Sev.en's standing under s 447A(4) of the Act
91 It was not doubted that Sev.en has an economic interest in the outcome of IGPC's administration. That interest derives from Sev.en's shareholding in companies with an interest in IGPC, and because it is a creditor of IEHA, which is a major creditor of IGPC. On the basis of those interests, Sev.en claimed that it fell within the expression "any other interested person", as used in s 447A(4)(f), which provides that such a person may apply for orders under s 447A(1). The defendants, however, submitted that Sev.en's interests were insufficient to make it an interested person for those purposes.
92 The expression "interested person" is not defined and must take its meaning from the context in which it is used. That said, there is nothing in the legislation that suggests that the expression should be given any limited or restricted meaning. So much was recognised by Austin J in Allatech Pty Ltd v Construction Management Group Pty Ltd (2002) 41 ACSR 587 (Allatech). There, Allatech Pty Ltd had brought proceedings under Pt 5.3A (specifically, s 445D) seeking an order terminating a DOCA. Its standing to do so was challenged. Relevantly, standing under s 445D was conferred in materially identical terms to s 447A(4). In these circumstances, Austin J held (at 591 [18]) that the words "other interested person" are "words of wide scope", and that the legislature intended to give standing to apply for relief to a broad class of applicants. His Honour then observed (at 591 - 592 [20] - [21]):
In my view, the words "other interested person" in s 445D(2) are intended to encompass applicants whose material rights or economic interests are or may be affected by the operation or effect of the deed of company arrangement which they seek to challenge, at least where the effect is substantial. …
An applicant whose substantial economic interests are at stake would be a person whose "interests are affected" … It is enough to say that when material legal rights or pecuniary or other economic interests of the applicant are or may be substantially affected by the matter in issue, the applicant is an "other interested person", however much further those words may extend, …
93 There is a close relationship between ss 445D and 447A, and no reason presents itself as to why Austin J's reasoning in respect of the former provision does not apply equally to the latter. In Re Nillumbik Community Church Incorporated (In Administration) [2010] VSC 136 (Re Nillumbik), Davies J cited Austin J's observations with approval in the context of the application of s 447A. Her Honour observed (at [30]) that "the expression 'interested person' is of wide scope and should be construed liberally in the context of s 447A". See also Habrok (Dalgaranga) Pty Ltd v Gascoyne Resources Ltd (2020) 149 ACSR 1, where Beach J said (at 53 [401], 54 [403]):
But in any event, Habrok has standing to bring the application as "any other interested person" pursuant to s 445D(2)(c). The expression "any other interested person" is to be interpreted broadly. And the test is that laid down by Austin J in Allatech, namely, whether the person's material rights or economic interests are or may be affected by the operation or effect of the deed of company arrangement that they seek to challenge. …
Further, for similar reasons, Habrok has standing as "any other interested person" under s 447A(4)(f) and as "a person with a financial interest in the external administration of the company" under s 90-20 of the Insolvency Practice Schedule.
94 The decision in Re Nillumbik has been applied or cited with approval in a number of decisions, including: MXJ v Company X (admin apptd) [2023] VSC 42, where it was said (at [40]) that a company director was an "interested person"; Re Windows on the World Steel Windows Pty Ltd (In Administration) [2020] VSC 880 [36], where it was accepted that any unitholder of a trust of which the company in administration was trustee was an "interested person" for the purpose of the section; and In the matter of ACN 004 410 883 Ltd (formerly Arrium Limited) (in liq) [2023] NSWSC 461, where Black J left open the possibility (at [210]) that an "interested person" might be wide enough to include the credit insurer of trade creditors of the company in administration.
95 There is much force in the view that the concept of an "interested person" under s 447A should be accorded a wide application and extend to persons whose economic interests are substantially affected, rather than being limited to those whose legal rights are directly affected. When a company is placed into administration, it is not only creditors or shareholders whose interests are affected. Whilst the denial or alteration of the rights of such persons is no doubt immediate and direct, the detrimental impact on those entities can often have a consequential effect on the economic interests of others. That is especially so when the insolvency of one entity becomes a contagion which spreads to immediate creditors and possibly beyond, thereby financially preventing those immediately affected from taking any action. It may be left to those who are more indirectly affected to seek to remediate any infelicities in the application or use of Pt 5.3A. Similarly, it may be that the entities directly affected by an administration will not take action under s 447A because of their association with interested parties or the administrators. The present case is, perhaps, an exemplar. The main creditors are generally associated with CSEL or the administrators and, as such, are not interested in bringing an application such as the present. The wide wording of s 447A(4) suggests that the legislature recognised that, in the world of commerce, where an almost infinite variety of circumstances might exist, no significant limitation should be imposed on the class of persons who might make an application for relief.
96 On behalf of the defendants, detailed reference was made to the decision in Tucker as joint and several administrator of Allegiance Mining Pty Ltd (Recs and Mgrs Apptd) (Subject to Deed of Company Arrangement) v Su [2022] WASC 178 (Tucker v Su). There, an application was made by the deed administrators of a company, Allegiance Mining Pty Ltd (Allegiance), that they have leave to transfer all of the existing shares in Allegiance to a company referred to as Mallee Resources Limited, which was a condition of a DOCA entered into by Allegiance. Mr Su relevantly sought to be joined as an "interested person" pursuant to s 444GA(2)(c) of the Act, but his joinder was opposed. He was the holder of approximately 13% of the shares in Dundas Mining Pty Ltd (in liquidation) (Dundas), which was the holding company of Allegiance. He was also a related party creditor of Dundas in an amount of $200,000. In essence, Mr Su sought to prevent the DOCA's terms and conditions being carried out because he believed that alternative proposals were available to Allegiance and the members of Dundas would be better off under those proposals than they would be under the existing DOCA.
97 In his reasons refusing to grant Mr Su leave to intervene, Sanderson M identified (at [21]) that the parties had agreed that "subject to modification to reflect the difference in subject matter, Allatech elucidates the proper interpretation of the descriptor 'any other interested person'". The "modification" in question is that concerned with the subject matter of the section giving rise to the Court's exercise of power in respect of which the person is seeking to be a party. For instance, the class of "interested persons" for a section concerned with the setting aside of a DOCA might properly be narrower than the class of persons interested in preventing a DOCA from being entered into. Although Sanderson M ostensibly agreed with the observations of Austin J in Allatech, he sought to narrow the scope of the concept of an "interested person" by the observation (at [27]) that:
The better view may be that the reference to 'substantially' refers to materially or significantly impact. In other words, as the interested parties in this case would have it, there must be a direct rather than reflective impact on the party seeking to be joined. …
98 A "reflective" loss is, apparently, a loss sustained by reason of another person sustaining a loss from a wrong - in contrast to a loss that is sustained from wrongful conduct directly. Master Sanderson said (at [29]) that:
… With respect, I think that is a proper formulation of the position Mr Su finds himself in. Hartree submits Mr Su's situation, so far as his shareholding in Dundas is concerned, is analogous to one of reflective loss. The reflective loss principle precludes a shareholder from independently seeking to recover loss in an action against a wrongdoer where the claimed loss derives from, and is not independent of, loss suffered by the company which the company itself could recoup in a separate action against the wrongdoer: see Minerology Pty Ltd v Sino Iron Pty Ltd [No 2] [2021] WASCA 105 [260] - [261].
99 In the result, Sanderson M held (at [39]) that Mr Su's interest was indirect or reflective, with the consequence that he had no standing for the purpose of the application.
100 It is not irrelevant to note that Sanderson M made reference to the decision of the Queensland Supreme Court in Public Trustee (Qld) v Octaviar Ltd [2009] QSC 202 (Octaviar), where the following was observed by McMurdo J (at [8]):
It is not disputed that the Public Trustee is a creditor of OL. Accordingly, he has standing to apply for the termination of its deed. The Public Trustee claims to be a creditor of OA. The administrators disagree. But they, and all other parties here, apparently accept that the Public Trustee has standing to apply for the termination of the deed for OA on the basis that he is an "interested person" within the meaning of s 445D(2)(c). As will appear, the interest of the Public Trustee as a substantial creditor of OL makes him an interested person because of the potential impact of the DOCA for OA upon the amount of funds to be distributed to creditors of OL.
101 There, it was accepted that a creditor (the Public Trustee) of a company (OL) was an "interested person" in the setting aside of a DOCA entered into by another company (OA) on the basis that OL would receive an amount from the DOCA entered into by OA. In other words, it was accepted that a creditor of a creditor of a company under a DOCA was an "interested person" when it was asked whether or not the DOCA ought to be set aside. It is, with respect, difficult to see how that scenario can be any different, in the present context, to the example of reflective loss sustained by a shareholder consequent upon a loss to a company. It is also difficult to see how that position is different to that of Mr Su. Moreover, the observations of McMurdo J are consistent with the approach in Allatech.
102 As the submissions of Sev.en identified, Tucker v Su has been neither followed nor cited subsequently. No other court has sought to limit the entitlement to seek relief under s 447A to those whose financial and legal interests are directly affected. With respect, there is no compelling basis upon which to read the expression as involving any analogy to the right to bring a cause of action for loss sustained by a company, in accordance with the reasons of Sanderson M. In keeping with the modern approach to statutory construction, it is inappropriate to impose any judicial exegesis upon the wide words that the legislature has used. In the present context, to do so would be inconsistent with the effect of Austin J's decision in Allatech.
103 Ultimately, due respect should be accorded to the observations of Austin J and his Honour's purposive construction of the statutory language, which concluded that a sufficient impact on economic rights was enough to demonstrate standing, in apparent contrast to a direct impact on legal rights. There is no warrant for reading down the observations of Austin J or for reading into s 447A (or any cognate provision) any word or words of limitation.
104 The decision in Tucker v Su would have the Court read s 447A(4)(f) as if it said "any other directly interested person". It is a significant step to read words into a statutory provision that have the effect of limiting its obvious operation. Here, the application of Sanderson M's approach would effect a substantial limitation on the class of persons who might apply under s 447A for relief in relation to an administration. With respect, no principled basis for doing so was identified in Tucker v Su, and it is difficult to ascertain why the legislature would have intended that a person whose economic interests were significantly and substantially affected by an abuse of the Pt 5.3A process should be denied a remedy under the section, merely because their immediate legal interests or rights were unaffected. Instead, the legislature should be seen as having intended to provide protection from the abuse of Pt 5.3A. Given the wide range of persons who might be impacted by an administration, there is no reason to limit the class of persons who might seek relief.
105 The defendants submitted that to construe liberally the scope of s 447A(4) would be to open the floodgates and allow every single intermediate company in a corporate group to make an application. However, no legitimate reason was advanced as to why the scope of the section should not extend that far - albeit that is not to say that it necessarily does. In any event, it is likely that it will be those entities that are most directly affected by an administration, and that are financially capable, that will seek relief when it is available. Entities whose interests are derivative upon those more immediately affected, meanwhile, will likely stand back and obtain the benefit of any successful action. It is unreasonable to assume that all entities that might have suffered loss from the same original source will reflexively each apply for relief.
106 At the hearing, both parties referred to the New South Wales Court of Appeal's decision in BE Australia WD Pty Ltd v Sutton (2011) 82 NSWLR 336. In that case, the Court had cause to consider Austin J's decision in Allatech. Justice of Appeal Campbell (with whom McColl JA agreed) stated (at 376 [168]) that:
In my view, Allatech and Commonwealth v Rocklea Spinning Mills were correctly decided so far as who is an "interested person" within s 445D(2) is concerned. Some statements in them need modification to be applied to the present case. That is because in the context of s 445D(2) an "interested person" is a person who has an interest in whether the court makes an order terminating a DOCA. By contrast, in the context of s 447A an "interested person" is a person interested in whether the court makes the order that is sought under s 447A.
107 Relevantly, the defendants relied on Campbell JA's reference to a passage from Allatech in which Austin J quoted the following statement made by Davies J in the context of ss 27 and 30 of the Administrative Appeals Tribunal Act 1975 (Cth), which permits a person whose "interests are affected" by a decision to seek review of that decision:
… a person seeking joinder must be able to identify a relevant interest which is his. In other contexts, dicta in cases have used the adjectives 'real', 'genuine' and 'direct' to describe the relationship required between the decision and the interest. Sections 27(1) and 30(1) do not make use of adjectives but they do require that the applicant demonstrates genuine affection of an interest which attaches to him.
108 They suggested that this passage "identif[ies] some adjectival assistance to qualify the nature of the interest that would satisfy the issue of standing" for the purposes of s 447A(4). They also submitted that both Campbell JA and Austin J recognised that there is an "additional ingredient" that needs to be demonstrated in order to establish that a plaintiff is an "interested person". With respect, these submissions are not quite accurate. For the reasons expressed above, there is no principled basis for reading adjectives into the provision that have the effect of qualifying the nature of the interest required. As to their Honours' observations regarding the need for an "additional ingredient", each observed that, where the plaintiff is a creditor, there must be something beyond the "bare claim" of being a creditor before it can be sensibly said that the plaintiff is an interested person. It can be accepted that the words "other interested person" in s 447A(4) are unlikely to be intended to encompass any possible entity with an interest in the orders sought, however remote that interest may be. The assessment of whether a plaintiff is an "interested person" must be made in the circumstances of each case.
109 As a matter of both principle and authority, the expression "interested person" in s 447A(4) is to be read in much the same manner as the cognate expression in s 445D(2). It is intended to encompass entities whose "material rights or economic interests are or may be affected".
110 Here, the administration substantially affects Sev.en's economic interests - specifically, in its capacity as, effectively, the sole creditor of IEHA, which is in turn a substantial creditor of IGPC. Sev.en therefore falls within the scope of the expression "any other interested person" for the purpose of s 447A. It has standing to make the present application. That conclusion follows from the position accepted by McMurdo J in Octaviar and the principles referred to by Austin J in Allatech. It was submitted by the defendants that the debt owed to IEHA was controlled by Mr Sparks and Mr Hughes as administrators, and that this negated Sev.en's interest. However, it was not explained how that was so or why their control of IEHA's indebtedness was relevant to Sev.en's economic interest. That is important here, where Sev.en is the only real creditor of IEHA, and that company's administrators should act in a manner that enhances Sev.en's chances of being paid.
111 It is also quite possible that Sev.en has standing arising from its 25% economic interest in IGPC. Although that interest arises by a somewhat unusual corporate structure, and it is derived through shareholdings in nine companies, the evidence of the shareholdings does at least show it to exist. As the holder of such an interest, Sev.en may be detrimentally affected by the conduct of IGPC's current administrators if the company's entitlement to recover from CSEL is not appropriately explored and/or valued, or is otherwise diminished by a release of any claims. It is not irrelevant to note that the administrators have previously dealt with Sev.en on the basis that it held a major "interest" in IGPC's administration. They entered into a Deed of Cooperation with Sev.en for the purpose of sharing information or documents relating to the administration that might be relevant to Sev.en and might keep it informed of the rebuilding of the C3 and C4 units. It is unusual that the administrators would deal with Sev.en in that way, apparently on the basis that it had a substantive interest in units C3 and C4, and then purport to deny that interest for the purposes of this application.
112 The defendants submitted that Sev.en's position as an "indirect shareholder" was not sufficient to establish it as a person whose material or economic interests were affected. That proposition was advanced on the basis that it was unknown whether the interest of IEHA in IGPC was diminished by the financial position of the companies between IEHA and Sev.en. It was suggested that the financial circumstances of the intermediate companies might be such that not all, or perhaps not any, of the economic benefit of IEHA's shareholding would pass to Sev.en. The difficulty here is that there was no evidence of the financial standing of the intermediate entities and, as was submitted on behalf of Sev.en, this had not been raised as an issue in the proceedings. That latter proposition is correct. Moreover, Sev.en had sought to establish its standing, in part, by reliance on a sequence of shareholdings and adduced evidence of that. In the absence of any challenge to the financial standing of those companies, it is not open to the defendants to raise the issue during addresses. In the absence of evidence to the contrary, it is open to conclude that Sev.en derived an economic interest in IGPC via the sequential shareholdings.
113 The defendants' submissions on this point are further undermined by the evidence adduced by the administrators themselves. An exhibit to the Fourth Sparks Affidavit is an email of 8 March 2023 sent on behalf of IGPC's directors to persons who were apparently interested in that company. It concerned the growing problems with the cashflow of the company consequent upon the failures of units C3 and C4. Notably, the recipients of the letter included three persons at Sev.en: A Němcová, A Svoboda and P Šlechta. The terms of the letter indicate that it was mostly directed to the "ultimate owners of the Callide project", which were referred to as the "shareholders", though that latter term was not referring to the actual shareholders of IGPC but, inter alia, Sev.en. An important issue raised in the letter was the question of whether an offer from an insurer of unit C4 should be accepted. In that discussion, reference was made to Sev.en's position in relation to the offer which indicated that, as a matter of commercial reality, it had substantial influence on IGPC. The letter also identified that Sev.en was influential in relation to the financing that IGPC might pursue, and that it had relevant control over the identity of the company's directors. This provides some evidence that Sev.en's economic interest in IGPC was not seriously diluted by the financial position of the intermediate companies. In such circumstances, it is unrealistic to suggest that Sev.en does not have a direct and significant economic interest in IGPC, through the sequential shareholdings, that is sufficient to give it standing in the present action.
114 It was further submitted that Sev.en's interest would have been insufficient to qualify it to bring a derivative action in the name of IGPC or to seek relief under s 90-15 of the Insolvency Practice Schedule (Corporations) (being Sch 2 to the Act) (IPS), though the relevance of that point is unclear where no such application is made.
115 It follows that the defendants' challenge to Sev.en's standing fails. That company's legal and economic interests have been detrimentally affected by the administration and are further imperilled by the apparent future conduct of the administrators. It therefore has a substantial interest in ensuring that IGPC's potential claims against CSEL are appropriately investigated, preserved and pursued.