Limiting Administrators’ Liability: In the matter of Cook Cove Pty Limited (Admins apptd) and Boyd Cook Cove Finance Corporation Pty Ltd (Admins apptd) [2009] NSWSC 620
Synopsis
Administrators of Cook Cove Pty Limited (“Cook Cove”) and Boyd Cook Cove Finance Corporation Pty Limited (“Boyd”) sought an order under section 447A(1) of the Corporations Act 2001 (“Act”) limiting their liability under s443A of the Act for post appointment debts to the value of their indemnity against the property of the companies under section 443D of the Act.
Background
Cook Cove and Boyd were special purpose vehicles, incorporated for the purpose of implementing the Cook Cove Trade and Technology Zone Development Project (“Project”). Cook Cove is the developer of the Project, on behalf of the Cooks Cove Development Corporation.
The Project involves several agreements between key stakeholders, to design and build a new commercial business zone located adjacent to the Cooks River and Sydney Airport (“Site”) and redevelop certain recreational community facilities (including the Kogarah Golf Club) on the Site.
The Administrators considered the best strategy for the creditors of the Cook Cove and Boyd would be a restructure of the Project. The proposed restructure involved, as an initial stage, a stakeholder (a) paying all amounts owing to pre-appointment creditors and (b) providing funding for certain Post Appointment work. Once that initial stage was completed the Project could be restructured.
Under the arrangement, the Administrators would determine the nature of any post appointment work and enter into fixed fee contracts with contractors. The stakeholder would then pay the contractors and also provide an indemnity to the Administrators.
The Administrators argued that the proposed indemnity was limited in nature and that it was foreseeable that they may be required to incur a debt, for which they would be personally liable under section 443A(1) of the Act.
The secured creditors consented to the orders sought.
The proposed post appointment work contractors were informed of the Administrators’ intention to make the application. Only one creditor voiced an objection, but did not appear at the hearing.
The Court noted that
- Contractors doing post appointment work would not be prejudiced by the proposed orders. They were free to decline to contract with the Administrators.
- The orders sought did not limit the Administrators’ liability in respect of all contracts but only those in respect of the so called ‘Fixed Fee Contracts’.
Austin J made the orders as requested thereby limiting the Administrators’ liability to the value of the statutory indemnity.
Implications
Unlike previous decisions this application went beyond liability for post appointment funding. However it cannot be said to be a precedent which will lead to a flood of applications to avoid personal liability. It does, however, highlight the width and flexibility of section 447(1) of the Act.
