K.J. Renfrey Nominees Pty Ltd (Trustee), in the matter of OneSteel... [2020] FCA 417 | Case summary

What happened

The administrators of McWilliam's Wines Group Ltd and Mount Pleasant Wines Pty Ltd (the companies) were appointed on 8 January 2020 (para 6). The administrators continued trading the businesses and pursued a sale process (paras 8-9). The companies' principal secured creditor at appointment was Margaret River Wine Production Pty Ltd (MRWP), which had security under convertible notes and, on 14 February 2020, appointed receivers and managers of the secured property (paras 10-13). That intervention risked a disruption of the administrators' sale process, duplication of insolvency costs and an outcome less favourable to creditors.

On 17 February 2020 the administrators entered a Funding Agreement with Gordon Brothers to borrow up to $6.5 million and executed a General Security Deed securing the loan over all present and after-acquired property (paras 16-19). The loan was limited-recourse to assets of the administrations, carried 0% interest for the first three months and higher rates thereafter, included an establishment fee, and ranked ahead of administrators' remuneration for repayment (para 19). Settlement occurred on 18 February 2020; MRWP's facilities were repaid and MRWP's receivers retired (paras 18, 27(b)).

Two legal obstacles threatened the effectiveness of that transaction. First, without modification under s 447A the administrators might be personally liable under s 443A for liabilities incurred under the Funding Agreement. Second, under s 588FL, security interests granted in external administration can automatically vest in the company unless the Court fixes a later registration time under s 588FM. To protect the administrators and to preserve Gordon Brothers' security, the administrators sought ex parte orders: (1) under s 447A(1) to modify s 443A so liabilities under the Funding Agreement were debts incurred in their capacity as administrators and, if company assets were insufficient, to relieve them of personal liability to the extent of that insufficiency; and (2) under s 588FM to fix the registration time for the collateral for the purposes of s 588FL(2)(b)(iv) (Orders and paras 1, 2, 30-31). The Court made the orders on 9 March 2020 (paras 1-3; Orders).

Why the court decided this way

Gleeson J applied familiar principles for each statutory discretion.

Relief under s 447A

The statutory power: s 447A permits modification of s 443A to exclude personal liability in appropriate cases (para 26 as reflected in cited authorities).
Factors relied upon: the Court looks for arrangements that are in the interests of creditors, consistent with Part 5.3A objectives, enable the business to continue trading for creditors' benefit, do not prejudice creditors, and where notice has been given (paras 24-26).
Application to the facts: Gleeson J accepted the administrators' evidence that the funding was necessary to continue trading and the sale process, to avoid duplicative receiver costs, to avoid a perception of a fire-sale that would harm sale value, and to extinguish MRWP's pre-emptive rights thereby improving the competitiveness of the sale process and likely returns to creditors (paras 20-21, 27(a)-(f)). The loan terms were found commercially reasonable in the circumstances of an external administration, including limited recourse and a short anticipated term (paras 21-22, 32). Creditors and ASIC had been notified, and no one opposed (paras 4, 27(g)). Gordon Brothers consented to limited recourse and to the administrators being excused from personal liability (para 33).
Conclusion: those features satisfied the Court that relief under s 447A was appropriate and would not prejudice creditors, so the Court modified the operation of s 443A to limit administrators' personal liability (Orders and paras 27-28).

Relief under s 588FM

The statutory problem: s 588FL renders security interests granted during external administration enforceable by vesting them in the company unless the Court fixes a later registration time under s 588FM (paras 30-36).
The statutory test: s 588FM(2) allows fixing a later time where failure to register earlier is not such as to prejudice creditors or shareholders, or where on other grounds it is just and equitable to grant relief; prejudice attributable to delay is particularly relevant (paras 36-37).
Application to the facts: the Court accepted there was no prejudice attributable to delay because Gordon Brothers registered promptly on 21 February 2020 after the security deed on 17 February 2020 (para 38). The security replaced MRWP's previously held security, did not displace other PPSR priorities, and was integral to repayment of MRWP and retirement of receivers, benefiting creditors generally (para 39). No creditor objected (para 39).
Conclusion: the Court fixed the registration time to 16 March 2020 for s 588FL(2)(b)(iv) purposes, preserving Gordon Brothers' security (Order 2; paras 38-39).

Overall, Gleeson J concluded the orders were necessary and proportionate to protect the interests of the administrations and creditors while upholding the statutory purposes of external administration provisions (paras 27, 38-39).

Before and after state of the law

Before this decision, the principles permitting courts to limit administrators' personal liability and to fix later registration times for security interests in external administrations were well-established in the jurisprudence. Gleeson J explicitly relied on prior authorities including Griffin Coal (Mentha) and other cases summarising the circumstances in which s 447A relief is appropriate (paras 24-26), and cited authorities explaining the operation of s 588FL and s 588FM (para 34 and 35).

What this decision confirms or clarifies:

It applies established principles to a fact pattern involving urgent limited-recourse funding to refinance and discharge a prior secured creditor and to retire receivers. The decision confirms that where funding is necessary to preserve an ongoing sale process, avoid duplicative insolvency costs and is on commercially reasonable terms, the Court will modify s 443A under s 447A to limit administrators' personal liability (paras 20-23, 27-28).
It reaffirms that s 588FM relief will be granted where the lender registered promptly and where the security replaces an earlier security without altering priorities or prejudicing creditors; the Court will consider the commercial context and benefits to creditors (paras 29-39).

The judgment does not alter statutory tests but demonstrates their application in a common commercial insolvency situation: short-term limited-recourse funding to preserve business-as-a-going-concern sale processes.

Key passages with plain-English translation

Para 2: "In summary, the orders are intended to: (1) relieve the administrators ... and (2) make effective the security interest ..."
- Plain English: The Court granted two core protections: administrators will not be personally on the hook for the loan if the companies' assets cannot pay, and the lender's security will remain effective rather than immediately vest in the companies.
Para 27: "I accepted that it was appropriate to make the order sought ... limiting their personal liability ..."
- Plain English: The judge was persuaded by the administrators' evidence and arguments and concluded limiting personal liability was proper.
Para 32-33: Observations that the loan terms were reasonable, limited-recourse, and that unsecured creditors are not disadvantaged where the lender consents.
- Plain English: The Court found the funding deal was commercially sensible for a company in administration and that unsecured creditors stand to benefit from the transaction; since the lender agreed to limited recourse, refusal to grant relief would not protect creditors.
Para 38-39: On s 588FM, "Stipulating a later time ... causes no prejudice ... registered ... on 21 February 2020 ... it was just and equitable ..."
- Plain English: Because the lender promptly registered and the security replaced the discharged prior security without affecting other creditors' priorities, it was fair to allow the lender to keep its security.

What fact patterns trigger this precedent

This decision is relevant where the following factual constellation exists:

A company is in external administration with an active sale process the administrators are pursuing (paras 6-9).
A prior secured creditor has or is likely to appoint receivers (paras 10-14), risking disruption, duplication of insolvency costs and a fire-sale outcome.
A third-party lender provides urgent limited-recourse funding to refinance the prior secured debt, enabling repayment and retirement of receivers, preserving an ongoing sale process (paras 15-19).
The funding is on commercially reasonable terms in context (paras 21-22) and includes a general security over all present and after-acquired property.
The lender registers promptly on the PPSR and creditors are notified and do not object (paras 29-39).

When these elements are present, courts are likely to consider s 447A relief to limit personal liability and s 588FM relief to preserve lender security, provided creditors are not prejudiced by delay or priority displacement (paras 27, 38-39).

How later courts have treated it

This judgment itself cites and follows earlier authorities (e.g. Griffin Coal, Ten Network, K.J. Renfrey, Flow Systems and others) in applying established principles (paras 24, 34-36). The decision fits into an established line of cases where courts exercise s 447A and s 588FM discretions to facilitate financing or transactions that preserve going concern value in administrations, so long as creditors are not disadvantaged and the record supports commercial reasonableness and notice (paras 24-39). Practitioners should treat this judgment as consistent with, and as an application of, the existing body of authority rather than a departure.

Subsequent treatment by later courts is not recorded in these reasons; parties and practitioners should monitor later authority for refinements, but this decision strengthens the practical line that courts will protect administrators and lenders in urgent recapitalisation scenarios that advance creditor interests.

Still-open questions

Degree of judicial scrutiny of commercial terms: Gleeson J accepted administrators' evidence that terms were commercially reasonable (paras 21-22, 32). The judgment does not set a precise standard for what constitutes 'commercially reasonable' or a threshold of evidence. Future disputes could test how detailed evidentiary proof must be to support that finding.
Scope of 'prejudice' under s 588FM: The judge emphasised prejudice attributable to delay in registration is the key concern (paras 36-38). However, more complex priority webs or competing unregistered arrangements could raise contested questions about what sorts of commercial prejudice suffice to defeat relief.
Interaction with competing secured parties and proprietary rights: The decision turned on the fact the Gordon Brothers security replaced MRWP's security and did not displace other PPSR priorities (para 39). Cases involving multiple security interests over different collateral, or where replacement is less tidy, may test the boundaries of the 'no displacement' rationale.
Ex parte practice and creditor engagement: The orders were made ex parte yet creditors and ASIC were notified in advance and none opposed (paras 4, Orders para 3). The balance between urgency and adequate creditor consultation remains a practical tension; future cases could refine required notice and timing standards when relief is sought urgently.
Administrators' indemnity limits under s 443D: The orders relieve personal liability 'to the extent of that insufficiency' (Order 1(b)). The judgment does not delve into the mechanics of recourse to administrators' indemnity under s 443D, and future litigation could explore interactions between indemnity, priority of repayment, and consequences where assets prove insufficient.

Practitioners should read this decision as confirming the Court's willingness to facilitate limited-recourse funding and to preserve security where those steps demonstrably protect and are likely to benefit creditors; but they should also recognise the factual specificity required to show commercial reasonableness, prompt registration and lack of prejudice.

Judgment (16 paragraphs)

[1]

ORDERS NSD 92 of 2020 IN THE MATTER OF MCWILLIAM'S WINES GROUP LTD (ADMINISTRATORS APPOINTED) (ACN 000 024 108) AND MOUNT PLEASANT WINES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 000 024 813 GAYLE DICKERSON, TIM MABLESON AND RYAN EAGLE IN THEIR CAPACITY AS JOINT AND SEVERAL ADMINISTRATORS OF MCWILLIAM'S WINES GROUP LTD (ADMINISTRATORS APPOINTED) (ACN 000 024 108) AND MOUNT PLEASANT WINES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 000 024 813) First Plaintiff

[2]

MCWILLIAM'S WINES GROUP LTD (ADMINISTRATORS APPOINTED) (ACN 000 024 108) Second Plaintiff

[3]

MOUNT PLEASANT WINES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 000 024 813) Third Plaintiff

[4]

JUDGE: GLEESON J DATE OF ORDER: 9 March 2020

[5]

Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (Act), Part 5.3A of the Act is to operate in relation to the Applicants as if s 443A(1) of the Act provides that: (a) the liabilities of the First Applicants (in their capacities as administrators of each of the Second Applicant and the Third Applicant) (the Administrators) incurred under the "Administrators' Funding Agreement" dated 17 February 2020 in the form exhibited at pages 197 to 266 of Exhibit GD3 to the affidavit of Gayle Dickerson sworn 3 March 2020 (Funding Agreement), including monies borrowed, interest incurred in respect of monies borrowed and borrowing costs, are in the nature of debts incurred by the Administrators in the performance and exercise of their functions as joint and several administrators of each of the Second Applicant and Third Applicant (Companies); and (b) notwithstanding paragraph (a), if the property and assets of the Companies (where relevant) are insufficient to satisfy the debts and liabilities incurred by the Administrators arising out of or in connection with the Funding Agreement, including in relation to any monies advanced under the Funding Agreement, whether before the making of this order or after, such that the indemnity that exists under s 443D of the Act is insufficient to meet any amount for which the Administrators may be liable, then the Administrators will not be personally liable to repay such debts or satisfy such liabilities to the extent of that insufficiency.
Pursuant to section 588FM of the Act, in respect of any security interests created, granted by or in connection with the "General Security Deed" dated 17 February 2020 in the form exhibited at pages 267 to 299 of Exhibit GD3 to the affidavit of Gayle Dickerson sworn 3 March 2020 (General Security Deed), the registration time for the collateral is fixed to be, for the purposes of s 588FL(2)(b)(iv) of the Act, 16 March 2020 (being the time that is the end of 20 business days after the date of the General Security Deed that gives rise to the security interests that come into force).
Within two (2) business days after the making of these orders, the Administrators are to provide notice of these orders to: (a) all creditors of the Companies (including the persons claiming to be creditors of the Companies) in the following manner: (i) where the Administrators: (A) have an email address for a creditor, by sending the Notice by email to each such creditor; (B) do not have an email address for a creditor (or have received notification of non-delivery of a notice sent in reliance on sub-paragraph (A) above) but have a postal address for the creditor, by sending the Notice by posting a copy of it to the postal address for each such creditor; and (C) do not have an email address for a creditor or a postal address, by sending or communicating the Notice to the creditor in any other way provided for by the Act or the Insolvency Practice Rules 2016; (ii) by publishing a notice on the KPMG website at ; and (b) the Australian Securities and Investments Commission (ASIC).

[6]

GLEESON J: 1 On 9 March 2020, on the ex parte application of the plaintiffs by interlocutory process filed 4 March 2020, I made orders addressing matters arising in the administrations of the second plaintiff (McWilliam's) and the third plaintiff (Mount Pleasant) (collectively companies) in connection with funding provided Gordon Brothers Pty Ltd (Gordon Brothers). 2 In summary, the orders are intended to: (1) relieve the administrators of any personal liability for the Gordon Brothers funding under s 443A of the Corporations Act 2001 (Cth) (Act); and (2) make effective the security interest over the companies' assets granted in favour of Gordon Brothers and avoid the result that would otherwise pertain, namely, the immediate vesting of the security interest in the administrators. 3 These are my reasons for making those orders. 4 The creditors of the companies, the committee of inspection of McWilliam's and the Australian Securities and Investments Commission (ASIC) were all notified in advance of the application. There was no opposition expressed by any person to the orders sought. 5 The application was supported by an affidavit of one of the first plaintiffs, Ms Dickerson, sworn 3 March 2020.

[7]

Background 6 The administrations commenced on 8 January 2020. 7 On 4 February 2020, the Court made orders extending the convening period for the second meeting of creditors to 31 July 2020: Dickerson (Administrator), in the matter of McWilliam's Wines Group Ltd (Administrators appointed) [2020] FCA 57 (McWilliam's (No 1)). Background facts concerning the companies are set out in McWilliams (No 1) at [3] and following. 8 Since their appointment, the administrators have taken charge of, and continued to trade, the business of the companies with a view to offering the business for sale as a going concern and/or explore a possible deed of company arrangement or recapitalisation which may benefit creditors. The administrators commenced an immediate process for the sale of the companies' business. The administrators have received informal expressions of interest from more than 100 parties. 9 On about 23 January 2020, the administrators entered into an agreement with Colliers International (NSW) Pty Ltd to act in relation to the sale of the group's business. Having regard to Colliers' advice, the administrators anticipated any agreement for the sale of the business would be finalised by late April 2020 or early May 2020.

[8]

Appointment of receivers 10 As at the commencement of the administration and at all material times up to and including 18 February 2020, Margaret River Wine Production Pty Ltd (MRWP) was the principal secured creditor of the companies pursuant to a secured convertible notes deed dated 7 December 2018. 11 In McWilliam's (No 1) at [20], Yates J noted: As to the secured creditors, the Group's main secured creditor, Margaret River Wine Production Pty Ltd (MRWP), has been specifically contacted by the administrators and given notice of this application. MRWP has not made any express response, but the evidence before me indicates that it supports the sale process being carried out by the administrators. I note in this connection that it has sought and been granted an extension of the decision period in which it might seek to enforce its security. As yet, it has given no indication that it will enforce that security and, whilst I recognise that that remains a possibility, the present position is that the administrators will continue to be in control of the sale process they envisage. 12 There is no dispute that the appointment of the administrators was an event of default under the convertible notes deed. 13 On 14 February 2020, MRWP appointed receivers and managers of the secured property of the companies. 14 On 18 February 2020, in the circumstances described below, the receivers and managers retired.

[9]

Gordon Brothers funding 15 From early February 2020, the administrators took steps to explore the prospect of obtaining funding to refinance the companies' indebtedness to MRWP to facilitate a smooth, efficient and orderly sale of the companies' business in the event that MRWP took steps to enforce its security. 16 On 17 February 2020, the administrators entered into a funding agreement with Gordon Brothers (GB Funding Agreement) to borrow the amount of $6.5 million to refinance the debt owed to MRWP under the convertible notes deed, secured by a general security over all present and after acquired property of the companies pursuant to a deed entitled "General Security Deed" dated 17 February 2020 (GB General Security Deed). 17 Ms Dickerson's evidence was that, given the 14 February 2020 appointment of receivers, the funding from Gordon Brothers was required urgently to ensure continuity in the sale process commenced by the administrations (which was already reasonably well advanced) in the interests of all creditors and to minimise the potential duplication of costs of insolvency practitioners by avoiding the receivers incurring fees and remuneration. 18 On 18 February 2020, settlement of the refinancing of the debt to MRWP took place. As a result, MRWP is no longer a secured creditor of the companies. 19 Copies of the loan and security documentation were in evidence. In summary, the terms of the funding are: (1) Gordon Brothers agreed to advance up to $6.5 million to the administrators for the purpose of repaying the debt to MRWP; (2) the rate of interest payable on the loan is 0% for the first three months and thereafter 12% per annum; (3) the fees payable include an establishment fee of $250,000 (plus GST); (4) the loan is to be repaid to Gordon Brothers in priority to the administrators' remuneration; (5) the loan is on a limited recourse basis, limited to the assets in the external administration of the companies, such that the administrators do not have personal liability for the debts and liabilities incurred; and (6) a security interest over the property, assets and undertaking of the companies has been granted in favour of Gordon Brothers.

[10]

Application for relief under s 447A(1) of the Corporations Act 2001 (Cth) 20 The administrators are of the view that entering into the GB Funding Agreement was in the best interests of the companies and their creditors for the following reasons: (1) it was crucial for the ongoing trading of the business of the companies; (2) it ensured a continuation of the ongoing sale of the companies' business as a going concern, which was already reasonably well advanced; (3) it avoided potential duplication of costs of insolvency practitioners by avoiding the receivers' incurring fees and remuneration (both generally insofar as the receivers would have been entitled to operate the business of the companies and also specifically in relation to the sale); (4) negative impacts on the sale process (and eventual sale price) may have been avoided where interested parties may otherwise have had a perception that the business was being sold on a liquidation/fire sale basis rather than as a going concern; (5) it avoided any likely delay resulting from the receivers having to conduct their own investigations and familiarising themselves with the affairs of the companies; and (6) MRWP's contractual rights, including the pre-emptive "last look" rights it had to acquire the assets of the companies, were extinguished, which would lead to a more competitive sale process for the sale of the business of the companies as a going concern for the benefit of creditors. 21 Ms Dickerson's evidence was that the administrators considered that the GB Funding Agreement was on reasonable commercial terms, noting that the loan is likely to be short-term based on their anticipation that any agreement for the sale of the business of the companies may be completed by late June 2020. 22 The administrators also considered that it is unlikely that more favourable terms could have been obtained for finance given the companies are in external administration. Mr Dickerson stated that, in the administrators' experience of accessing funding in such circumstances, the terms proposed were at market rates. 23 Finally, Ms Dickerson did not believe that any creditor of the companies (whether secured, employee or unsecured) would be prejudiced or disadvantaged by the relief sought by the administrators under s 447A of the Act limiting their personal liability for at least the following reasons: (1) the provision of funding by Gordon Brothers provides the opportunity for the administrators to continue to fund the trading of the companies' business, and will facilitate the administrators' attempts to obtain a sale or recapitalisation of the companies' business; (2) a sale of the companies' business and assets is likely to maximise the return to the unsecured creditors of the companies; (3) the provision of funding by Gordon Brothers provided for the discharge of the MRWP facilities and the retirement of the receivers, with the consequential benefits set out in [20] above (which could not have been achieved without that funding); (4) the terms of the GB Funding Agreement are on commercial terms; and (5) Gordon Brothers has itself agreed that the loan is a limited recourse loan to the assets available in the administrations of each of the companies.

[11]

Legal principles 24 The administrators noted that the Court's power under s 447A of the Act to make orders limiting an administrator's personal liability under s 443A is well recognised: see, for examples: Mentha, in the matter of Griffin Coal Mining Company Pty Ltd (administrators appointed) [2010] FCA 1469, 82 ACSR 142 (Griffin Coal) at [28]-[29] and Korda, in the matter of Ten Network Holdings (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 1144 (Ten Network) at [40]. 25 In Griffin Coal at [30], Gilmour J said: The principles governing the granting of an application for orders under s 447A to vary the liability of administrators under s 443A can be summarised as follows: (a) the proposed arrangements are in the interests of the company's creditors and consistent with the objectives of Part 5.3A of the Corporations Act: Re Great Southern at [13]. (b) typically the arrangements proposed are to enable the company's business to continue to trade for the benefit of the company's creditors: Re Malanos at [9] and Re View at [17]. (c) the creditors of the company are not prejudiced or disadvantaged by the types of orders sought and stand to benefit from the administrators entering into the arrangement: Re View at [18], and also Re Application of Fincorp Group Holdings Pty Ltd [2007] NSWSC 628 at [17]. (d) notice has been given to those who may be affected by the order: Re Great Southern at [12]. 26 In Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493 at [23], Gordon J stated: Section 447A(1) of the Act empowers the Court, in an appropriate case, to modify the operation of s 443A to exclude personal liability on the part of a voluntary administrator, and to provide that a loan taken by the company via the voluntary administrator is repayable on a limited recourse basis. Orders in similar terms have frequently been made in circumstances where the Court is satisfied that an administrator has entered into a loan agreement or other arrangement to enable the company's business to continue to trade for the benefit of the company's creditors: see, for example, Re Ansett Australia Ltd (No 1) at [49]; Re Spyglass Management Group Pty Ltd (admin apptd) (2004) 51 ACSR 432 at [6]; Sims; Re Huon Corporation Pty Ltd (admins apptd) (2006) 58 ACSR 620 at [12]; Re Malanos [2007] NSWSC 865 at [13].

[12]

Consideration 27 I accepted that it was appropriate to make the order sought by the administrators, limiting their personal liability under the GB Funding Agreement for the reasons set out in their written submissions, namely: (a) the arrangement for funding is in the interests of the Company's creditors and consistent with the objectives of Part 5.3A of the Act; (b) the arrangement for funding has permitted the secured debt of MRWP to be repaid and the Receivers to be retired; (c) this avoided the duplicative costs of the Receivers and ensured that the Administrators remained in control of the running of the Group's business; (d) it also avoided any interruption of the sale process for the Group's business and assets (including avoiding the possibility of potential purchasers perceiving that the assets were to be sold as part of a fire sale rather than on an orderly basis as a going concern); (e) by repaying MRWP's debt and redeeming the notes, MRWP no longer has a preemptive right to purchase the business of the Companies - this creates a more competitive process for the sale of the assets and business and is likely to enhance the price received by the Administrators (for the benefit of all creditors); (f) the creditors are not materially be prejudiced or disadvantaged and, indeed, should stand to benefit from the Administrators having entered into the arrangement and drawn down the funds from Gordon Brothers; and (g) sufficient notice had been given to creditors and these creditors have either (in the case of Gordon Brothers) expressly consented to the Administrators being excused from personal liability under the Funding Deed or otherwise (in the case of other creditors such as members of the Committee of Inspection) not indicated any opposition to such relief. 28 I also accepted the following submissions: 31. The purpose of entering into the GB Funding Agreement was to ensure repayment of the debt to the existing secured creditor and the retirement of the Receivers appointed by that secured creditor. In the absence of funding, the inevitable result would have been (further) duplicative costs of insolvency practitioners and a potential fire sale of the Company's business and assets, all of which would have been value destructive. 32. In addition, the evidence establishes that the terms of the GB Funding Agreement are reasonable [Dickerson paras 61-62], which is a relevant consideration: see Nexus Energy (above) at [8]. No interest is charged for the first three months of the loan and it is likely to be short-term in duration. In the circumstances, it is unlikely that funding could have been obtained on more favourable terms. 33. Moreover, there will be no disadvantage or prejudice the Company's unsecured creditors insofar as the proposed orders relieve the Administrators from personal liability in the particular circumstances. As Finkelstein J said in Re Spyglass Management Group (2004) 51 ACSR 432 at [6], in remarks entirely apposite to the present case, "As the lenders have agreed to a loan of this kind, there is no reason why the order should not be made. Practically speaking the creditors have no interest … because they cannot be disadvantaged by it". 34. Only Gordon Brothers could arguably be prejudiced by a limitation of the Administrators' personal liability; however, it has agreed to that course by including a provision to that effect in the GB Funding Agreement itself. Moreover, it consents to the orders limiting the personal liability of the Administrators [Dickerson para 59].

[13]

Application for relief under s 588FM of the Act 29 On 21 February 2020, Gordon Brothers registered the following security interests on the PPS Register against the companies: (1) security interest over all present and after acquired property (no exceptions) of McWilliam's with registration number 202002210028862; (2) security interest over all general intangible property (including any ADI account) of McWilliam's with registration number 202002210030409; (3) security interest over all present and after acquired property (no exceptions) of Mt Pleasant with registration number 202002210029039; and (4) security interest over all general intangible property (including any ADI account) of Mt Pleasant with registration number 202002210030575. 30 The administrators sought an order that, in respect of any security interests in the property of the companies created, granted by or in connection with the GB General Security Deed in favour of Gordon Brothers (GB security interests), the registration time for the collateral is fixed, for the purposes of s 588FL(2)(b)(iv) of the Act, to be 16 March 2020 (being the time that is the end of 20 business days after the date of the GB General Security Deed that gives rise to the security interest that comes into force). 31 Without an order from the Court extending the registration time for the purposes of s 588FL(2)(b)(iv) of the Act, the GB security interests would automatically vest in the companies pursuant to s 588FL of the Act. This is because, absent an order under that section, under s 588FL(2)(b)(ii) of the Act, the deadline for registration is the earlier of the time that is the end of 20 business days after the GB General Security Deed came into force and the critical time which is defined in s 588FL(7) to be the date on which the external administration of the companies began (which was on 8 January 2020, when the administrators were appointed). 32 The administrators' submitted that the relief sought by the administrators under s 588FM of the Act would not adversely affect the interests of secured, employee and unsecured creditors of the companies for the following reasons: (1) by refinancing the loan from MRWP: (a) the companies' indebtedness to MRWP was paid in full; (b) MRWP released its security over property of the companies; and (c) MRWP is no longer a secured creditor of the companies; (2) the general security interest granted to Gordon Brothers over all present and after acquired property of the companies pursuant to the GB General Security Deed simply replaced the security held by MRWP - this will not have any impact on the priority of other secured creditors (who maintain their security interests over specific collateral of the companies, there being no other secured creditors with a security interest over all present and after acquired property of the companies); (3) similarly, the position of other unsecured creditors has not changed (by virtue of the granting of the general security interest to Gordon Brothers and the release of MRWP's security); and (4) without an extension of the registration time for the purposes of s 588FL(2)(b)(iv) of the Act, Gordon Brothers will lose the benefit of its security over the property of the companies and will suffer prejudice as a result. 33 The administrators considered that it was just and equitable for Gordon Brothers to have the benefit of the GB security interests where the urgent provision of funding by Gordon Brothers pursuant to the GB Funding Agreement in essence ensured that: (1) the administrators could continue to fund the trading of the companies' business and facilitate the administrators' attempts to obtain a sale or recapitalisation of the companies' business, for the benefit of all creditors; and (2) the MRWP debt (and MRWP's rights under its facilities, including its preemptive "last look" rights) was discharged and the receivers retired shortly after appointment.

[14]

Legal principles 34 As already noted, the effect of s 588FL is to render the GB security interests unenforceable. The operation of the legislative scheme was explained by Greenwood J in Hill (Administrator) in the matter of Flow Systems Pty Ltd (Administrators Appointed) [2019] FCA 35 (Flow Systems) at [60]-[61] and [65]. 35 It is now well established that s 588FL applies to the grant of security interests when a company is under external administration, such that the relevant security interests will vest in the company unless an order is made stipulating a later time pursuant to s 588FM: K.J. Renfrey Nominees Pty Ltd (Trustee), in the matter of OneSteel Manufacturing Pty Ltd v OneSteel Manufacturing Pty Ltd [2017] FCA 325; (2017) 120 ACSR 117 at [22] and [24]; Ten Network at [60]-[64]; Flow Systems at [65]. 36 By s 588FM(2), the Court may make an order fixing a later time for the purposes of s 588FL(2)(b)(iv) if it is satisfied that, relevantly: (a) the failure to register the collateral earlier: … (ii) is not of such a nature as to prejudice the position of creditors or shareholders; or (2) on other grounds, it is just and equitable to grant relief. 37 The type of prejudice that is of particular relevance is prejudice attributable to the delay in registration: Re Appleyard Capital Pty Ltd; 123 Sweden AB v Appleyard Capital Pty Ltd [2014] NSWSC 782; (2014) 101 ACSR 629 at [30].

[15]

Consideration 38 Stipulating a later time so as to ensure that the GB security interests are effective causes no prejudice attributable to delay in registration. Gordon Brothers registered its security interests on 21 February 2020, following the execution of the GB General Security Deed on 17 February 2020. 39 Further, I accepted that it was just and equitable that the order sought be made having regard to the following matters: (1) there is no prejudice to creditors generally where the GB security interests secure a similar obligation as was previously secured by MRWP's security interest which has now been discharged; (2) the granting of the security interests was part of the transaction that led to repayment of the debt to MRWP and the retirement of the receivers, in the interests of creditors generally; (3) there is no displacement of the priority of other parties with a PPSR registration; and (4) no creditor raised any objection to the relief sought.

[16]

Other matters 40 I also made orders providing for prompt notice of the Court's orders to creditors and to ASIC, and granting interested persons liberty to apply for a variation or discharge of the orders. 41 Further, I made an order that the administrators' costs of the application be costs in the administrations and be paid out of the assets of the companies. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.

K.J. Renfrey Nominees Pty Ltd (Trustee), in the matter of OneSteel Manufacturing Pty Ltd v OneSteel Manufacturing Pty Ltd

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