KordaMentha duo to pay costs in failed dismissal bid

A bid to prevent a creditor salmoning its way up the waterfall has backfired on a pair of former receivers after a court refused their application and ordered them to pay the costs the creditor incurred in opposing them.

“I am unable to accept the submission of ADZ and the Receivers that, unless DGR has paid the secured debt, it has no standing to bring any proceeding for declaratory or other relief with respect to the remedy of subrogation.” Judge Sean Cooper.

Depending on the extent of any indemnification available to them, the May 17, 2024 decision of Queensland Supreme Court Judge Sean Cooper could be particularly galling given the receivers resigned from their roles in January this year.

In judgment delivered last week in DGR Global Ltd v P.T. Limited as trustee of the Armour Energy Security Trust [2024] QSC 90 his honour refused to summarily dismiss an application for subrogation being brought by DGR Global (DGR), which is a shareholder and creditor of Armour Energy Limited (Armour), one of several companies in the Armour Group.

KordaMentha’s Richard Tucker and Rob Hutson were appointed joint receiver managers of the Armour Group on November 10, 2023.

On the same day McGrathNicol’s Mark Holland, Jonathan Henry and Damien Pasfield were appointed voluntary administers (VAs). The trio were subsequently appointed liquidators of the group on January 19, 2024.

Three days later notices confirming Tucker and Hutson had retired as receivers were lodged with ASIC, a retirement that apparently followed the appointment of three EY partners as receivers on January 17.

Despite relinquishing a formal role Tucker and Hutson, along with secured creditor ADZ Energy, headed to court in March.

Specifically they sought to have summarily dismissed DGR’s application for a declaration that, upon payment of a secured debt owed by Armour under a security agreement pertaining to fixed rate secured amortising notes, DGR is entitled to be subrogated to the rights of P.T. Limited and Perpetual Corporate Trust, which are trustees of the Armour Energy Security Trust and the Armour Energy Note Trust respectively.

There’s plenty of detailed meat for lovers of caselaw in this judgment but iNO was unable to elicit a response form Tucker and Hutson in respect of whether they’d been indemnified against the adverse costs order they’ve now been ordered to pay, pending of course any appeal.

Running alongside DGR’s subrogation application is an application for declarations that the receivers’ appointment was invalid because the default was allegedly engineered by those controlling ADZ Energy and related entity Shunkang.

In refusing the application for summary dismissal the judge also made orders for the consolidation of the subrogation and validity proceedings and the joinder of Shunkang and law firm Baker & McKenzie so DGR can pursue a claim for alleged knowing involvement in Shunkang’s alleged misleading or deceptive conduct and unconscionability under Australian Consumer Law (ACL).

iNO makes no suggestion of wrongdoing.