Revroof Pty Ltd (receivers and managers appointed) (administrators appointed) v Taminga Street Investments Pty Ltd

Orders for provision of payout figure

1. Cyprus Capital filed a submitting appearance, which stated that it "submits to the making of all orders sought, and the giving or entry of judgment in respect of all claims made, save as to costs".
2. At the hearing before me this morning, the Administrators and Cyprus Community sought an order that Cyprus Capital provide a payout figure by 4pm on 20 February 2025, with the matter then returning for directions on 21 February 2025. The Receivers, who appeared on the application, supported this course.
3. I am satisfied that this is an appropriate course. Cyprus Capital has submitted to the orders sought in the Amended Interlocutory Process, which include an order for such a payout figure to be given within seven days. I accept the Administrators' submission that this time period should be truncated, given that the first Cyprus Capital facility is due for repayment in one week's time and given that a payout figure has not been previously provided despite repeated requests going back some four months. There is no evidence, and no basis to conclude, that there would be any impediment to Cyprus Capital providing such a figure within two business days. No such impediment has been identified by Cyprus Capital in any of the extensive correspondence relating to this issue.
4. The matter can then come back for directions on the day following the provision of the payout figure, at which time consideration can be given to what further orders, if any, should be made, in the light of (a) whether there is any dispute about the payout figure, and (b) whether there is any dispute about any of the documentation which the Administrators seek to be executed by Cyprus Capital or the Receivers in order to discharge Cyprus Capital's securities and terminate the Receivers' appointment.

Limitation of Administrators' Personal Liability under Avari Refinancing Agreements

1. The Administrators have formed the view that it would be in the interests of Cyprus Community and its administration for Cyprus Community to refinance its current secured debts, for the reasons set out in the affidavit of Mr Kelly sworn 29 January 2025. These include that: 1. the Avari refinancing offers more advantageous terms than the existing facilities including in relation to fees, costs and interest; 2. the refinancing will allow Cyprus Community to repay the Cyprus Capital facility which matures on 25 February 2025 and the Sydney Wyde facility which matures in December 2025; 3. the refinancing will reduce the number of secured creditors from two to one and will afford Cyprus Community greater options and a more flexible timeframe to make arrangements for its future and the realisation of its assets; and 4. the retirement of the Receivers will reduce the professional fees and costs to which Cyprus Community is subject and reduce the number of insolvency appointments from two to one.
2. The Administrators have power to cause Cyprus Community to accept the Avari letter of offer and to enter into the loan and security agreements which are necessary to give effect to the Avari refinancing: s 437A of the Act.
3. Section 443A of the Act provides that the administrator of a company under administration is liable for debts which he or she incurs, in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator, including for repayment of money borrowed, interest in respect of money borrowed, or borrowing costs.
4. The Administrators have a right of indemnity out of the property of Cyprus Community (subject to some exceptions) in respect of such liabilities, which is secured by a statutory lien on the company's property: s 443D, 443E and 443F of the Act.
5. The Administrators are not prepared to cause Cyprus Community to proceed with the Avari refinancing unless their personal liabilities in respect of the letter of offer and finance documents with Avari are limited to the extent of their indemnity against the property of Cyprus Community.
6. Accordingly, the Administrators seek an order under s 447A of the Act limiting the extent of their liability in respect of the Avari refinancing.
7. Section 447A of the Act provides that the Court may make such order as it thinks appropriate about how Part 5.3A of the Act is to operate in relation to a particular company. An application under s 447A may be made by, inter alia, the administrator of a company under administration: s 447A(4)(c).
8. It is well established that the Court has power under s 447A of the Act to make orders limiting an administrator's personal liability under s 443A of the Act, including in respect of the repayment of money borrowed or interest on money borrowed.
9. In Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493 at [23], Gordon J stated as follows: "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] FCA 1469; (2004) 51 ACSR 432 at [6]; Sims; Re Huon Corporation Pty Ltd (admins apptd) [2006] FCA 1201; (2006) 58 ACSR 620 at [12]; Re Malanos [2007] NSWSC 865 at [13]."
10. In Mentha, in the matter of Griffin Coal Mining Company Pty Ltd (administrators appointed) [2010] FCA 1469 at [30], Gilmour J held that 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 Pt 5.3A of the Corporations Act … (b) typically the arrangements proposed are to enable the company's business to continue to trade for the benefit of the company's creditors … (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 … (d) notice has been given to those who may be affected by the order …"
11. This statement of principles has been adopted in subsequent authorities, including by Gordon J in Secatore at [24], and by Black J in In the matter of RCR Tomlinson Ltd (administrators appointed) & Ors [2018] NSWSC 1859 at [11] (and see the cases there cited).
12. In RCR Tomlinson at [11], Black J, after referring to and adopting those principles, continued as follows: "It seems to me that, in the present circumstances, the question ultimately becomes whether it is in the interests of the Companies that the borrowing take place, because it is plain enough that the Administrators could not be expected to assume unlimited personal liability for a borrowing of this magnitude, or the risk that their indemnity against the Companies' assets is ultimately not sufficient to discharge that borrowing."
13. I accept the Administrators' submission that, in circumstances where the refinancing would be in the interests of Cyprus Community for the reasons identified in Mr Kelly's affidavit, the Court should grant the relief sought under s 447A so as to permit the Administrators to make the commercial decision to proceed with the Avari refinancing without being required to assume the risk of personal liability to Avari.
14. In its letter of offer, Avari has agreed that the Administrators may obtain such an order and will consent to it if required.
15. The proposed order will not occasion prejudice to any of the unsecured creditors of Cyprus Community, given that the value of its real property substantially exceeds the proposed borrowing. Notice of this application has been given to creditors and to the Australian Securities and Investments Commission, and no person has appeared to oppose the relief sought.
16. Further, the Administrators seek, and I will make, an order providing for notification of the orders made to be given to creditors and for any person who can demonstrate a sufficient interest to have liberty to apply to vary or discharge the orders within two business days.

Relief under Section 588FM

1. The Avari letter of offer requires that Cyprus Community grant to Avari a general security interest over all of its present and after acquired property. It is a condition precedent of the Avari refinancing either that an order be obtained under s 588FM of the Act extending the time for the registration of such security interest, or alternatively that a declaration be made that such an order is not required.
2. By the Amended Interlocutory Process, the Plaintiffs seek an order under s 588FM of the Act fixing the time for registration of any security interests granted by Cyprus Community in respect of the Avari refinancing as being the end of 20 business days after the date that the documents which give rise to such security interests come into force.
3. There is some doubt regarding whether any such application is required. In the decision of In the matter of Antqip Hire Pty Ltd (in liq) [2021] NSWSC 1122 at [63], Brereton J held that: "s 588FL does not apply to security interests granted by a security agreement made after the critical time. It follows that s 588FL(2) does not cover the plaintiff's security interests. There is no need for, nor utility in, an order under s 588FM fixing a later time for the purposes of s 588FL(2)(b)(iv)."
4. That decision has been treated favourably in other jurisdictions, including in recent decisions by Jackman J in Revroof Pty Ltd (receivers and managers appointed) (administrators appointed) v Taminga Street Investments Pty Ltd [2023] FCA 543 and by Cheeseman J in Cathro, in the matter of Cubic Interiors NSW Pty Ltd (in liq) [2023] FCA 694. Each of those decisions, however, recognised the prudence of bringing an application for an order under s 588FM in circumstances where there has not yet been any intermediate appellate authority confirming the correctness of the reasoning in Antqip.
5. Although I have no reason to doubt the decision of Brereton J in Antqip, I accept that, in the absence of intermediate appellate authority confirming the position, it is just and equitable (within the meaning of s 588FM(2)(b)) for the order which is sought to be made.
6. I will express the order as being made "to the extent necessary" to indicate that I have not, in making this order, expressed any doubt about the reasoning in Antqip or any preference for a contrary view.
7. ORDERS
8. For those reasons, I will make the following orders: 1. That, pursuant to Section 447A of the Corporations Act 2001 (Cth) (Act), Part 5.3A of the Act is to operate in relation to the Second Applicant as if section 443A(1) of the Act provides that: 1. the liabilities of the First Applicants (Administrators) incurred with respect to any obligations arising out of, or in connection with the Letter of Offer from Avari to the Second Applicant, including any document entered into under or in connection with the Letter of Offer (and including a loan agreement, general security agreement or deed, and mortgages), and 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 and powers as joint and several administrators of the Second Applicant (within the meaning of section 443A of the Act); and 2. notwithstanding that the liabilities in subparagraph (a) are debts incurred by the Administrators in the performance and exercise of their functions and powers as joint and several administrators of the Second Applicant, if the property and assets of the Second Applicant (where relevant) are insufficient to satisfy these debts and liabilities, such that the indemnity that exists under section 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. 1. That the First Applicants take all reasonable steps to cause notice of the Court's orders to be given, within 5 business days of the making of the orders, to the creditors (including persons or entities claiming to be creditors) of the Second Applicant in the following manner: 1. where the First Applicants have an email address for a creditor, by notifying each such creditor, via email, of the making of the orders and providing a link to a website where the creditor may download the orders and the Interlocutory Process; 2. where the First Applicants do not have an email address for a creditor but have a postal address for that creditor (or have received notification of non-delivery of a notice sent by email in accordance with subparagraph (a) above), by notifying each such creditor, via post, of the making of the orders and providing a link to a website where the creditor may download the orders and the Interlocutory Process; 3. placing scanned, sealed copies of the Interlocutory Process and the orders on the creditors' portal webpage maintained by the First Applicants for the administration of the Second Applicant at https://ey.creditors.accountants/l/Job/Details/E64D0A22-F470-4619-8189-00FD873011DD; and 1. That any person who can demonstrate a sufficient interest have liberty to apply, within 2 business days of notice having been provided to the Applicants, to vary or discharge order 1. 2. Pursuant to section 588FM of the Act, and to the extent necessary, that the time for registration of any security interests granted by the Company in favour of Avari or its nominees in connection with any document entered into under or in connection with the Letter of Offer is fixed, for the purposes of section 588FL(2)(b)(iv) of the Act, to the end of 20 business days after the date that the documents that give rise to the security interests come into force. 3. That the First Respondent provide in writing to the First and Second Applicants by 4pm on 20 February 2025 a payout amount (Payout Amount), and specify in writing how the Payout Amount is calculated, as at 25 February 2025, of the: 1. Secured Moneys under the First GSD and Debt under the First Mortgage which secure the payment of monies payable by the Second Applicant pursuant to the First Loan Deed; and 2. Secured Moneys under the Second GSD and Debt under the Second Mortgage which secure the payment of monies payable by the Second Applicant pursuant to the Second Loan Deed. 1. Stand over the Amended Interlocutory Process for directions before Nixon J at 12:00pm on Friday, 21 February 2025. 2. Costs reserved.

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: 21 February 2025