will receive a better outcome than if the Company is placed into liquidation".
5. Mr Devine gives some further evidence about that prospect in paragraphs 25 and 26 of his affidavit. Mr Devine deposes that that Mr Dickson has indicated to him (through IGE's former solicitors) that he (Mr Dickson) is prepared to put forward a deed of company arrangement (or DOCA) proposal.
6. In cross-examination, Mr Devine confirmed that he has not had any discussions directly with Mr Dickson about his intention to put forward a DOCA proposal. It is plain from paragraph 26 of Mr Devine's affidavit and his evidence given in cross-examination, and also from the submissions made by Mr Newton, that Mr Devine has only a very vague understanding at this stage of what any DOCA proposal put forward by Mr Dickson might involve. That reflects the administrators' very recent appointment, the limited information provided to Mr Devine since their appointment, and the lack of clarity in the proposal Mr Dickson's possible proposal, as outlined in his 30 May affidavit.
7. Mr Devine explained his understanding of Mr Dickson's intended DOCA proposal in the following terms in paragraph 26 of his affidavit: "At the moment, I am unclear as to the details of what may be proposed other than in very broad terms. In summary, I understand that a DOCA proposal may involve some or all of the following: (a) A deed proposal which utilises the SGC funding, which if available would lead to creditors potentially being paid 100 cents in the dollar. (b) A deed proposal using funds proposed by an Irish company, Environmental Resources (ER) for the purchase of shares. Exhibited at tab 16 is a copy of a letter from Mr Hess of ER in which he refers to ER's commitment to invest $8,647,754 into a DOCA. (c) A subordination of part of Fandola's debt, which would improve the relative position of other creditors in the event of a distribution from a deed fund."
8. Mr Newton submitted that Mr Devine was referring to essentially three possibilities that warranted investigation by the administrators at this early stage of the administration: 1. a possible DOCA proposal utilising funding of approximately $8.647 million to be provided by ER, together with the subordination of the debt owed by IGE to Fandola Investments Pty Ltd (Fandola). Mr Dickson is the sole shareholder, director and secretary of Fandola; 2. a possible DOCA proposal utilising funding of approximately USD $90 million to be made available to IGE by SGC; or 3. some combination of (1) and (2) above.
9. It was plain from Mr Devine's evidence in cross examination that he had not formed any independent opinion about whether the prospect of a DOCA involving some or all of these elements was realistic, although he emphasised that he had been told that there was realistic prospects of such a DOCA being proposed. Mr Devine referred to the possibility that further alternative DOCA proposals may emerge during the administration if the winding up application is adjourned, but he acknowledged that this was speculation.
10. What Mr Devine has been told about the possible DOCA proposal is limited to the evidence in Mr Dickson's affidavit sworn on 30 May 2021 and Mr Devine's conversation with Mr Engel concerning SGC funding to which I refer below.
11. In his affidavit sworn on 30 May 2021, Mr Dickson deposed: [3] "In the event that the funding from SGC does not transpire in accordance with [a funding schedule set out in a letter from SGC to IGE dated 27 May 2021] or at all, I will be proposing a DOCA with the following key terms: (a) Mr Hess of ER has confirmed that ER would contribute an amount of AUD8,600,000 into a DOCA; (b) subordination of the loan by a related party of IGE, [Fandola] by an amount of AUD10,000,000. Fandola's loan as at 30 June 2021 will be AUD24,592,097. On total Australian creditors of AUD40,197,685 as at 14 June 2021, this represents 25%; and (c) I am informed and verily believe that Fandola has security over intellectual property (IP) rights of [IGE Singapore]. Fandola would not exercise its security over the IP under the DOCA. That is, Fandola would utilise its security to arrive at a commercially beneficial outcome for creditors. Specifically, Fandola would look to achieve a sale or some other return from the exploitation of IP and use those proceedings for the benefit of creditors."
12. In addition to the possible DOCA proposals referred to at [22]-[29] above, Mr Devine referred to the following fourth possibility: [4] "Also, irrespective of whether interests associated with Mr Dickson put forward a Deed Proposal, if an adjournment is granted, I intend to explore the possibility of realising funds for the benefit of creditors through a DOCA process, where funds are obtained by a backdoor ASX listing through the DOCA process. Although I have not had any personal experience in salvaging the listed entity through this process, other practitioners in my firm do have that experience."
13. In his supplementary oral evidence, Mr Devine described his "backdoor ASX listing" possibility as effectively involving a sale of the shell of the listed public entity.
14. I turn now to consider the evidence relating to each potential element of the possible DOCA proposal and Mr Devine's "backdoor ASX listing" possibility.

The prospect of ER "contributing" AUD $8.6 million "into a DOCA"

1. The letter that Mr Devine refers to in paragraph 26(b) of his affidavit as evidencing ER's commitment to invest AUD $8,647,754 into a DOCA is a letter dated 29 May 2021 from Mr John Hess, Chairman of ER, to Mr Dickson. The letter reads: [5] "I am writing on behalf of the board of Environmental Resources ('ER'), (Registration Number: 72923), to state that ER remains committed to the purchase of 90,928,394 shares in [IGE] for the consideration of AU$8,627,754. This transaction may occur as a payment into a Deed of Company Arrangement ('DOCA'). I understand from our discussions that you intend to appoint a voluntary administrator ('VA'). The commitment of ER to invest in the DOCA is unaffected by this appointment."
2. In his affidavit sworn on 30 May 2021, Mr Dickson gave the following evidence concerning negotiations with ER in the context of this letter has been provided to IGE: 1. in early 2020, Mr Dickson travelled to Ireland and met with Mr Hess and his business associates where he presented IGE's business plan for two days with a view to negotiating ER providing funding to IGE via an International Bill of Exchange in the amount of USD $500 million. However, that transaction did not proceed as a result of the COVID-19 pandemic commencing in March 2020; [6] 2. Mr Hess and his associates re-engaged in discussions with IGE in about March 2021 and expressed "a desire to move ahead with a funding package" involving "taking an equity position in IGE and also funding IGE Group plants"; [7] 3. as part of the negotiations that commenced in March 2021, Mr Hess became involved in negotiations between IGE and the plaintiff, which resulted in a draft deed of settlement and release being prepared between solicitors acting for IGE and the plaintiff. It was implicit in the evidence that the draft deed, which was presented to Mr Hess on 19 April 2021, provided for ER to purchase the plaintiff's shares in IGE; [8] 4. Mr Hess regarded that draft deed (which was not in evidence) as uncommercial because it required settlement immediately upon entry into the deed; [9] 5. Mr Hess nevertheless wrote to Mr Neil Cussen, an advisor to IGE, on 10 May 2021 confirming ER's commitment to purchase the plaintiff's 90,928,394 shares in IGE for AU$8,627,754 and stating that the transaction would be settled by ER transferring those funds to IGE "for disbursement to the relevant parties"; [10] 6. Mr Dickson had a call with Mr Hess on 27 May 2021 for the purpose of "request[ing] the commitment of ER that they would support IGE in the event of the proposal of a Deed of Company Arrangement (DOCA) to the value that they had offered to purchase the shareholding of IGE as detailed in Mr Hess's letter dated 10 May 2021". According to Mr Dickson, he asked Mr Hess whether ER would "be willing to participate in committing financially to an arrangement called a Deed of Company Arrangement that would see you allocate an amount of money to an escrow account that would be used by an administrator to negotiate an arrangement with the company's creditors". Mr Hess replied: "On the surface, I would say yes. I do not believe you will need to pay that much to be honest." When asked again, "so you would commit to that value?", Mr Hess replied: "Again, yes Paul, subject to seeing the legal framework that is proposed"; [11] 7. in a further call on 28 May 2021, Mr Dickson informed Mr Hess that IGA had appointed a voluntary administrator "as it will offer us all some protection and will allow the business to carry on as funding drops into place. Once we have funding, the VA will leave." Mr Dickson asked whether the appointment of the administrators "affects your commitment in relation to contributing to the DOCA in the amount of AUD8,600,000 that we spoke of yesterday?". Mr Hess replied: "You know it does not. I explained yesterday that we are committed to this." Mr Hess also said: "The appointment of the VA changes nothing in terms of my commitment to the DOCA. Indeed, it is a good idea, as that is the only way to deal with [the plaintiff]." [12]
3. According to Mr Dickson, Mr Hess sent the letter of 29 May 2021 to which I have referred above after a further call on 29 May 2021 in which Mr Hess indicated that he would record in a letter his commitment to pay AUD $8,627,754. [13]
4. It is plain from Mr Dickson's evidence of the conversations on 27 and 28 May 2021 that Mr Hess understood payment into a DOCA as a means for ER to acquire the plaintiff's 90,928,394 shares in IGE for AU$8,627,754 without having to deal directly with the plaintiff. That is confirmed by the terms of Mr Hess's letter of 29 May 2021 as set out at [33] above. According to Mr Dickson, Mr Hess's unwillingness to purchase the shares directly from the plaintiff was grounded in his outrage at the plaintiff's proposal that the transaction be settled immediately upon entry into the deed of settlement and release. I find it impossible to reconcile this position with the notion that Mr Hess was willing for ER to pay (or commit to paying) AU$8,627,754 into a DOCA to purchase the plaintiff's shares in IGE notwithstanding that: 1. the terms of a DOCA have not yet been drafted and there is no clarity about whether ER's "contribution" to a DOCA would entitle ER to a transfer of the plaintiff's shares; 2. as Mr Newton submitted, any entitlement of ER to a transfer of the shares in return for the "contribution" to a DOCA would be subject the plaintiff's consent or the leave of the Court by reason of s 444GA of the Corporations Act; and 3. assuming for present purposes that the plaintiff's shares in IGE could be transferred to ER in consideration for its "contribution" to a DOCA, this would result in ER investing AUD $8.6 million in a company that is at risk of being wound up at the instigation of its creditors who are presently owed $40.197 million [14] if, inter alia, IGE breaches the terms of the DOCA, [15] and those terms are presently unknown.
5. There is no evidence that the features of a DOCA regime to which I have referred immediately above have been brought to Mr Hess's attention.
6. For those reasons I do not consider that the evidence supports Mr Dickson's assertion in paragraph 32(a) of his affidavit that "Mr Hess of ER has confirmed that ER would contribute an amount of AUD8,600,000 into a DOCA". I consider that Mr Hess's statements in the conversations to which Mr Dickson deposed were either affected by misunderstandings that would be unlikely to survive Mr Hess's review of the "legal framework" in due course, or were not bona fide having regard to Mr Hess's objections to the previous share purchase transaction documented in the draft deed of settlement and release referred to by Mr Dickson.
7. For completeness, I note that Mr Devine was unable to shed any light on how a "contribution" paid by ER "into a DOCA" in consideration for a transfer of the purchase of the plaintiff's shares in the listed entity IGE would be payable to and for the benefit of creditors of IGE as a whole.

The position of Fandola

1. According to Mr Clark's affidavit sworn on 26 May 2021, Fandola is the largest trade creditor of the IGE Group. [16] The amount owing to Fandola is approximately AUD $24.5 million. [17] It is Mr Devine's understanding, based on information provided by Mr Clark, that Fandola holds security over intellectual property owned by IGE Singapore, and that intellectual property is the IGE Group's most important asset because companies in the IGE Group would be unable to pursue any projects without the intellectual property. [18] Mr Devine has not made any inquiries concerning the registration of Fandola's security interest on the Personal Property Securities Register in January 2021 when, in Mr Devine's view, IGE was insolvent.
2. Mr Dickson's evidence in paragraph 32(c) of his affidavit concerning his intentions in relation to Fandola's security over the IGE Group's intellectual property are internally inconsistent. On the one hand, Mr Dickson deposes that Fandola would not exercise its security. On the other hand, he deposes that Fandola would "utilise" its security by looking to achieve a sale or some other return from the exploitation of the intellectual property, with the proceeds of such a sale being utilised for the benefit of creditors. When it was put to him in cross-examination that the IGE Group would not be able to pursue any projects if the intellectual property was sold, Mr Dickson referred to the possibility of a sale of the intellectual property to a third party who would then licence it back to the IGE Group. No evidence was adduced that would enable the Court to form a view as to whether such a sale and licence back arrangement is a realistic or fanciful possibility. It was not mentioned in Mr Dickson's affidavit, and appeared to be an idea formed on the run in cross-examination.
3. Mr Dickson was at pains to emphasise that, as far as he was concerned, all options were on the table and he would do and cause Fandola to do anything necessary to make a DOCA work. This general statement of willingness stands in stark contrast to Mr Dickson's failure to formulate any details of his intended DOCA proposal during the period that these winding up proceedings have been on foot since 17 November 2020, including the period since 17 March 2021 when it became clear that IGE would need to adduce evidence to displace the presumption of insolvency in order to resist the winding up application, IGE's own expert's opinion as to solvency was dependent on the availability of SGC funding, and that funding repeatedly failed to materialise as I refer to in more detail immediately below. I accept, of course, that a DOCA could not be presented to IGE's creditors for consideration prior to the appointment of voluntary administrators. However, if Mr Dickson wanted to avoid IGE being wound up, it is to be expected that he would have given detailed thought during this period to potential DOCA proposals and that he would now be able to describe any DOCA proposal that he intends to put forward in a coherent manner and in considerably more detail than is provided in paragraph 32 of his affidavit.

The prospect of SGC making funds available for drawdown under the SGC loan agreement

1. In relation to the prospect of a deed proposal which utilises funding from SGC, the evidence establishes that the loan agreement was entered into on about 6 July 2017 between Integrated Energy UK Limited (as borrower) and SGC (as lender). Under that loan agreement, US$90 million was to be made available to be drawn down in tranches commencing on 22 June 2017 and concluding on 22 February 2018. [19] The loan agreement was subsequently varied in July 2019 [20] and August 2020, [21] although it is not clear from the evidence whether the August 2020 variation added anything to the variation announced by IGE to the ASX on 2 August 2019 or merely documented that variation. [22] It is convenient to refer to the loan agreement entered into in July 2017, as subsequently varied, as the SGC loan agreement.
2. No funds have flowed from SGC to IGE under the SGC loan agreement in the period of almost four years since it was signed on about 6 July 2017.
3. There have been a series of announcements by IGE and statements by representatives of SGC about this. The announcements made by IGE indicate that, until about June 2019, IGE deferred drawing down under the SGC loan agreement because it was successful in raising funds from other sources. However, as at 14 June 2019, IGE expected to be able to draw down funds under the SGC loan agreement within 30 days. An ASX announcement issued by IGE on 14 June 2019 referred to the progress of construction projects at Amsterdam and Northampton and stated: [23] "… it is timely that the draw-down of funds will be received from Structured Growth Capital, Inc ('SGC') within the next 30 days. The draw-down of funds from SGC was initiated in April 2019 and the funding schedule is expected to be received from SGC in the next 7 days with funds receipted within the next 30 days thereafter. Up until this point we have relied on draw-down bridging finance … which will now be repaid on receipt of the SGC draw-down funds. The funds receipted from SGC will be used to complete the Amsterdam facility and construct the Northampton facility. The loan agreement in place with SGC was identified as a key commercial agreement at the time of our 2017 prospectus and we have negotiated the deferment of utilising funds from this specific facility for an extended period via the use of bridging finance, careful construction planning and negotiation with business partners."
4. What followed was a series of further ASX announcements in which IGE announced that the timing of the expected receipt of funds under the SGC loan agreement was later than had been stated in the previous announcement. By these announcements, the timing was extended to 7 August 2019, [24] 7 September 2019, [25] 30 October 2019, [26] December 2019 [27] and January 2020. [28] I note that the announcement extending the time to 7 September 2019 attributed that extension to a variation negotiated to the SGC loan agreement in July 2019 which transferred the benefit of the loan agreement to IGE Singapore as borrower.
5. On 27 January 2020, Mr Brian Engel, President of SGC, wrote to Mr Clark of IGE advising that "there has been a slight delay to the funding process. The initial funding will now occur in February 2020." This "slight delay" was attributed in Mr Engel's letter to "some necessary contract re-negotiations, not previously foreseen" that had been "concluded over the weekend" and which would not "impact the terms of the arrangement between SGC and [IGE]." [29] I infer that the contract that had been re-negotiated was the contract between SGC and a third party on whom SGC was reliant for funding in order for SGE to discharge its obligations as lender under the SGC loan agreement.
6. On 27 February 2020, IGE issued an ASX announcement concerning a dispute with the plaintiff that was the subject of earlier proceedings in this Court. The announcement described the dispute as involving "the interpretation of an investment contract in relation to the ability of the foreign entity to exercise an option to have the investment repaid prior to its intended maturity." The announcement goes on to refer to the amount claimed and, from those details, I infer that the "foreign entity" referred to is the plaintiff. The announcement stated that IGE had the capacity to repay the investment the subject of the dispute from its key funding sources, which were listed as including the SGC loan agreement. [30]
7. On 23 March 2020, IGE issued an ASX announcement entitled "Funding Update", which stated (relevantly) that SGC remained committed to providing the previously advised funding but that the COVID-19 pandemic had "necessarily created an obstacle in terms of meeting the previously announced funding timings" and that SGC had committed to provide an updated funding schedule during March 2020. [31]
8. On 1 April 2020, IGE issued a further "Funding Update" announcement quoting Mr Engel as confirming that SGC would "complete its contractual commitments" to provide loan funding of USD $90 million under the SGC loan agreement and that SGC expected to pay the first loan instalment on 27 April 2021, "assuming a reasonable continuation of stabilization of major markets in the coming weeks". [32]
9. In IGE's Quarterly Operations Review for the March 2020 quarter, IGE reported that markets had not continued to stabilize as assumed in its 1 April 2020 announcement, but that SGC nevertheless anticipated paying the first instalment under the SGC loan agreement on 14 May 2020. [33] In subsequent ASX announcements, that timing was revised to the end of May 2020 [34] before being further revised to a "best estimate" of 15 June 2020. [35]
10. On 7 October 2020, SGC wrote to IGE advising that the loan funding instalments were "expected to commence" on about 30 October 2020. The letter referred to ongoing challenging market conditions flowing from the COVID-19 pandemic and stated that "though the fundamental agreement stays in place, we have continued to refine our approach to your funding". The letter also refers to the more direct cause of the delay as being the need for SGC to make arrangements to put in place the "necessary collateral". [36] There is no evidence that SGC required IGE to provide "collateral" for the loan funding. I infer that the reference to "necessary collateral" is a reference to security or collateral that SGC was required to provide or procure in order to access the source funds that it was dependent on to discharge its obligations as lender under the SGC loan agreement. On 13 October 2020, the SGC loan agreement was amended by inserting a payment schedule specifying that the loan funding instalments were to commence on 30 October 2020 with an initial instalment of USD $2 million. [37]
11. On 31 October 2020, SGC wrote to IGE stating: [38] "Today we received confirmation the funds for the initial funding transfer are being held in 2 bank accounts ready to be engaged. Therefore, please advise all relevant parties that the initial phase of the funding transaction is being completed and we look forward to getting them paid."
12. The funds were not paid.
13. In a further letter to IGE dated 12 May 2021, SGC stated: [39] "I can advise you that Deutsche Bank (Germany) has released a MT799, via the banking swift communication system, on Friday 7 May 2021. This swift communication was sent to JP Morgan (USA). It is expected that JP Morgan, in following standard AML banking procedures will authenticate and verify the document over the next three to four banking days. In following normal banking protocols, communications will continue between the banks culminating in the release of an agreed instrument, available for monetization within two to three banking days after JP Morgan's verification of the MT799. Following release of the agreed instrument, monetization is expected to require a further one to two banking days, with funds then available for distribution, after international transfers, by 26 May 2021. It is appreciated that there have been a number of delays to this point and this has created difficulties for IGES and its creditors but the timeframe to finalize this matter is now truly imminent. For the purposes of clarity, I can confirm that with the release of the MT799 that bank to bank communications regarding the exchange of key financial instruments are well progressed. I further confirm that I have been working with a number of parties to ensure a release of initial loan funds will occur within the next 7 to 10 banking days. Further to recent discussions and correspondence, we have had to make a number of adjustments to ensure funds are released to IGES in the short-term. Based on the information disclosed to me by IGES, these loan funds will be sufficient to settle amounts due to major creditors of the company. To the extent permitted, I will forward relevant materials (redacted as necessary) in order to keep you apprised of progress. I trust, that despite the delays, it is appreciated that the most recent adjustments to the release of loan funds are a reflection of our commitment to being long-term business partners of IGES. We remain keen to be actively involved in the IGES commercially beneficial and environmentally significant projects. In summary, despite the delays, I assure you that with these latest refinements to the process, we are now very close to finalization with funding being imminent. Please feel free to release this letter to any creditors, shareholders or other appropriate parties, as necessary, to provide verification regarding the imminent funding. "
14. No witness in these proceedings professed to understand the first two paragraphs of this letter or attempted to explain the substance of the causes of SGC's failure to provide loan funding to date. Accordingly, there was no evidence that would justify a conclusion that those causes are likely to have been removed or resolved. In his affidavit sworn on 17 May 2021, Mr Clark simply referred to SGC's letter of 12 May 2021 as "detailing the process and milestones involved to achieve funding", including "the release of the MT799 bank-to-bank communications" as a "critical step". This part of Mr Clark's affidavit was admitted as a submission only. Mr Clark exhibited a document that he described as "a redacted copy of the released MT799" referred to in SCG's letter of 12 May 2021. The document refers to a standby letter of credit to be delivered by Deutsche Bank AG, but there is nothing on the face of the document that associates this letter of credit with SGC, let alone SGC's arrangements to facilitate the discharge of its obligations as lender to IGE under the SGC loan agreement. [40]
15. Mr Clark's affidavits referred to the most recent statements made by Mr Engel that loan funds would be provided by SGC in instalments commencing on 26 May 2021 (which did not occur) and statements made by SGC as recently as 25 May 2021 that SGC is "now in a position to release loan funding". [41]
16. In paragraph 20 of his affidavit sworn on 30 May 2021, Mr Devine deposed that SGC had "indicated that they continue to be prepared to proceed with funding the Company, notwithstanding our appointment as administrators". Pausing there, I do not consider that the history summarised above demonstrates preparedness, in any meaningful sense of the word, on the part of SGC to provide loan funding to IGE in accordance with the SGC loan contract. Assuming that SGC was willing to provide that funding, then the history demonstrates that it has been unable to do so.
17. Mr Devine refers to a letter dated 27 May 2021 from Mr Engel of SGC to Mr Trent Hancock of PKF Australia, whom IGE was then considering appointing as administrator of IGE. [42] The letter refers to Mr Hancock being "in the process of being engaged by [IGE] to assist the directors and management as funding for the IGE business is being finalised". This suggests that Mr Engel does not understand the nature and consequences of the appointment of an administrator to a company. An administrator's role is to take control of the company's business, property and affairs during the period of the administration: Corporations Act, ss 437A ,437D.
18. The letter continues by referring to challenges encountered by SGC in "progressing the existing funding structure" under the SGC loan agreement by reason of the "continued and unpredictable effects of the COVID-19 pandemic impacting all our international contacts." Mr Engel then states: "These delays and impacts on business processes and funding transactions are now, I am pleased to say, behind us." There is no material in the balance of the letter which assists the reader to resolve these two statements, which are plainly inconsistent with one another on the face of the letter.
19. The letter then states that SGC is now "well positioned to finalize the loan funding" and sets out nine "expected" loan funding instalments totalling USD $50 million to be made during the period from June to September 2021, commencing with an instalment of USD $3,000,000 on 10 June 2021.
20. I note the discrepancy between the total funding amount of USD $50 million referred to in this letter and the amount of USD $90 million referred to in the SGC loan agreement.
21. I also note that the terms of the letter the very same kind of terms that have been attributed to Mr Engel in IGE's previous announcements concerning SGC loan funding - terms professing commitment but couched in the language of "in a position to", "expectation" and "anticipation", and so falling short of actual commitment. Those "commitments" have never been met by SGC in the whole of the period since June 2019 in which IGE has been seeking to draw down funds under the SGC loan agreement.
22. In paragraph 21 of his affidavit, Mr Devine deposes to having spoken with Mr Engel, together with Mr Clark, by telephone on 30 May 2021. According to Mr Devine, he referred to Mr Engel's 27 May 2021 letter to Mr Hancock and asked Mr Engel to confirm that SGC's position in relation to the funding amount and timing remained the same. Mr Engel replied: "Yes, SGC is still committed to the funding proposal. It is expected that I will be in a position to provide a letter confirming that the funding is in place and a letter of credit will be provided. I am dealing with Wells Fargo and JP Morgan, but expect the funds will come through Wells Fargo. The letter will also confirm there is sufficient collateral."
23. Mr Devine also asked Mr Engel to confirm that, although the letter to Mr Hancock included a payment schedule for USD $50 million, the total funding would be USD $90 million. Mr Devine deposes that Mr Engel replied: "Yes, that is correct. Hopefully you will be successful on Monday [referring to the application to adjourn the winding up application] and we can discuss further." That leaves unexplained the reference to USD $50 million in the 27 May 2021 letter and the timing of any tranches of funding in excess of USD $50 million.
24. In my opinion, the statements made by Mr Engel during this conversation with Mr Devine do not rise above a statement of SGC's "commitment" to provide loan funding in circumstances where SGC was not then in a position to confirm that funding is in place and will be provided. Moreover, SGC's ability to provide that confirmation is contingent on its dealings with third parties - JP Morgan and Wells Fargo - and the nature of those dealings is not disclosed by the evidence. This appears to me to be a downgrading of the position that Mr Clark deposes Mr Engel communicated to him in numerous conversations as recently as 25 May 2021 to the effect that "we are now in a position to release loan funding". [43]
25. An email from Mr Engel to Mr Clark dated 28 May 2021 [44] confirms that SGC's ability to provide funds to IGE under the SGC loan agreement is being affected by the requirements stipulated by the issuer of a letter of credit for certain funds of the "Investor" to be consolidated in one account at either JP Morgan or Wells Fargo and further requirements of JP Morgan in relation to the terms of the letter of credit. I infer from this email that SGC's ability to lend funds to IGE under the SGC loan agreement is contingent on the issue of that letter of credit, as the email states that the "Funder" is expected to be in a position to provide funding within three business days after the issue of the letter of credit.
26. A chronology annexed to Mr Dickson's affidavit, which was admitted as a submission only, describes the SGC funding as a "structured finance agreement" and refers to various bank documents provided by SGC that are said to "support the existence of the loan". If the documents referred to are including the eight volumes of documents tendered at the hearing on 31 May 2021, the parties did not identify them in their submissions.
27. I also note that Mr Devine's account of his conversation with Mr Engel on 30 May 2021 does nothing to dispel my concern arising from the 27 May 2021 letter that Mr Engel and SGC may not understand the consequences of administration. At the end of the conversation, Mr Clark told Mr Engel that his earlier advice that the administrators "would resign" two weeks after SGC provided funding was incorrect and that "the process takes longer, around 4 to 6 weeks or possibly longer". It seems to me that this statement would leave Mr Engel with the impression that it would be open to the administrators to simply resign. The manner and circumstances in which an administration comes to an end are, of course, provided for in s 435C of the Corporations Act.
28. As Mr Devine acknowledged in cross-examination, the history of funding under the SGC loan agreement not materialising contrary to IGE's public announcements and statements made by SGC is a matter of significant concern when assessing whether there is a realistic prospect of SGC providing funding for a DOCA. However, Mr Devine sought to downplay this by saying that SGC would now be dealing with administrators with a strict time frame. Mr Devine did not articulate why SGC might be more likely to make funds available for drawdown by IGE in administration than during the period since June 2019 in which IGE has not been in administration and has been seeking to access funds that SGC is obliged to lend under the SGC loan agreement.
29. Mr Devine also emphasised that he had not had an opportunity to assess the reasons for SGC's delays in the past. However, he acknowledged that he had not been able to positively satisfy himself that there were good reasons and, in the absence of such good reasons, this "possibly" critically undermined the prospect of SGC providing funding for a DOCA.

Mr Devine's "backdoor ASX listing" idea

1. I have referred to Mr Devine's idea concerning a backdoor ASX listing at [30]-[31] above. The evidence adduced did not rise above Mr Devine having identified this as a theoretical possibility because he is aware that it has been done in other cases and he had a short conversation with one of his colleagues who has been involved in such transactions previously in which Mr Devine asked a general question about his colleague's experience without going into details concerning IGE. Indeed, Mr Devine had not been appointed as one of the administrators of IGE at the time of this conversation. In the period since his appointment, Mr Devine has given no consideration to how IGE's industry, assets, shareholder spread and other relevant factors might influence any price that could potentially be achieved if a backdoor ASX listing were pursed.

Consideration and determination

1. In paragraph 7 of his affidavit, Mr Devine deposes that it is his opinion that it is in the best interests of creditors that the winding up hearing be adjourned to at least enable him to complete a s 439A report to creditors and make a proper assessment of the alternatives of a DOCA. As I have already mentioned, the period of the adjournment sought is one month - that is, until 30 June 2021.
2. Mr Devine's opinion is based on the very general and limited information provided to the administrators about the prospect of SGC loan funding being made available or a DOCA that Mr Dickson has said he intends to propose if that SGC loan funding does not become available.
3. It was submitted on behalf of IGE that, at this very early stage of the administration, it was in the interests of creditors to adjourn the winding up application so as to allow time for the administrators to investigate the DOCA possibilities that have emerged because Mr Whittingham's report suggests that creditors will receive nothing in a winding up of IGE and further investigations by the administrators may identify that creditors would at least receive something if one of the DOCA possibilities is progressed. It was submitted that there was therefore a potential upside for creditors in the administration being continued for the proposed period of one month, and no potential downside or prejudice to creditors.
4. Counsel for Messrs Clark and Dickson adopted the submissions made on behalf of IGE.
5. Having regard to: 1. the history of SCG's failure to provide loan funding under the SGC loan agreement in the period since June 2019 when IGE has been seeking to draw down on that funding (see [45]-[58] above); 2. the absence of any evidence of the causes of those failures that would point to a possibility beyond speculation that SGC may now provide that loan funding (see [56] and [70]-[71] above); 3. the terms Mr Engel's most recent statements which indicate that SGC is in fact not presently able to provide that loan funding (see [59]-[67] above); and 4. the likelihood that Mr Engel's recent statements concerning SGC's willingness to do so were made with Mr Engel labouring under a misunderstanding concerning the implications of IGE have entered into voluntary administration (see [59] and [69] above), 5. there is an insufficient evidentiary basis for the Court to be satisfied that it is in the interests of creditors for the administrators to investigate the possibility of IGE drawing down funds under the SGC loan agreement for the purpose of a DOCA.
6. Mr Dickson has not explained his intentions in a coherent manner, let alone provided any details of the DOCA proposal that he says he wishes develop if SGC funding does not eventuate, despite having had a significant period of time to formulate a coherent explanation and develop at least some of the detail: see [42] above. Mr Devine was unable to grapple with the structural difficulty that is plain on the face of the limited description that Mr Dickson has provided, namely how the price of AUD $8,600,000 that ER is prepared to pay to purchase the plaintiff's shares in IGE can serve as a contribution under a DOCA for the benefit of IGE's creditors: see [39] above. For that reason, and also for the reasons explained at [36]-[38] above, I am not satisfied that there is a sufficient evidentiary basis to conclude that it is in the creditors' interests for the administrators to spend time investigating the possibility of a DOCA proposal with funding from ER. Nor has sufficient detail been presented by Mr Dickson for me to conclude that it is in creditors' interests for the potential role of Fandola in any DOCA to be investigated: see [40]-[42] above.
7. As Mr Jones submitted, there is no admissible evidence to the effect that a backdoor ASX listing is a meaningful possibility for IGE. In my opinion, it is not in the interests of creditors for the administration to continue to facilitate investigation of this theoretical possibility.
8. Although the submissions made on behalf of IGE suggested that IGE would not trade during the administration, there is no evidence to this effect as Mr Newton acknowledged. On the contrary, there is evidence that Mr Dickson's intention is that IGE will continue to trade during the administration. As I have referred to at [34] above, Mr Dickson told Mr Hess of ER on 28 May 2021 that IGA had appointed a voluntary administrator "as it will offer us all some protection and will allow the business to carry on as funding drops into place."
9. As Mr Newton emphasised, Mr Whittingham expresses the opinion in his report that IGE's creditors will not receive a return in a winding up. However, it does not follow that the continuation of the administration, and the adjournment of the winding up application, for a period of one month (or indeed any period) is not detrimental to creditors in circumstances where IGE has been insolvent since at least December 2020 (according to Mr Devine's evidence in cross-examination), it has continued trading during that period and its executive chairman intends that it will continue to trade during the administration, and the adjournment of the winding up application will have the effect of deferring the appointment of a liquidator who would be in a position to take such steps as they may consider appropriate to investigate potential insolvent trading claims against directors and any other recovery actions. I accept the plaintiff's submission that an adjournment of the winding up application would be prejudicial to creditors in that it would defer such investigations: see [15] above.
10. For completeness, I acknowledge Mr Clark's evidence that certain creditors have agreed to defer the time for payment of certain amounts owing to them. [45] Mr Dickson's affidavit sworn on 30 May 2021 is the most recent evidence of Fandola's position: see [29] above. For the reasons referred to immediately above, Mr Dickson has a personal interest in IGE not being wound up and subject to a liquidator's investigations. The correspondence from the other "major creditors" exhibited to Mr Clark's affidavit sworn on 17 May 2021 is dated in mid-May 2021 and requires or expresses an expectation that part of the debts owing to those creditors will be repaid in June or July 2021. [46] There is no evidence of the current position of any of those creditors in circumstances where SGC loan funding has still not been provided to IGE and administrators have now been appointed to IGE. Even assuming that their previous positions remain unchanged, those positions do not amount to an agreement to defer the payment of their debts until after the plaintiff has been paid in full, contrary to the assertion in paragraph 8 of Mr Clark's affidavit sworn on 26 May 2021.
11. For all of those reasons, I am not satisfied that it is in the interests of creditors of IGE to adjourn the winding up application so as to allow the administration to continue for a sufficient period to enable the voluntary administrators to investigate a possible DOCA. The application under s 440A(2) of the Corporations Act is therefore dismissed.

Winding up application

1. The plaintiff has published the notice required by s 465A(1)(c) of the Corporations Act. [47]
2. The plaintiff relies on the presumption of insolvency that arose pursuant to s 459C of the Corporations Act from IGE's failure to comply with a statutory demand issued by the plaintiff on 4 June 2020 in relation to a judgment debt of $12,400,000. As IGE's application to set aside that statutory demand was dismissed on 10 March 2021, the statutory period for compliance with the demand under s 459F(2) expired on 17 March 2021 and the presumption of insolvency arose on that date.
3. As I have already mentioned, Mr Devine gave evidence that IGE is obviously insolvent and neither IGE nor Messrs Clark and Dickson relied on any evidence to displace that presumption. They did not seek to be heard against the plaintiff's application to wind up IGE in insolvency in the event that the adjournment application was dismissed. Mr Devine's evidence that IGE is obviously insolvent is consistent with Mr Whittingham's report in the events that have happened, as referred to at [5] above.
4. As referred to at [11] above, Messrs Clark and Dickson raised an issue concerning the liquidator proposed by the plaintiff for appointment. That issue was addressed in a brief round of written submissions and evidence on 1 June 2021. In short, the plaintiff filed a consent of another registered liquidator, Mr Glenn Livingstone of KPMG, to be appointed by the Court and to act as liquidator of IGE. Common ground was reached that it would be appropriate for the Court to appoint Mr Livingstone if an order is made winding up IGE in insolvency. For the reasons I have referred to immediately above, such an order should be made.

Conclusions and orders

1. For all of the reasons above, I make the following orders: 1. Order that the interlocutory process filed in court by the defendant on 31 May 2021 is dismissed. 2. Order pursuant to s 459A of the Corporations Act 2001 (Cth) that Integrated Green Energy Solutions Limited (ABN 23 003 669 163) (the Company) be wound up in insolvency. 3. Order that Glenn Livingstone of KPMG, Level 38, Tower Three, International Towers Sydney, 300 Barangaroo Avenue, Sydney, New South Wales, a registered liquidator, be appointed as liquidator of the Company. 4. Order that the plaintiff's costs of these proceedings be paid out of the assets of the Company.

Endnotes

1. Paragraph 7 of Mr Devine's affidavit.
2. Exhibit TD-1, p 197.
3. Paragraph 32 of Mr Dickson's affidavit.
4. Paragraph 27 of Mr Devine's affidavit.
5. Exhibit TD-1, p 296; Annexure D to Mr Dickson's affidavit.
6. Paragraphs 6-18 of Mr Dickson's affidavit.
7. Paragraph 19 of Mr Dickson's affidavit.
8. Paragraphs 20-21 and 42 of Mr Dickson's affidavit.
9. Paragraph 23 of Mr Dickson's affidavit.
10. Paragraph 22 of Mr Dickson's affidavit and Annexure C to that affidavit.
11. Paragraph 24 of Mr Dickson's affidavit.
12. Paragraph 25 of Mr Dickson's affidavit.
13. Paragraph 26 of Mr Dickson's affidavit.
14. Exhibit TD-1, p 197.
15. Corporations Act, ss 445C-445D.
16. Paragraph 10 of Mr Clark's affidavit sworn on 26 May 2021.
17. Paragraph 13 of Mr Devine's affidavit; paragraph 32(b) of Mr Dickson's affidavit.
18. Paragraph 22 of Mr Devine's affidavit.
19. Exhibit TD-1, pp 201-249 at p 216.
20. Exhibit 2, p 551.
21. Paragraph 19 of Mr Devine's affidavit and tab 11 of Exhibit TD-1.
22. Exhibit 2, p 551.
23. Exhibit 2, p 1448.
24. Exhibit 2, p 541.
25. Exhibit 2, pp 551 and 554.
26. Exhibit 2, pp 619-620.
27. Exhibit 2, p 635.
28. Exhibit 2, pp 638-639.
29. Exhibit 2, p 826.
30. Exhibit 2, p 862.
31. Exhibit 2, p 894.
32. Exhibit 2, pp 896-897.
33. Exhibit 2, pp 900-902.
34. Exhibit 2, pp 910-913.
35. Exhibit 2, p 919.
36. Exhibit 2, 1572.
37. Exhibit 2, p 1573.
38. Exhibit 2, p 2170.
39. Exhibit 2, p 2403.
40. Paragraphs 29 to 30 of Mr Clark's affidavit sworn on 17 May 2021 and Exhibit 2, p 2406.
41. Paragraphs 25 to 28 of Mr Clark's affidavit sworn on 17 May 2021.
42. Exhibit TD-1, pp 253-254.
43. Paragraphs 3 and 4 of Mr Clark's affidavit sworn on 26 May 2021.
44. Annexure F to Mr Dickson's affidavit.
45. Paragraphs 35-42 of Mr Clark's affidavit sworn on 17 May 2021; paragraphs 8-10 of Mr Clark's affidavit sworn on 26 May 2021.
46. Exhibit 2, pp 2400-2401, 2410-2411.
47. Affidavit of Kristen Ruiz-Diaz affirmed on 14 May 2021 and Exhibit 2, pp 2407-2409. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 June 2021