Receivers lose bid to invalidate rivals’ appointment

Over in West Australia a stoush between rival receivers has led to the issuance of an interesting judgment in respect of the extinguishment or not of security via a DoCA.

“It is not correct to describe the possibility of a variation to that Loan Agreement made at a later time as a contingent claim existing at an earlier time.” Justice Natalie Charlesworth.

The judgement in Specialised Welding Australia Pty Ltd v Disselkoen [2024] FCA 1184 comes about in circumstances where the company, Specialised Welding Australia (SWA) was placed into administration in 2022, passed through to deed effectuation in 2023 and had receiver managers appointed in July this year by a former director and secured creditor, swiftly followed by the appointment of rival receivers by another secured creditor in August.

Following the appointment of Hall Chadwick duo Richard Albarran and Brent Kijurina by Blackbird First Mortgage Corporation Pty Ltd (Blackbird) Blackbird filed an interlocutory application seeking declarations that the July 18, 2024 appointments a week earlier of Auxilium Partners’ Bob Jacobs and Andrew Smith as receiver managers of SWA were invalid.

Blackbird argued that the receiver managers’ appointments were invalid because their appointor, former SWA director John Grono had extinguished his security under a loan agreement – subsequently varied by deed – when he voted in favour of the DoCA. Federal Court judge Natalie Charlesworth didn’t see it that way.

“I have considered arguments advanced by Blackbird to the extent that the relevant debt was one that was created by way of a variation to a written instrument first created at an earlier time, and its acknowledgement that Mr Grono would have been protected had he secured a debt that was recorded in a new and different instrument,” the judge began.

“It is difficult to see how the objectives of Pt 5.3A could be promoted by drawing such a fine distinction.

“That is especially so when Pt 5.3A requires that a secured creditor be in a position to make a choice based on facts and circumstance that are knowable at the time, or at least predictable.

“Here the knowable and predictable facts and circumstances were that Mr Grono had performed all of his obligations under the Loan Agreement on its terms as presently then in force between the parties and he had claims against the Company for breach. It was those claims that were extinguished by the DOCA.

“It is not correct to describe the possibility of a variation to that Loan Agreement made at a later time as a contingent claim existing at an earlier time.”

“As at the Relevant Date, there was no claim to be repaid against the relevant debt in accordance with the definition of “claim” under the DOCA, whether contingent or otherwise.

“Accordingly, I conclude that the claim that formed the foundation of the appointment of the Grono Receivers was not affected by the DOCA nor by the creditors’ trust established under it.

“It follows that Blackbird’s amended interlocutory application must be dismissed,” she said.