Mentha, in the matter of The Griffin Coal Mining Company Pty Limited... [2011] FCA 104 | Case summary

Directs pursuant to s 447D of the Corporations Act that the first plaintiffs were justified in causing the second plaintiff, The Griffin Coal Mining Company Ltd (Administrators Appointed) (ACN 008 667 385) (Griffin Coal), to enter into a coal supply agreement dated 21 December 2010 with Perdaman Chemicals and Fertilisers Pty Ld (Perdaman) (Coal Supply Agreement).
Pursuant to s 447A(1) of the Corporations Act that Part 5.3A of the Corporations Act is to operate in relation to Griffin Coal: (a) so that any personal liability of the first plaintiffs pursuant to s 443A of the Corporations Act arising out of or in connection with the Coal Supply Agreement will only apply in respect of debts or liabilities accruing during the period of the voluntary administration of Griffin Coal and shall not extend to any liability that accrues or may be attributable to the period after the voluntary administration of Griffin Coal ends; (b) as if s 443A(1) of the Corporations Act provided that the debts and liabilities incurred by Griffin Coal pursuant to the Coal Supply Agreement and which accrue during the period of voluntary administration of Griffin Coal are debts incurred by the first plaintiffs in the performance and exercise of their functions and powers as administrators of Griffin Coal and are the subject of the right of indemnity referred to in s 443D for the purposes of s 443E and 443F; and (c) such that, notwithstanding paragraph (a), if the indemnity of the first plaintiffs under s 443D of the Corporations Act is insufficient to meet any amount for which the first plaintiffs may be liable arising out of or in connection with the Coal Supply Agreement, the first plaintiffs will not be personally liable to repay such amount to the extent of that insufficiency.

REASONS FOR JUDGMENT 1 I made orders in this matter on 8 February 2011. These are my reasons for so doing. 2 The plaintiffs are administrators of various companies in the Griffin group of companies, including, the second plaintiff, Griffin Coal Mining Company Pty Ltd. Each of the plaintiffs is a partner of KordaMentha, an accounting firm. 3 The history of the various administrations is described in earlier decisions of the Court: Mentha; in the matter of The Griffin Coal Mining Co Pty Ltd (administrators appointed) [2010] FCA 30; Mentha; in the matter of The Griffin Coal Mining Co Pty Ltd (administrators appointed) (No 2) [2010] FCA 499; Mentha; in the matter of The Griffin Coal Mining Company Pty Ltd (administrators appointed) [2010] FCA 764; Mentha; in the matter of The Griffin Coal Mining Company Pty Ltd (administrators appointed) (No 3) [2010] FCA 1087; Mentha; in the matter of The Griffin Coal Mining Company Pty Ltd (administrators appointed) [2010] FCA 1469 and Mentha; in the matter of The Griffin Coal Mining Company Pty Ltd (administrators appointed) (No 2) [2010] FCA 1470. 4 The present application is similar to the application in Mentha; in the matter of The Griffin Coal Mining Company Pty Ltd administrators appointed) [2010] FCA 1469. It is supported by an affidavit of the first-named first plaintiff sworn on 1 February 2011. The administrators also rely on certain of the affidavit material read in this earlier decision. The administrators seek orders and directions pursuant to s 447A and s 447D of the Corporations Act 2001 (Cth) stating that they were justified in causing Griffin Coal Mining Company Pty Ltd to enter a particular long term coal supply contract, and to limit their liability as administrators under that contract in respect of any liabilities which might arise after they retire. The contract itself contains a provision with the desired limiting effect: cl 1A.2 of the coal supply agreement. 5 However, s 443A of the Corporations Act imposes personal liability upon the administrators in respect of liabilities to which it applies, despite any agreement to the contrary: s 443A(2). The only way to alter this is by way of orders modifying the operation of Pt 5.3A pursuant to s 447A of the Corporations Act. 6 The Court has the power to make orders of the type sought. I referred, in this regard, to the statutory provisions and the relevant authorities in Mentha; in the matter of The Griffin Coal Mining Company Pty Ltd (administrators appointed) [2010] FCA 1469 at [23]-[38]. 7 The administrators are of the view that it was and is in the best interests of the creditors of Griffin Coal Mining Company Pty Ltd for it to enter the coal supply contract. This is for two reasons. First, the agreement represented a valuable business opportunity for Griffin Coal Mining Company Pty Ltd to sell its coal product to a purchaser. Second, the administrators were concerned that a failure to enter such an agreement might lead to the company losing the opportunity to sell coal to this particular purchaser and that they would be placed in breach of a previously agreed heads of agreement. 8 The proposed orders limiting the administrators' liability are consistent with the agreed contractual position. Hence, the purchaser under the coal supply contract will suffer no prejudice, compared to what they consensually agreed, by the contemplated orders or the limitation of the administrators' liability. 9 The Committee of Creditors for Griffin Coal Mining Company Pty Ltd unanimously support the application. 10 The only secured creditor, which is ACN 113 353 638 Pty Ltd, has acknowledged in correspondence with the first plaintiff, in effect, that it does not approve or disapprove of the proposed limitation orders. 11 In my view, the creditors will not be prejudiced by the orders limiting the liability of the administrators to exclude liabilities which arise after the administrators' retirement. I set out, in principle, the reasons for this previously in Mentha; in the matter of The Griffin Coal Mining Company Pty Ltd (administrators appointed) [2010] FCA 1469 at [45]-[46]. These reasons are apt also to this application. Indeed, it is, to the contrary, in the creditors interests that the orders be made. I accept the view to that effect expressed by the administrators. 12 I am also satisfied that there is a sound basis for making the confidentiality orders sought.

Mentha, in the matter of The Griffin Coal Mining Company Pty Limited (administrators appointed) [2011] FCA 104

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