In the matter of University Co-operative Bookshop Limited (admins apptd) (No 2) [2020] NSWSC 97 (20 February 2020)

Last Updated: 20 February 2020

Supreme Court New South Wales

Case Name:	In the matter of University Co-operative Bookshop Limited (admins apptd) (No 2)
Medium Neutral Citation:	[2020] NSWSC 97
Hearing Date(s):	In Chambers (on the papers)
Date of Orders:	20 February 2020
Decision Date:	20 February 2020
Jurisdiction:	Equity - Corporations List
Before:	Gleeson J
Decision:	Directions given under s 90-15, Insolvency Practice Schedule (Corporations) and orders made under s 447A, Corporations Act 2001 (Cth)
Catchwords:	CORPORATIONS – voluntary administration – co-operative registered in New South Wales under Co-operatives National Law – application of Pt 5.3A Corporations Act 2001 (Cth) to a co-operative – application for directions – Insolvency Practice Schedule (Corporations) s 90-15 – whether relevant provisions of Insolvency Practice Schedule and Insolvency Practice Rules (Corporations) 2016 broadly equivalent to repealed provisions of Pt 5.3A Corporations Act 2001 (Cth) and Corporations Regulations 2001 (Cth) – direction given under s 90-15 CORPORATIONS – voluntary administration – whether operation of Pt 5.3A should be modified in relation to the administration of a co-operative – whether new provisions of Insolvency Practice Schedule and Insolvency Practice Rules should apply to administration of co-operative – order made under Corporations Act s 447A
Legislation Cited:	Co-operatives (Adoption of National Law) Act 2012 (NSW), ss 4, 13, 15, 382 Corporations (Ancillary Provisions) Act 2001 (NSW), Pt 3 Corporations Act 2001 (Cth), ss 436A, 447A, Pt 5.3A, Div 3 - Pt 5.9, Sch 2 Corporations Regulations 2001 (Cth) Insolvency Practice Rules (Corporations) 2016 Insolvency Practice Schedule (Corporations), s 90-15
Cases Cited:	Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270; [2000] HCA 30 Re Ansett Australia Limited and Korda (No 3) [2002] FCA 90; (2002) 115 FCR 409 Re Belmont Sportsmans’ Club Co-operative Ltd [2015] NSWSC 543 Reidy, In the matter of eChoice Ltd (Admin Apptd) [2017] FCA 1582 Re University Co-operative Bookshop Limited (admins apptd) [2019] NSWSC 1898
Category:	Principal judgment
Parties:	Philip Carter, Daniel Walley, Andrew Scott / PricewaterhouseCoopers (Plaintiff / Administrators)
Representation:	Counsel: Solicitors: Herbert Smith Freehills (Administrators)
File Number(s):	2019/395169

JUDGMENT

1. GLEESON J: Application is made by the administrators of the University Co-operative Bookshop Limited (admins apptd) (Co-op) for directions pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), or alternatively, an order pursuant to s 447A(1) of the Corporations Act 2001 (Cth) in relation to a particular aspect of the administration of the Co-op.
2. Messrs Carter, Walley and Scott were appointed as joint and several administrators of the Co-op pursuant to s 436A of the Corporations Act on 24 November 2019. Co-op is a co-operative. According to the affidavit evidence, it is registered in New South Wales.
3. The issue which has arisen in the administration of Co-op is uncertainty as to whether the IPS and Insolvency Practice Rules (Corporations) 2016 (IPR) apply to an external administration of a co-operative registered in New South Wales. The reason for doubt is that, with effect from 2017, certain provisions of the Corporations Act and the Corporations Regulations 2001 (Cth), which were previously applied to co-operatives by the relevant legislation were repealed, and new provisions were introduced in the IPS and IPR, some of which at least, broadly correspond with the provisions that had been repealed and other provisions are new.
4. The scheme of the legislation by which certain parts of the Corporations Act apply to co-operatives is as follows. Section s 4 of the Co-operatives (Adoption of National Law) Act 2012 (NSW), adopts the Co-operatives National Law (as set out in the Appendix to the NSW Co-operatives Act) (CNL) as a law of New South Wales. The CNL when read with Pt 3 of the Corporations (Ancillary Provisions) Act 2001 (NSW), applies certain parts of the Corporations Act to co-operatives, including (subject to certain modifications) Pt 5.3A and Div 3 of Pt 5.9: CNL, ss 13, 15 and 382. See Re Belmont Sportsmans’ Club Co-operative Ltd [2015] NSWSC 543 at [8] (Black J).
5. On 17 December 2019, in addition to extending the time under s 439A(6) for convening the second meeting of creditors of the Co-op, Black J dealt with the administrators’ application for directions under s 90-15 or s 447A relief at a level of principle: Re University Co-operative Bookshop Limited (admins apptd) [2019] NSWSC 1898. It is convenient to reproduce his Honour’s reasoning at [4]-[7]:

[4] The co-operative legislation does not, however, expressly apply provisions taking the form of the IPS, as a schedule to the Corporations Act, or the IPR, to co-operatives. Mr Izzo notes that, while s 19(1)(a) of the Corporations (Ancillary Provisions) Act 2001 (NSW) preserves the operation of regulations made under the applied law, that does not in turn apply to the IPS or the IPR given their different character. However, Mr Izzo points out that cl 6 in Schedule 4 to the CNL addresses the position where part of the law or an Act has been repealed and re-enacted, with or without modifications, and has the consequence that a reference in the CNL to such a provision then includes the provision as re-enacted since the enactment of the reference. Mr Izzo also points out that, again by a somewhat complex process, those provisions extend to provisions included in the Corporations Regulations, which may now have been enacted in corresponding provisions. Mr Izzo rightly points out that this approach has previously been applied in respect of a corresponding issue and a broadly corresponding saving provision in s 10 of the Acts Interpretation Act 1901 (Cth) in Re Wiggins Island Coal Export Terminal Pty Ltd [2018] NSWSC 1342.
[5] It seems to me that that approach preserves the effect of relevant sections, so far as they were previously contained in the Corporations Act or Corporations Regulations and are now contained in the IPS or IPR, although it would not apply a wholly new provision introduced by the IPS or IPR to a co-operative, and recourse would then need to be made to s 447A of the Act.
[6] In these circumstances, Mr Izzo recognises that there are two ways in which that issue could be addressed. If, as I noted above, the provisions that have been introduced in the IPS and the IPR correspond to former provisions which are carried over by saving provisions, then the Court could give a direction, which must itself be made under the IPS, to the effect that the administrators are justified in proceeding on that basis. Given the complexity of those issues, it seems to me that such a direction would plainly be warranted, to allow the administrators to go forward in the administration, without being placed at risk by reason of the complexity of those issues. Second, to the extent that there is any gap arising from that process, because a previously existing provision has been omitted, or a new provision introduced in the IPS and IPR in a manner that does not trigger the operation of saving provisions, then it would also arguably be open to the Court to make orders under s 447A of the Corporations Act, modifying the operation of the Act, so as to apply that provision to a co-operative where Pt 5.3A generally applies to co-operatives. That of course should not be taken where the Act, or the co-operative legislation, already preserves those provisions.
[7] I am satisfied that the Court can and should make a direction of the kind sought by the administrators, to the extent the new provisions in the IPS and IPR correspond to provisions in the former Corporations Act or Corporations Regulations, and would also have power to vary the Act under s 447A in its operation to the Co-op entities, so far as new provisions have been introduced which needed to apply. Before making such a direction, however, it is appropriate that the relevant provisions and their relationship with former provisions, or new provisions which have no such relationship, be identified. The solicitors acting for the administrators have kindly agreed to undertake that task, so that orders may be made underpinned by such identification. Once that task has been undertaken, I would be prepared to make such an order, and I anticipate that another judge sitting in the Duty List or Corporations List, having regard to this judgment, may well take the same view.

6. I agree with that analysis and the approach to the present application identified by Black J.
7. Pursuant to liberty to apply granted by Black J on 17 December 2019, the administrators now seek directions and orders delineating those matters in respect of which a direction is sought under s 90-15 of the IPS and those matters in respect of which relief under s 447A is sought.
8. The further application has been dealt with in chambers on the papers.
9. In support of the application the solicitors for the administrators have prepared a schedule and tables identifying those provisions of the IPS and IPR that the administrators (a) submit are applicable in the administration of Co-op on the basis that they are re-enactments (with or without modifications) of former provisions of the Corporations Act or the Corporations Regulations; and (b) accept are new provisions of the IPS and IPR that are no comparable equivalent with the former provisions of the Corporations Act or the Corporations Regulations. After the Court raised a small number of queries with the administrators’ solicitors concerning some matters of detail in the tables, those solicitors provided updated draft directions and orders reflecting the administrators’ revised position.

Directions under s 90-15(1)

10. Section 90-15(1) of the IPS provides that the Court may make such orders as it thinks in relation to the external administration of the company. That includes where a company is under administration: s 5-15(a), IPS. Among other things, a court can make an order determining any question arising in the external administration of the company: s 90-15(3)(a), IPS.
11. An anterior question which arises is whether the power of the Court to give directions under s 90-15 of the IPS applies in the administration of a co-operative, such as the Co-op. That directs attention to the analysis of Black J extracted above at [5], as to whether s 90-15 of the IPS answers the description of a provision of Pt 5.3A which has been repealed and re-enacted by the IPS. The answer is yes.
12. The provisions of the Corporations Act which were repealed, with effect from 2017, included s 447D which was contained in Pt 5.3A. Section 447D(1) relevantly provided that an administrator of a company under administration may apply to the Court for directions about a matter arising in connection with the performance or exercise of any of the administrator’s functions and powers.
13. In Reidy, In the Matter of eChoice Limited (Admin Apptd) [2017] FCA 1582 Yates J at [27] proceeded on the basis that an application by an administrator for directions about a matter arising in connection with the performance or exercise of an administrator’s functions or powers would fall within the purview of the statutory power in s 90-15 to make an order that determines a question arising in the external administration of a company. His Honour applied the principles which have guided the Court’s jurisdiction under the former s 447D(1) of the Corporations Act referring in particular to the remarks of Goldberg J Re Ansett Australia limited and Korda (No 3) [2002] FCA 90; (2002) 115 FCR 409 at [65]- [66].
14. In my view, Yates J was correct to proceed on this basis. Directions about a matter arising in connection with the performance or exercise of an administrator’s functions or powers would fall within the statutory power to make an order under s 90-15 of the IPS that determines a question arising in the external administration of a company. Accordingly, I proceed on the basis that the power to give directions under s 90-15 is applicable to the administration of the Co-0p.
15. It is well established that the function of an administrator’s application for directions is to give the administrator advice as to the proper course of action to take in the administration. As Goldberg J explained in Re Ansett at [44]:

When liquidators and administrators seek directions from the Court in relation to any decision they have made, or propose to make, or in relation to any conduct they have undertaken, or propose to undertake, they are not seeking to determine rights and liabilities arising out of particular transactions, but are rather seeking protection against claims that they have acted unreasonably or inappropriately or in breach of their duty in making the decision or undertaking the conduct. They can obtain that protection if they make full and fair disclosure of all relevant facts and circumstances to the Court. In Re G B Nathan & Co Pty Ltd (1991) 24 NSWLR 674, McLelland J said at 679-680:

The historical antecedents of s 479(3) ..., the terms of that subsection and the provisions of s 479 as a whole combine to lead to the conclusion that the only proper subject of a liquidator’s application for directions is the manner in which the liquidator should act in carrying out his functions as such, and that the only binding effect of, or arising from, a direction given in pursuance of such an application (other than rendering the liquidator liable to appropriate sanctions if a direction in mandatory or prohibitrary form is disobeyed) is that the liquidator, if he has made full and fair disclosure to the court of the material facts, will be protected from liability for any alleged breach of duty as liquidator to a creditor or contributory or to the company in respect of anything done by him in accordance with the direction.

Modern Australian authority confirms the view that s 479(3) ‘does not enable the court to make binding orders in the nature of judgments’ and that the function of a liquidator’s application for directions ‘is to give him advice as to his proper course of action in the liquidation; it is not to determine the rights and liabilities arising from the company’s transactions before the liquidation’: [cases cited omitted].

16. Here the administrators seek a direction on a legal issue of substance or procedure. That is an appropriate subject matter on which directions may be given under s 90-15: Re Ansett at [65].
17. I accept the administrators’ revised submission that the following provisions of the IPS and IPR are applicable in the administration of Co-op on the basis that they are re-enactments (with or without modifications) of former provisions of the Corporations Act or the Corporations Regulations:
    • (1) (remuneration)
      • (a) Subdivision B of Div 60 of the IPS, other than ss 60-5(2), 60-10(2) and 60-15; and
      • (b) rr 70-35 and 70-45 of the IPR, other than r 70-45(4);
    • (2) (lodgment and audit of administration returns) ss 70-5, 70-6, 70-15 and 70-25 of the IPS;
    • (3) (meetings) Div 75 of the IPS, other than ss 75-20 to 75-40, and Div 75 of the IPR, other than rr 75-120 and 75-135 of the IPR;
    • (4) (committees of inspection) s 80-35 of the IPS and rr 80-5(2) and (7) of the IPR; and
    • (5) (review of external administration) ss 90-15 and 90-20 of the IPS.
18. In Appendix A, I have elaborated the analysis which supports this conclusion, adopting the helpful revised comparative tables prepared by the administrators’ solicitors.
19. A direction will be given under s 90-15 that the administrators are justified in proceeding on the basis that these provisions of the IPS and IPR are applicable in the administration of the Co-op

Relief under s 447A

20. The powers of the Court under s 447A are wide but as the High Court has emphasised are not entirely without limit: Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270; [2000] HCA 30 at [20]. The High Court continued at [20] by observing:

Some particular limitations, suggested in the course of argument, must be examined: first, that s 447A does not permit a court to make an order altering the times fixed by those provisions of Pt 5.3A which contain express provision for variation of the time so fixed; second, that it permits only orders having prospective effect; third, that it does not permit the making of orders affecting vested rights; and, fourth, that it does not apply unless there is a continuing administration (or, presumably, an extant deed of company arrangement).

21. I accept the administrators’ submission that the IPS and IPR contain new provisions which do not have equivalence to the provisions in the Corporations Act or Corporations Regulations which have been repealed with effect from 2017. The new provisions in the IPS and IPR are as follows:
    • (1) (statutory no profit rule) Subdivision E of Div 60 of the IPS and Div 60 of the IPR;
    • (2) (funds handling) Div 65 of the IPS;
    • (3) (information requests)
      • (a) ss 70-10, 70-20, 70-30 to 70-45, 70-55 and 70-65 to 70-90 of the IPS; and
      • (b) rr 70-1 to 70-15, 70-30, 70-55 and 70-60 of the IPR.
    • (4) (committees of inspection) s 80-35 of the IPS, and rr 80-5(2) and (7) of the IPR;
    • (5) (review of external administration) ss 90-15 and 90-20 of the IPS.
    • (6) (directions by creditors) Div 85 of the IPS;
    • (7) (inquiry by Court) ss 90-5, 90-10 and 90-21 of the IPS;
    • (8) (review by registered liquidator) Subdivision C of Div 90 of the IPS and Div 90 of the IPR;
    • (9) (removal of external administrator by creditors) Subdivision D of Div 90 of the IPS; and
    • (10) (other matters) ss 100-5 and 100-6 of the IPS.
22. An order under s 447A modifying the operation of Pt 5.3A in relation to the Co-op is appropriate given that Pt 5.3A generally applies to co-operatives. The modification will address the lacuna that exists in the administration of the Co-op insofar as the new provisions in the IPS and IPR do not otherwise apply to the administration.

Orders

23. The Court gives the following direction and makes the following orders:
    • (1) A direction under s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS) set out in Sch 2 to the Corporations Act 2001 (Cth), that the plaintiffs are justified in proceeding on the basis that the following provisions of the IPS and Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR) are applicable in the administration of University Co-operative Bookshop Limited (Administrators Appointed) ARBN 009 937 160 (Co-op).
      • (a) (remuneration)
        • (i) Subdivision B of Div 60 of the IPS, other than ss 60-5(2), 60-10(2) and 60-15; and
        • (ii) rr 70-35 and 70-45 of the IPR, other than r 70-45(4);
      • (b) (lodgment and audit of administration returns) ss 70-5, 70-6, 70-15 and 70-25 of the IPS;
      • (c) (meetings) Div 75 of the IPS, other than ss 75-20 to 75-40, and Div 75 of the IPR, other than rr 75-120 and 75-135 of the IPR;
      • (d) (committees of inspection) s 80-35 of the IPS and rr 80-5(2) and (7) of the IPR; and
      • (e) (review of external administration) ss 90-15 and 90-20 of the IPS.
    • (2) An order under s 447A of the Corporations Act that Pt 5.3A of the Corporations Act is to operate in relation to the Co-op in such a way so as to apply the following provisions of the IPS and IPR in the administration of the Co-op:
      • (a) (statutory no profit rule) Subdivision E of Div 60 of the IPS and Div 60 of the IPR;
      • (b) (funds handling) Div 65 of the IPS;
      • (c) (information requests)
        • (i) ss 70-10, 70-20, 70-30 to 70-45, 70-55 and 70-65 to 70-90 of the IPS; and
        • (ii) rr 70-1 to 70-15, 70-30, 70-55 and 70-60 of the IPR.
      • (d) (meetings) ss 75-20 to 75-40 of the IPS;
      • (e) (committees of inspection): Div 80 of the IPS, other than s 80-35, and Div 80 of the IPR, other than rr 80-5(2) and (7);
      • (f) (directions by creditors) Div 85 of the IPS;
      • (g) (inquiry by Court) ss 90-5, 90-10 and 90-21 of the IPS;
      • (h) (review by registered liquidator) Subdivision C of Div 90 of the IPS and Div 90 of the IPR;
      • (i) (removal of external administrator by creditors) Subdivision D of Div 90 of the IPS; and
      • (j) (other matters) ss 100-5 and 100-6 of the IPS.
    • (3) Grant liberty to apply to the Corporations Judge in respect of any further directions or orders that the plaintiffs may be advised to seek in connection with the application of the IPS and IPR to the administration of the Co-op.

SCHEDULE A

(1) Remuneration provisions

(a) Matters relating to:

• (i) who can approve an administrator’s remuneration;
• (ii) applications to the Court for approval of remuneration or review of a remuneration determination;
• (iii) factors that must be considered in any court application for review or approval of an administrator’s remuneration; and
• (iv) the preparation of a report in respect of the administrator’s remuneration,

were previously contained in s 449E of the Corporations Act.

(b) Section 449E has now been repealed in full and these matters are now addressed in Div 60 of the IPS and rr 70-35 and 70-45 of the IPR.

(2) Provisions regarding administration returns

(a) Matters relating to:

(i) the lodgment of administrator’s accounts; and
(ii) the audit of administrator’s accounts,

were previously contained in s 438E of the Corporations Act.

(b) Section 438E of the Corporations Act has now been repealed in full. Matters relating to an administrator’s accounts (now referred to as ‘administration returns’) are now addressed in ss 70-5, 70-6, 70-15 and 70-25 of sub-div 70 of the IPS, as contained in the table.

(3) Provisions regarding meetings of creditors

(a) Certain matters relating to:

(i) convening meetings of creditors;

(ii) notifying creditors about meetings of creditors;

(iii) the conduct of meetings of creditors; and

(iv) the obligation of an administrator to specify voidable transactions in his or her s 439A report,

were previously contained in ss 439A(3), 439A(4), 439B and 449C(5) of the Corporations Act and regs 5.3A.02, 5.6.11(2), 5.6.11(3) and 5.6.12-5.6.36A of the Corporations Regulations.

(b) Sections 439A(3), 439A(4), 439B and 449C(5) of the Corporations Act and regs 5.3A.02, 5.6.11(2), 5.6.11(3) and 5.6.12-5.6.36A of the Corporations Regulations have now been repealed in full. These matters are now addressed in Div 75 of the IPS, other than ss 75-20 to 75-40 and Div 75 of the IPR, other than rr 75-120 and 75-135.

(4) Committee of inspection provisions

(a) Matters relating to:

(i) the functions of committees of creditors; and

(ii) the membership of committees of creditors,

were previously contained in ss 436F and 436G of the Corporations Act.

(b) Sections 436F and 436G of the Corporations Act have now been repealed in full. These matters regarding committees of creditors (now referred to as ‘committees of inspection’) are now addressed in s 80-35 of the IPS and rr 80-5(2) and (7) of the IPR.

(5) Review provisions

(a) Matters relating to:

(i) applications by an administrator for directions from the Court in connection with the performance or exercise of an administrator’s functions and powers;

(ii) the Court’s power to make orders in connection with the supervision of an administrator (in respect of the conduct of an administrator and dealing with a vacancy in office);

(iii) removal and replacement of an administrator by the Court; and

(iv) adjustment of remuneration by the Court,

were previously contained in ss 447D, 447E, 449B and 449E(2) of the Corporations Act.

(b) Sections 447D, 447E, 449B and 449E(2) of the Corporations Act have now been repealed in full. These matters are now addressed in ss 90-15 and 90-20 of the IPS.

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Amendments

20 February 2020 - Sch A - rectified numbering

20 February 2020 - [3], line 6 - amend "where" to read "were".

[3], line 7 - amend "appealed" to read "repealed".