Kogan, in the matter of Insitec Pty Ltd (Administrators Appointed) [2024] FCA 672

Kogan, in the matter of Insitec Pty Ltd (Administrators Appointed) [2024] FCA 672

It is appropriate to limit the administrators' personal liability for debts incurred under the facility agreement to the extent of their right of indemnity out of company assets, as such limitation supports continued trading for the benefit of creditors, the agreement is commercially reasonable, there is no prejudice to creditors, and the secured creditor consents.

Parties
First Plaintiffs (administrators): Barry Frederic Kogan and Damien Mark Pasfield; Second Plaintiff: Insitec Pty Ltd (Administrators Appointed); Third Plaintiff: Insitec Group Holdings Pty Ltd (Administrators Appointed); Secured Creditor and Lender (non Party to Application): Gemini NewCo Pty Ltd
Jurisdiction
Australia
Judgment Date
20 June 2024
Procedural Posture
Corporations Proceeding (application Under Corporations Act) / First Instance Judgment
Outcome
Application allowed; orders made limiting administrators’ liability.
Legal Topics
Personal Liability of Administrators, Court Powers Under S 447 a, Facility Agreements During Administration, Creditor Protection
Corporations Law Insolvency Law Personal Liability of Administrators Court Powers Under S 447 a Facility Agreements During Administration Creditor Protection

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Parties

Barry Frederic Kogan and Damien Mark Pasfield

First Plaintiffs (administrators)

Insitec Pty Ltd (Administrators Appointed)

Second Plaintiff

Insitec Group Holdings Pty Ltd (Administrators Appointed)

Third Plaintiff

Gemini NewCo Pty Ltd

Secured Creditor and Lender (non Party to Application)

Procedural Posture

Corporations Proceeding (application Under Corporations Act) / First Instance Judgment

Legal Issues

  1. 1 Whether the Court should limit the personal liability of administrators under a facility agreement during administration
  2. 2 Whether the facility agreement and orders are prejudicial to creditors

Ratio Decidendi

It is appropriate to limit the administrators' personal liability for debts incurred under the facility agreement to the extent of their right of indemnity out of company assets, as such limitation supports continued trading for the benefit of creditors, the agreement is commercially reasonable, there is no prejudice to creditors, and the secured creditor consents.

Court Disposition

Application allowed; orders made limiting administrators’ liability.

Orders

  • Part 5.3A of the Corporations Act to operate as if section 443A(1) provides administrators’ liability under the facility agreement is limited to their right of indemnity under s 443D.
  • Administrators to notify creditors and ASIC of the orders within two business days.