Despite the power to provide directions to Administrators and Liquidators specifically provided in the Corporations Act, one consistent theme arises in the cases – the Courts will not second-guess purely commercial decisions of practitioners. The line between commercial decisions and those where the Courts will give guidance can however be difficult to discern in any particular case. The recent matter of In the matter of AWA Limited (Administrators Appointed) (Receivers and Managers Appointed) ACN 111 674 661 [2014] NSWSC 249 (Re: AWA) continued this approach and discussed when it is appropriate for an Administrator to seek the Court’s approval of a commercial decision in respect of the Administration process – to borrow monies and pay out a secured creditor. Associate, Sarah Drinkwater and Lawyer, Tim Logan discuss the case.


The background facts in relation to RE: AWA are as follows:

  • The Plaintiffs were appointed as Administrators to AWA Limited (AWA) on 25 February 2014.
  • The initial investigations of the Administrators indicated that AWA had significant assets, including current debtors, work in progress and inventory, and, in relation to liabilities, 78 secured creditors registered on the PPSR. The major secured creditor was Moneytech Finance Pty Ltd (Moneytech), which was owed $2.741m secured by a fixed and floating charge.
  • The Administrators considered that the best commercial outcome for creditors was a sale of AWA’s business as a going concern, and a number of parties had expressed an interest.
  • On 28 February 2014, Moneytech appointed Receivers and Managers (Receivers) pursuant to its security.
  • The Receivers were incurring remuneration of $200,000 to $250,000 per week, and proposed to retrench some employees and factor further debtors. The Administrators considered this to not be necessarily in the best interest of the creditors as a whole, and therefore sought funding to pay Moneytech out and retire the Receivers.
  • The Administrators found two potential funders who provided funding proposals, and sought to accept a proposal from Woolley GAL II Plt Limited (Woolley), who was introduced to the Administrators by a director of AWA.

The application

The Administrators sought directions pursuant to section 447D of the Corporations Act 2001 (the Act) that they were justified in entering into a loan agreement with Woolley. The Administrators also sought relief pursuant to section 447A in respect to:

  • Extending the Administrators’ personal liability referred to in section 443A.
  • Indemnifying the Administrators pursuant to section 443D.
  • Providing the Administrators with a lien pursuant to section 443F.

Consideration and decision

The Court considered that the relief sought pursuant to section 447A was not necessary, because the Corporations Amendments (Insolvency) Act 2007 expressly extended the scope of section 443A to include repayment of money borrowed. This legislation became effective subsequent to the case of Re Ansett Australia Limited (No 1) [2005] FCA 1806, in which orders similar to those sought by the Administrators were made. Ultimately the Administrators abandoned this portion of their claim and section 447A relief was not pursued at the hearing.

The Administrators instead sought directions pursuant to section 447D of the Act. When considering whether or not it was appropriate for the Administrators to approach the Court for directions pursuant to section 447D, His Honour commented that “it is insufficient to justify giving such directions that the liquidator or administrator wants reassurance about a commercial decision”, and provided that

  • where there are two competing offers for assets and a liquidator wishes to gain court directions in order to avoid a subsequent allegation that he or she has acted improperly in choosing one over the other.

In this case, there were two competing offers of a loan, one of which was introduced by an associate of AWA. It was therefore possible that creditors might later criticise the Administrators’ haste in

The material provided by the Administrators showed that:

  • It was in the interests of creditors generally that Moneytech be paid out and the Receivers removed, and that same occur expeditiously.
  • The Administrators had taken reasonable steps to source proposals.
  • The creditors had been consulted, and none objected.
  • Moneytech was content with the proposal.
  • The Administrators (and their partners) were willing to assume personal liability, subject to their right of indemnity.

Given the above evidence before the Court, and the Court’s determination that the matter fit within one of the four categories in which directions may be sought, the Court made an order pursuant to section 447D that the Administrators were justified in entering into a loan agreement with Woolley.

Another similar case

Briefly, Warren Jiear, Sarah Drinkwater and Tim Logan conducted a similar application seeking pursuant to sections 447A and 447D, in the case of KASH Aboriginal Corporation ICN 108 (Administrators Appointed) No 2 [2012] FCA 789. 

There, the administrators required funding for the Aboriginal Corporation (Corporation) to make required repairs to property owned by the Corporation in order to secure a lease of the property to the Salvation Army. The premises provided support of indigenous and other persons in respect of alcohol and drug addiction support and was the only facility of that nature for a substantial distance. As such, there was a public benefit in ensuring the facilities were maintained. The Salvation Army would not lease the premises if the repairs were not completed, and the Corporation had no capacity to fund the repairs itself, or secure third party funding. 

Here, the Administrators, through a service company sought to provide the funding to the Corporation. The orders sought by the Administrators were made by the Court, with Collier J providing the following explanation when considering the Court’s ability to make the orders sought:

The real question before the Court is not whether the Court will “allow” the First Applicant Administrators to enter the loan and mortgage agreement they propose – it is whether the Court will approve the administrators so acting without becoming personally liable for the resultant debt as would normally follow the operation of s443A of the Corporations Act. 

In my view it is appropriate to make the orders sought by the Applicants…


The AWA case highlights, on the one hand, the ability of Administrators to borrow funds without the need for court approval, given the 2007 amendments to section 443A. However, where there are competing proposals, and risk associated with accepting one proposal in circumstances where it was referred by an associate of the company, it is appropriate for directions to be sought from the Court pursuant to section 447A.