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Mentha, in the matter of Griffin Coal Mining Company Pty Ltd (administrators appointed) [2010] FCA 1469

by Martha.Ware 13. April 2011 09:08

Facts

The Administrators caused Griffin Coal to continue to trade to realise maximum value for the business as a going concern. The Administrators had received extended time for the second creditors meeting on three occasions to allow the sales process to proceed. Completion of the contract for sale was expected in February 2011. Griffin Coal’s mining leases would expire on 31 December 2010.

 

The Administrators sought directions and orders under s 447A(1) of the Corporations Act limiting their personal liability in respect of applying for, maintaining and holding the new mining leases.

 

The principles governing the grant of orders under s 447A to vary the liability of administrators are whether: 

  • the proposed arrangements are in interests of the creditors and consistent with Part 5.3 objectives;
  • the arrangements proposed enable companies business to continue to trade for the benefit of its creditors;
  • the creditors were prejudiced or disadvantaged by the orders sought or stood to benefit; and
  • notice has been given to those who may be affected: [30].

The practical utility of the administrators’ statutory indemnity is also a key factor favouring s 447A orders: [33].

 

In this case the liabilities were for potentially significant amounts and the creditor (WA Department of Mines and Petroleum) was involved in drafting the orders sought: [35]. The proposed orders were consistent with the general principles governing s 447A grants and with the policy reasons behind s 443A [37] being to either ensure the business continues to trade or to achieve higher returns to creditors than would be available in an immediate winding up. The creditors benefited from the orders as the mining leases were required to maximise the sale proceeds [39]. Griffin Coal could not continue all its business operations without the leases.

 

It was fair to the Administrators to grant the orders as they had significant potential exposure due to the long term nature of the leases and the potent amounts involved: [42] and [43]. The Administrators believed Griffin Coal would be a solvent entity after the sales process: [45].

It was also fair as the Administrators were concerned they may be liable long after they had the right to be indemnified out of Griffin Coal’s assets: [46] The Administrators would not enter into the new leases without the protection of the orders.

 

A key stakeholder, Department of Mines and Minerals, was not prejudiced as the: 

  • administrators remained personally liable during the administration period;
  • Minister’s rights in respect of post administration debts were consistent with his/her rights against a solvent entity; and
  • orders would not detract from the rights the Minister would otherwise have had in the event the holder defaulted: [49].

The secured creditors and majority of the Committee of Creditors supported the application.  ASIC did not oppose it.

 

The orders sought related to the limitation of the Administrators’ personal liability and did not otherwise adversely affect Griffin Coal’s liability or prejudice creditors’ interests: [56]. Further, interested parties would have an opportunity to be heard: [57].

 

Outcome

 

The court held that the Administrators were justified in causing Griffin Coal to apply for, maintain, prosecute applications for, and if granted, hold new mining leases and licences. Accordingly, pursuant s 447A of the Corporations Act Part 5.3 was to operate and the Administrators’ liability under s 443A was limited.

 

 

Relevant paragraphs of Ford

[26.010], [26.020], [26.030], [26.110], [26.170], [26.171], [26.180], [26.190], [26.193], [26.200], [26.201], [26.202], [26.203], [26.210], [26.220], [26.230], [26.280], [26.373], [26.410], [26.430], [27.182]

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Ford's Principles of Corporations Law



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