Re Wintech Group Limited [2011] VSC 273 (21 June 2011)

1 On 16 June 2011, I made an order pursuant to s 447A of the Corporations Act 2001 (Cth) ("the Act") that Part 5.3A of the Act is to operate in relation to Wintech Group Limited ("the company") as if the administrators appointed to the company on 12 April 2011 ("the original administrators") were validly appointed. I now publish my reasons for making that order.

2 The original administrators were appointed as administrators of the company by ABEnergy Properties Pty Ltd ("ABE"). ABE held a charge over assets of the company under an undated Deed of Fixed and Floating Charge ("the charge") and relied on the power given to charge holders under s 436C of the Act to make the appointment. Section 436C of the Act is in the following terms:

436C Chargee may appoint administrator

(1) A person who is entitled to enforce a charge on the whole, or substantially the whole, of a company's property may by writing appoint an administrator of the company if the charge has become, and is still, enforceable.

I, V Sweeney, in my capacity as the director of [ABE], a secured creditor entitled to enforce a charge on the whole, or substantially the whole, of the property of [the company] hereby appoint [the original administrators] as joint and several administrators of the company.

4 On 27 April 2011, the creditors of company resolved at a meeting pursuant to s 436E of the Act to remove the original administrators as administrators of the company and to appoint the plaintiffs ("the current administrators") as administrators of the company. On their appointment, the current administrators conducted investigations into the affairs of the company and commenced preparation of their report to creditors pursuant to s 439A of the Act. As the result of legal advice obtained in the course of carrying out those functions, the current administrators became concerned about the validity of the appointment of the original administrators and the effect that any invalidity may have on the administration. The current administrators accordingly made an application to the Court under s 447C of the Act for declarations that the appointments were valid or alternatively an order pursuant to s 447A that the Act is to operate in relation to the company as if the appointments were valid.

(1) The charge, which was undated, secured the payment of money[1] for which the company was liable "under or in connection with the Transaction Documents",[2] namely:

the Loan Facility Agreement and Subscription Deed of contemporaneous date and any document or agreement entered into pursuant to them[3]

ABE actually advanced moneys to the company under an agreement titled "Convertible Loan and Subscription Agreement". The current administrators are concerned that the loans advanced under that agreement were not secured by the charge and that the charge was not enforceable when the original administrators were appointed.

(2) The secured property was charged "to the Chargees",[4] which was a reference to four entities, namely ABE, Corporate Governance Australia Pty Ltd ("CGA"), Sydney Capital Partners and Mr V Sweeney as trustee of the Maguire Family Superannuation Fund, each of which had appointed CGA as their agent for the purposes of the charge. The current administrators' concern is that an appointment under s 436C of the Act had to be by the four entities, and could not be effected by ABE alone.

6 In my opinion, it is sufficiently clear that the parties intended the charge to secure the monies advanced under the Convertible Loan and Subscription Agreement, and that the definition of "Transaction Documents" should not be read too semantically. The "Subscription Deed" and "Loan Facility Agreement" are identified in the charge by reference to their contemporaneous date of execution to the charge. It is apparent that the contemporaneous date was intended to have the connotation "on or about": see the definition of "Facility Agreement" defined to mean the Loan Facility Agreement "dated on or about the date of this Deed by the Chargor".[5] The charge itself was not dated, although the evidence was that it was granted by the company on 17 March 2011 and registered on 28 March 2011. The Convertible Loan and Subscription Agreement was dated 11 March 2011 and the funds advanced under it were provided on 18 March 2011. This agreement appears from the company's records to be the only agreement in existence under which funds were or would be advanced. The conclusion can sensibly be drawn that the "Subscription Deed" and "Loan Facility Agreement" so described in the charge are one and the same as the Convertible Loan and Subscription Agreement. Accordingly I find that the loans advanced under that agreement were secured by the charge at the time of the making of the appointment under s 436C.

7 In my view, the concerns about whether ABE alone could effect the valid appointment of the original administrators are properly based. It is clear from the terms of the charge that the charge is to the chargees collectively, not to the chargees jointly and severally.[6] Thus the appointment of administrators under s 436C should have been by all chargees, not by ABE alone. This is sufficient to invalidate the appointment of the original administrators under s 436C of the Act. Accordingly I would not make the declaration of validity sought by the current administrators under s 447C of the Act.

Should an order be made under s 447A of the Corporations Act?

8 The next question is whether an order should be made pursuant to s 447A of the Act that Part 5.3A of the Act is to operate in relation to the company as if the appointments were valid.

9 The Court's power under s 447A of the Act is not only a power to cure defects or to remedy the consequences of some departure from the scheme set out in the other provisions of Part 5.3A of the Act.[7] The power is a broad power to make orders which alter the way in which Part 5.3A is to operate in relation to a particular company. The focus of the Court when making an order under s 447A is the position of the company at the time of making the order and what is best for the company in the future.[8] Although there is a temporal element in the wording of s 447A of the Act, it does not preclude the making of an order with future effect, but in respect of past matters or events.[9] This includes making an order that Part 5.3A of the Act is to operate in relation to the company as if the original administrators had been validly appointed.

10 In the present case, there a number of reasons warranting the making of such an order under s 447A of the Act.

11 First, Mr Sweeney has given evidence that although the appointment of the original administrators was expressed to be effected by ABE, each of the chargees supported the making of the appointment and that if it had been considered at the time that all of the chargees needed to participate in making the appointment, each of the chargees would have participated in making the appointment. Mr Sweeney was able to give that evidence because he is the sole director of ABE, the sole director of CGA, a limited partner of Sydney Capital Partners of which CGA is the general partner and he is empowered to bind Sydney Capital Partners both in his capacity as a limited partner and by causing CGA to act in its capacity as general partner and he is the trustee and authorised signatory of the Maguire Family Superannuation Fund.

12 Secondly, following their appointment as current administrators, the current administrators received three expressions of interest from parties in putting forward a proposal for a deed of company arrangement ("DOCA"). The proposals included a formal proposal for a DOCA from ABE. Subsequently the other two parties have indicated to the current administrators that they do not intend to proceed with their proposals. The current administrators have formed the view that it is in the best interests of the creditors for the company that the DOCA proposed by ABE be executed and have made that recommendation to the creditors.

13 Thirdly, the current administrators have provided a Report to Creditors pursuant to s 439A of the Act for the purpose of deciding on the future of the company. At a meeting of creditors on 26 May 2011 called for that purpose, the first plaintiff advised the creditors, amongst other things, that there were issues about the appointment of the original administrators which may require an application to the Court to resolve. The minutes record that there were questions from the floor on the issues relating to the question of the validity of the appointment and that none of the creditors of the company present indicated that they wished to vote to adjourn the meeting. The resolution to adopt the ABE DOCA was then put and carried on the voices.

14 Fourthly the current administrators are not aware of any party that would be subject to any particular prejudice by the implementation of the DOCA pursuant to the current administration process and resolution passed on 26 May 2011.

15 Accordingly it was appropriate in my view to grant the relief sought under s 447A. In aid of that order, I further ordered that the execution of the DOCA be extended for two weeks to ensure that the DOCA can be executed within the time limited by the Act.

[1] Deed of Fixed and Floating Charge (undated), Cl 2.1

"all money which a Transaction Party is or at any time may be or become actually or contingently liable to pay to or for the account of the Chargees for any reason under or in connection with the Transaction Documents"

[3] Ibid, Cl 1.1 "Transaction Documents".

[7] Australasian Memory v Brien (2000) 200 CLR 270 at [17]-[18], [24], [26].

[8] Xie v Crisp [2011] VSC 154, 222 (Ferguson J).

[9] Australasian Memory v Brien (2000) 200 CLR 270, 282 [26].