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Re Quirky Mama Productions Pty Ltd[2021] QSC 345

Re Quirky Mama Productions Pty Ltd[2021] QSC 345

SUPREME COURT OF QUEENSLAND

CITATION:

Re Quirky Mama Productions Pty Ltd [2021] QSC 345

PARTIES:

IN THE MATTER OF QUIRKY MAMA PRODUCTIONS PTY LTD ACN 624 109 774 (SUBJECT TO A DEED OF COMPANY ARRANGEMENT)

IMMORTAL IMAGINATION MOTION PICTURES LIMITED (NZ COMPANY NUMBER 6751693)

(applicant)

v

TERRENCE JOHN ROSE

(first respondent)

DAVID MICHAEL STIMPSON

(second respondent)

STEPHEN DIXON

(third respondent)

FILE NO:

BS No 9775 of 2020

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court of Victoria (transferred by consent to the Supreme Court of Queensland pursuant to s 1337H of the Corporations Act 2001 (Cth))

DELIVERED ON:

17 December 2021

DELIVERED AT:

Brisbane

HEARING DATE:

3 November 2021

JUDGE:

Bradley J

ORDER:

The application is dismissed.

CATCHWORDS:

CORPORATIONS – VOLUNTARY ADMINISTRATION – ADMINISTRATOR – FUNCTIONS, POWERS, RIGHTS AND LIABILITIES GENERALLY – where Quirky Mama Productions Pty Ltd (QMP) was a special purpose vehicle incorporated for the production of a feature film – where QMP entered into a written agreement with contractor Green Smoke Digital Pty Ltd (GSD) for the supply of post-production services in respect of the film – where GSD sub-contracted visual effects services to the applicant – where QMP and the applicant subsequently entered into a written agreement for the provision of visual effects services for the film – where QMP was placed into voluntary administration and the third respondent was appointed voluntary administrator – where the third respondent was removed as voluntary administrator and the first and second respondents were appointed administrators – where QMP entered into a deed of company arrangement (DOCA) and the first and second respondents were appointed deed administrators – where the administrators did not engage the applicant to do any work or incur any debt during the administration periods – whether the respondents, in the performance or exercise of any of their functions and powers as the various administrators of QMP, incurred any debt to the applicant for services rendered

Corporations Act 2001 (Cth), s 419, s 436C, s 436E(4), s 439A(6), s 443A, s 443C, s 444B, s 444D(1), s 444E(3)(c),  s 566, s 1337H

AGL Victoria Pty Ltd v Lockwood (2003) 10 VR 596, cited

ASIC v Edwards [2005] 220 ALR 148, cited

Hawkins v Bank of China (1992) 26 NSWLR 562, considered

McMahon’s (Transport) Pty Ltd v Ebbage [1998] 1 Qd R 185, cited

Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1, cited

Shepherd v ANZ Banking Corporation Ltd (1996) 20 ACSR 81, considered

Standard Chartered Bank of Australia v Antico [Nos 1 & 2] (1995) 38 NSWLR 290, cited

Strawbridge; in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) (2020) 144 ACSR 347, cited

COUNSEL:

J Twigg QC, with I Hristovski, for the applicant

C J Conway for the respondents

SOLICITORS:

Kahns Lawyers for the applicant

Mills Oakley for the respondents

  1. [1]
    This is a decision on whether the respondents, in their various capacities as administrators or deed administrators, are liable for certain debts claimed by the applicant (IIMP).  The debts relate to a feature film produced by Quirky Mama Productions Pty Ltd (QMP) under the title “Occupation Rainfall” (the Film). 

Background facts

  1. [2]
    QMP was incorporated on 30 January 2018.  The two directors of QMP were, and remain, Carmel Imrie and Carly Imrie.  They are related, as mother and daughter.  QMP’s business was the completion of all activities for the making of the Film.  In that sense, it was a special purpose vehicle. 
  1. [3]
    Another company, Occupation Two Pty Ltd (O2) was incorporated on 30 January 2018.  It had the same directors as QMP.  O2 was a film production company. It raised funds through investment loans for the purpose of funding the production of the Film.  O2 loaned the funds it raised to QMP, which used those funds to produce the Film. 
  2. [4]
    The Film was to be a sequel to the feature film “Occupation” produced in 2018 by another company, Sparkefilms Pty Ltd.  Luke Sparke was engaged as the director of the Film.  He had been the director of “Occupation”.  The director of a motion picture film is the lead controller of all creative aspects of the film, including the interpretation of the script or screenplay, the selection of actors, overseeing the production process including filming, the “post-production” work such as the use of sound, music and special effects, the editing of the filmed footage, and monitoring the budget for the film.  Mr Sparke was also the writer, executive producer, and editor of the Film.  It appears he was an employee of QMP. 
  1. [5]
    Mr Sparke was not appointed a director of QMP.  IIMP contended that Mr Sparke was a “shadow director” of QMP.  In their report to creditors of QMP, dated 5 November 2020, the first and second respondents (the Administrators) noted that Mr Sparke “may be considered a shadow director”.  He is not a party to this proceeding.  It is not necessary to determine whether he was a shadow director.  I make no finding in that respect.   

PPS agreement with GSD

  1. [6]
    On 17 April 2019, QMP and Green Smoke Digital Pty Ltd (GSD) entered into a written agreement (the PPS agreement).  By clause 2.1 of the PPS agreement, QMP and GSD agreed that QMP engaged GSD, and GSD accepted its appointment as an independent contractor to supply “the Services”, which were “all services relating to the supply of post production facilities in respect of the Film to be provided by [GSD]” under the PPS agreement.  The balance of clause 2 was in these terms:

2.2 Non-exclusivity

The Parties acknowledge that this Agreement does not establish any exclusive dealings between the Parties and either Party is free to deal with third parties in respect of the kinds of services contemplated by this Agreement

2.3 Subcontracting

[QMP] acknowledges that [GSD] may sub-contract its rights or obligations under this Agreement to third parties in the course of supplying the Services, but [GSD] accepts that it will at all times be responsible for all actions or omissions of those contractors.

2.4 No obligation for usage

Notwithstanding anything to the contrary contained in this Agreement, [QMP] is not obliged to actually use the Services or Deliverables nor to include any Services or any Deliverables in the Film.”

  1. [7]
    Alex Becconsall is a director of GSD.  

VFX agreement with the applicant

  1. [8]
    IIMP is a company.  It was registered on 6 March 2019 pursuant to the Companies Act 1983 (NZ).  Tobias Wolters is its sole director and shareholder.  In his affidavit affirmed 14 July 2021, Mr Wolters refers to the applicant as “my company”.
  2. [9]
    Under an “Agreement for the provision of Visual Effects services” dated 11 February 2020, Mr Wolters was a contractor providing services to GSD in the form of “the necessary tasks to complete VFX shots” for the Film.  Under the agreement, GSD was to pay Mr Wolters at an hourly rate for this work.  The compensation clause also provided:

“[GSD] will pay compensation to [Mr Wolters] for the services rendered based on the contractors agreed rate.  Payment shall be calculated based on the number of hours committed to the project and final payment provided upon the projects [sic] completion and delivery.  [GSD] may choose to make part payments to [Mr Wolters] at any time, however there will be no minimum amount required until the final payment takes place at which time any outstanding amounts owing will be paid. A bonus payment will also be made to the sum of 10% of the total cost of hours worked upon final payment.  Compensation as stated in this Agreement will be made as per the dates noted in the ‘Termination’ clause listed below.  Except otherwise stated in this Agreement, all monetary amounts referred to in this Agreement are in USD (American Dollars).”

  1. [10]
    The ‘Termination’ clause provided:

“This Agreement shall commence on the Effective Date and shall terminate on Project Delivery or 31/12/2020 which ever comes first.”

  1. [11]
    Sometime before 13 April 2020, Mr Wolters had been provided with a letter from the firm Mills Oakley dated 18 March 2020, in these terms:

“To Whom It May Concern

OCCUPATION II: RAINFALL – FEATURE FILM

We are the legal representatives for the producers of the above film production and have been instructed to prepare this letter with a view to our clients circulating it to you because you are either a supplier or vendor to the production or an investor in the production:

Our instructions, which we have no reason to doubt, are that:

  1. The film is presently in post and approximately 80% complete and remains on track to be duly completed mid year this year.
  2. Work on completing the film is continuing to be done on a daily basis and being funded by ‘family and friends’ investors on the film.
  3. Pre-sales of more than AUD$1M have been secured subject to completion of the film.
  4. The current timing of the completion of film and where it is at just now render it likely to be the first Australian film released after coronavirus restrictions ease later this year, when films in post production are expected to be very much in demand.
  5. The film’s distributor has been booking further screens in addition to the currently guaranteed 100 cinemas based on the most recent new footage and trailers for the film.
  6. The tax rebate for Qualifying Australian Production Expenditure is expected to exceed AUD$5M, in addition to payroll rebates and film grant proceeds, and the rebate’s expected timing is 3rd quarter of this year (subject to any COVIS-19 related disruptions).
  7. We will be contacting the Australian Taxation Office at the appropriate time and confirming that we are to reserve the whole of that rebate into our trust account, to then be disbursed as required. 
  8. The intention is that all sums remaining owing to investors and others will be paid on the same day.”
  1. [12]
    On 13 April 2020, Mr Wolters began a course of email communications with Mr Becconsall of GSD about his concern that he needed “to get a proper agreement done”.  As Mr Wolters put it, he was “taking quite a risk by having some of my team work for me on credit basically.”  Mr Wolters sought an agreement between QMP and IIMP, including provisions about “credits” in the opening or end titles of the Film for Mr Wolters and IIMP. 
  2. [13]
    By 17 April 2020, Carly Imrie of QMP had sent Mr Wolters a draft “Visual Services Production Services Agreement” between QMP and IIMP. 
  3. [14]
    On 24 April 2020, QMP and IIMP entered into a written agreement (the VFX agreement) for IIMP to provide visual effects for the Film to QMP.  The VFX agreement is dated 17 April 2020, which is its “effective date”. 
  4. [15]
    By clause 1.2, titled “DESIGNATION OF PRODUCER’S REPRESENTATIVES”, QMP and IIMP agreed:

“[QMP] designates Luke Sparke as the Business Representative for the Picture in granting approval in accordance with the terms and provisions in Paragraph 3.1 of the Standard Terms.  [QMP] designates Luke Sparke (Director) and Alex Becconsall of [GSD] as the Creative Representative(s) for the Picture to exercise creative approval rights granted to [QMP] in accordance with the terms and provisions of Paragraph 3.2 of the Standard Terms.”

  1. [16]
    By clause 2 of the VFX agreement, titled “SERVICES”, QMP and IIMP agreed that:

“IIMP shall render all production services as are customarily rendered in connection with visual effects (the final images embodying such visual effects being referred to hereinafter as the “Work”) provided for first-class feature-length theatrical motion pictures in the motion picture industry, as, when and where reasonably required by [QMP], and shall comply with all reasonable directions, requests, rules and regulations of [QMP] in connection therewith”.

  1. [17]
    By clause 3, titled “COMPENSATION”, they also agreed that:

“QMP will pay compensation to IIMP for the services rendered based on the contractors agreed rate.  Payment shall be calculated based on the number of hours committed to the project and final payment provided upon the pictures completion and delivery.  QMP may choose to make part payments to IIMP at any time, however there will be no minimum amount required until the final payment takes place at which time any outstanding amounts owing will be paid. Agreement will be made as per the dates noted in the ‘Termination’ clause listed below.  Except otherwise stated in this Agreement, all monetary amounts referred to in this Agreement are in USD (American Dollars).

Further remuneration: IIMP shall receive a 2% Net Producer Profit share in the production back end remuneration after financiers and distributors have recouped.  Reinvested Compensation due will be paid in second position after [GSD] from dollars received from income by QMP generated from tax rebates and sales upon completion and delivery of film as per Exhibit A; Recoupment Schedule.”

  1. [18]
    Exhibit A Recoupment Schedule appears at the end of the VFX agreement.  It is as follows:

“First- [GSD]

Second- IIMP

Third- Post Sound/Composition

Fourth- Existing Vendors

Fifth- Investors

Sixth- Producers

We expect the First-Fourth persons will be paid out in the same day.”

  1. [19]
    By clause 5 of the VFX agreement, titled “CREDIT”, QMP and IIMP also agreed on the specific “credit” to be accorded in the main titles or the end titles to the Film to Tobias Wolters of IIMP, as “Visual Effects Supervisor” and as “Co-Producer”.  
  2. [20]
    By clause 6, titled “ENTIRE AGREEMENT; STANDARD TERMS”, IIMP and QMP agreed that:

“All other terms and conditions of IIMP’s engagement and services hereunder and the Work (…) are set forth in the Standard Terms and the exhibits and riders attached hereto and incorporated herein by this reference.  This Agreement (including the Standard Terms and the exhibits and riders) constitutes the entire understanding of the parties hereto and replaces any and all former agreements, understandings and representations relating in any way to the subject matter hereof.  No modification, alteration, or amendment of this Agreement shall be valid or binding unless it is in writing and signed by the party to be charged with such modification, alteration or amendment.”

  1. [21]
    The “Standard Terms” in the VFX agreement included the following:

3.1 BUDGET/SHOT COST APPROVALS. The Business Representative designated in Section 1.3 of the Underlying Agreement is hereby authorised to exercise the approval rights over all budgetary matters arising hereunder, including but not limited to shot sequence costs.  The Business Representative will be required to render approvals hereunder in writing on behalf of [QMP] within two (2) business days (or such shorter time period as may be required due to the exigencies of production) after submission of cost estimates or other budgetary matters by IIMP to the Creative Representative.

3.2 CREATIVE APPROVALS. The Creative Representative is hereby authorised by [QMP] to exercise the creative approval rights granted to [QMP] hereunder. 

11.2 TERMINATION. [QMP] shall have the right to terminate This Agreement at any time, with or without cause, by giving thirty (30) days prior written notice to IIMP.  In the event that [QMP] terminates this Agreement, the parties shall be relieved of any further obligations hereunder, provided that [QMP] pays to IIMP any part of the Estimated Fee actually incurred by IIMP up until the effective date of termination (i.e. non refundable expenditures on and/or commitments to personnel, facilities, materials and equipment relating to the production of the Work), prorated as applicable, provided IIMP delivers documentation of such costs and expenses to [QMP], at [QMP’s] request. 

11.3 EFFECTS IF SUSPENSION OR TERMINATION

(ii)  Upon termination of this Agreement pursuant to Paragraph 11.2 above, (x) IIMP shall be relieved of all further obligations hereunder, except the obligation to deliver to [QMP] all elements of the Producer Deliverables supplied by [QMP] to IIMP and all in process and/or completed elements of the Work paid for by [QMP] prior to the date of such termination; and (y) [QMP] shall be relieved of all further obligations hereunder, except as provided in Paragraph 11.2 above.

(iii)  Either party’s sole remedy with respect to any breach or alleged breach of this Agreement by the other party shall be the recovery of money damages, if any, and the rights in the Work herein granted by IIMP to [QMP] shall not terminate by reason of such breach.  In no event may either party seek to obtain recission, injunctive and/or other equitable relief by reason of any breach of the other party’s obligations hereunder.”

Voluntary administration

  1. [22]
    On 7 August 2020, the third respondent (Mr Dixon) was appointed as voluntary administrator of QMP.[1]  Between 7 August and 2 December 2020, QMP was in voluntary administration.[2]
  2. [23]
    Between 7 and 19 August 2020, Mr Dixon and his staff had no contact with IIMP or any representative of IIMP.  Nor, on behalf of QMP, did he or they authorise anyone, including the directors of QMP, Mr Sparke, GSD, or Mr Becconsall, to incur any debt with IIMP.
  3. [24]
    On 19 August 2020, at the first meeting of creditors convened by Mr Dixon, the creditors removed Mr Dixon as administrator and appointed the Administrators as administrators of QMP.[3]  The creditors also resolved to appoint a committee of inspection for QMP and O2 (COI). 
  4. [25]
    Brooke Darlington, a senior manager employed by the Administrators gave some evidence of the situation of QMP when the Administrators were appointed.  It appears to be common ground, based on Ms Darlington’s evidence, that the Film (or the bundle of rights comprising the partially completed Film) was QMP’s main asset and only source of income for distribution to creditors, that the Film was not completed, and that the visual effects supplier GSD would need to be involved in completing the Film. 
  5. [26]
    The Administrators and their staff worked with the directors of QMP and with Alex Becconsall of GSD to ascertain the costs to complete the Film. 
  6. [27]
    On 20 August 2020, Ms Darlington met with the directors of QMP.  Ms Darlington discussed with Carmel and Carly Imrie the costs to complete the Film.  In those discussions became apparent to Ms Darlington that GSD was the supplier to QPM of visual special effects for the Film.  The discussions proceeded to identify the costs to complete the Film, other than the costs of completing the visual special effects for the Film (the VFX costs).
  7. [28]
    On 20 August 2020, Ms Darlington received access to many documents via “Dropbox”.  It is common ground that these documents included the VFX agreement.  It does not appear Ms Darlington specifically identified or reviewed the VFX agreement.
  8. [29]
    On 21 August 2020, Mr Becconsall sent an email to the Administrators attaching a schedule of the visual effects work necessary to complete the Film.  It referred to work sent by GSD to the applicant and to other visual effects contractors (named as MojoFX, Creature Work, Toby [Wolters], Cause+FX, WWFX, Digital Frontier, Creative Cupids, Pedro, and Rodeo Visual Effects Company).  This information was the subject of review and enquiries made by the Administrators and their staff of the directors of QMP and of Mr Becconsall over the following weeks.  In the course of those enquiries, Ms Darlington pressed Mr Becconsall to produce a statement of the total costs incurred as at 6 August 2020 for visual effects for the Film, less payments received by GSD for those costs, the estimated VFX costs, and a copy of the VFX agreement (or agreements) between QMP and GSD for the Film.
  9. [30]
    On 24 August 2020, the Administrators sought more information from Mr Becconsall of GSD about his estimate of the VFX costs. 
  10. [31]
    On 26 August 2020, Ms Darlington discussed the estimated costs to complete the Film and the VFX costs with the directors of QMP.
  11. [32]
    On 27 August 2020, the Administrators discussed the costs to complete the Film, including the VFX costs, with the COI.  Mr Becconsall of GSD was a member of the COI and attending the meeting.
  12. [33]
    On 31 August 2020, Mr Becconsall sent Ms Darlington an email, attaching a statement about the visual effects work carried out by GSD on the Film and a copy of the PPS agreement.  The statement recorded the following:

Total expense incurred up to and including 18/08/20:

$13,142,000

Less $275,000 costs paid to date

$12,867,000

Expected expenditure remaining until project completion

$7,075,000

  1. [34]
    It also included the following:

“This reflects a total combined expenditure of $20,217,000 AUD which is an approximate total cost for the VFX work to be carried out for the project.

Though it is hard to quantify exactly how much

Furthermore, there will be company running costs

It is my belief that this is the best way for us to proceed towards completing the film.  We have been able to continue our extensive workflow, and require only small, regular payments in order to keep our digital workforce running smoothly.  There is an excellent team working on this film, and everybody is excited about what the end product will deliver.”

  1. [35]
    The reviews and the responses to the enquiries made by the Administrators and their staff did not reveal that anyone on behalf of the Administrators had engaged IIMP to do any work for the administrators on or since 7 August 2020 or that IIMP was doing any work as a direct contractor to QMP under any agreement in place before 7 August 2020, including the VFX agreement.  On the contrary, the information provided to the Administrators and their staff was to the effect that IIMP was among several visual effects contractors engaged by GSD to work on visual effects for the Film. 
  2. [36]
    On 27 August 2020, the COI met for the first time and were advised that for QMP to apply for a refundable tax offset from Screen Australia (equivalent to 40% of the cost of producing the Film), it would be necessary to complete the Film to a standard that allowed it to be shown in a cinema and released at Monster Fest on 30 October 2020.  The COI were also informed that they would be sent a budget to complete the Film for review and comment. 
  3. [37]
    On 31 August 2020, Ms Darlington sent an email to the members of the COI.  It attached a confidentiality deed for each member of the COI to execute.  It explained that on receipt of an executed confidentiality deed, each member of the COI would receive a copy of a proposed funding agreement between the Administrators and Occupation Universe Pty Ltd (OU) to fund the cost to complete the Film and a summary of the estimated costs to complete the Film.
  4. [38]
    On 1 September 2020, the Administrators provided the COI members with a copy of the proposed funding agreement and the summary estimate of costs to complete the Film.  The same day the second meeting of the COI was held.  All members of the COI voted in favour of the Administrators entering into the proposed funding agreement with OU.  
  5. [39]
    On 1 September 2020, this court made orders extending the time for a second meeting of creditors, requiring it to be held on or before 13 November 2020.[4]
  6. [40]
    It appears that in the afternoon of 1 September 2020, the Administrators and Ms Carly Imrie executed the funding agreement with OU. Through Ms Darlington, the Administrators controlled the funding available under the funding agreement to meet the agreed limited costs of GSD on work to complete the visual effects work on the Film, by GSD and its contractors.  So far as Ms Darlington and the Administrators were aware, IIMP was a contractor engaged by GSD. 
  7. [41]
    On 2 September 2020, the Administrators received a revised estimate of the costs to complete the Film (excluding the VFX costs) from Ms Imrie of QMP.
  8. [42]
    On 2 September 2020, the Administrators implemented a practice that:
    1. (a)
      The directors of QMP had to seek the approval of the Administrators each week to incur any costs to complete the Film by submitting a spreadsheet of those costs and copies of any invoices to be paid;
    2. (b)
      The Administrators would consider the spreadsheet and invoices and provide written authority to incur and pay any costs to complete;
    3. (c)
      Once authorised, the directors of QMP would deposit sufficient funds into the administration account to enable the Administrators to pay the authorised costs and invoices.
  9. [43]
    On 15 September 2020, Ms Imrie of QMP sent the Administrators a copy of all GSD’s invoices for work prior to 7 August 2020.
  10. [44]
    On 17 September 2020, the Administrators advise GSD that:
    1. (a)
      GSD was an unsecured creditor of QMP;
    2. (b)
      It was in the best interests of creditors to move forward with GSD to complete the Film, however, this was subject to the Administrators reaching an agreement with GSD in relation to the VFX costs; and
    3. (c)
      Noting that the Administrators had not incurred the VFX costs.
  11. [45]
    In an email sent by Mr Becconsall to Ms Darlington on 22 September 2020, Mr Becconsall advised that:

“Currently there are over 350 people across multiple teams providing work for Occupation Rainfall, on behalf of Green Smoke Digital.”

  1. [46]
    On 24 September 2020, the COI met.  The Administrators advised the COI that:
    1. (a)
      no agreement had been reached with GSD regarding the VFX costs;
    2. (b)
      The Administrators had requested further details from GSD to substantiate the VFX costs; and
    3. (c)
      GSD had made a proposal regarding payment of the VFX costs.
  2. [47]
    The COI did not accept the GSD proposal. 
  3. [48]
    On 25 September 2020, the Administrators sent the COI with the terms of the GSD proposal.
  4. [49]
    On 28 September 2020, the Administrators confirmed to the COI that they had been unable to get the support of the COI in relation to GSD’s proposal, and that GSD had not indicated whether it would continue to complete the VFX work on the Film. 
  5. [50]
    On 6 October 2020, the directors of QMP confirmed to the Administrators that they intended to put forward a proposal for a deed of company arrangement.
  6. [51]
    On 14 October 2020, the QMP directors advised the Administrators of revisions to their intended proposal for a DOCA.
  7. [52]
    In or about October 2020, the Film was substantially completed.  On or about 30 October 2020, the Film was released on a limited basis at Monster Fest, an annual genre film festival. 
  8. [53]
    The Administrators and their staff had no contact with IIMP or any representative of it.  Nor, on behalf of QMP, did they authorise anyone, including the directors of QMP, Mr Sparke, GSD, or Mr Becconsall, to incur any debt with IIMP. 

DOCA

  1. [54]
    On 5 November 2020, the Administrators reported to creditors presenting a deed of company arrangement for the creditor’s consideration. 
  2. [55]
    On 13 November 2020, at the second meeting of creditors, convened by the Administrators, the creditors voted in favour of a resolution that QMP enter into a deed of company arrangement.[5]  It was to be executed by 4 December 2020.[6]
  3. [56]
    On 3 December 2020, the Administrators, QMP, O2, the directors of QMP and O2, GSD and nine secured creditors of QMP executed a deed of company arrangement (the DOCA).[7]  It was challenged by a creditor.  On 3 December 2020, the court declared the DOCA was valid and compliant with part 5.3A of the Act. 
  4. [57]
    The DOCA took effect from 4 December 2020.  It appointed the Administrators as the deed administrators.  It operates for 36 months or until the entitlements under it are repaid to the participating creditors.  The DOCA binds all creditors of QMP, so far as concerns claims arising on or before the date of the voluntary administration, i.e., 7 August 2020.[8]
  5. [58]
    The DOCA compromised all “Claims” against QMP existing at 7 August 2020. 

Events since the DOCA was executed

  1. [59]
    Mr Wolters deposed that, on or about 7 December 2020, he became aware that QMP had been in administration and that a DOCA had been in place. 
  2. [60]
    According to Mr Wolters, when he became aware QMP was under external administration, he sent an email to the directors of QMP and to Mr Becconsall of GSD “enquiring about the status of the payments that were outstanding” to IIMP. In fact, the email, sent to Mr Becconsall, Ms Carly Imrie and Ms Carmel Imrie, was in these terms:

“Hi Alex, Carly and Imrie,

I am sorry to hear that there is a delay in payments – sadly that is putting some of my artists in existential problems – and I am sure that you are dealing with lots of urgent problems at the same time right now.

As you wished, we have agreed on sending you the finals without watermarks.  However, please note that the rights of use for our shots can only be transferred once we are paid in full.

Best,

Toby”

  1. [61]
    It was not until 10 December 2020 that Mr Wolters raised the topic of QMP being in administration in an email to Ms Carly Imrie, copied to Mr Becconsall of GSD and Ms Carmel Imrie.  In the final paragraph of the email, Mr Wolters wrote:

“I also do not wish this to affect our future working relationship in the slightest.  I would like to openly ask you about the external administration status of Quirky Mama and if there is any reason for concern?”

  1. [62]
    On 10 December 2020, Ms Carly Imrie replied, copying the email to Mr Becconsall and Ms Carmel Imrie, advising:

“The admin is now over as it was a necessary thing for us to enter temporarily to protect the film and all creditors (including you) involved.  You are still part of the [GSD] and VFX costs to pay as per the payment schedule on your contract.”

  1. [63]
    On 15 December 2020, IIMP issued an invoice to GSD (Invoice 42).  Invoice 42 was issued at the request of Mr Becconsall and Mr Sparke. Invoice 42 attached many pages identifying “VFX Services” but did not indicate the date or dates on which any of this work was done.  The same day, Mr Wolter and IIMP issued an identical invoice to QMP, care of its directors, for USD$701,538.22 (Invoice 44).  According to IIMP’s written submissions, these otherwise identical invoices “included VFX work delivered pre the VFX Period and during the VA Period.” 
  2. [64]
    According to Mr Wolters, work by IIMP on the visual effects for the Film had been authorised by Mr Becconsall of GSD and by Mr Sparke during the voluntary administration period “in the normal way”. 
  3. [65]
    The copies of emails sent and received by Mr Wolters during this period conform to a general pattern.  He sent electronic files containing competed visual effects work to Mr Becconsall of GSD.  He received replies from Mr Becconsall acknowledging receipt of the emails and attachments.  He also received emails from Mr Sparke praising the work on the visual effects and providing other comments on the work and on work yet to be completed.  What might best be described as “feedback” from Mr Sparke was creative approval from a film director of creative work proposed to be included in the Film that was submitted to GSD by Mr Wolters or IIMP.      The emails do not include instances of IIMP submitting any cost estimates or other budgetary matters to Mr Becconsall or Mr Sparke for approval or of Mr Becconsall or Mr Sparke exercising approval rights over any budgetary matters, including any shot sequence costs. 
  4. [66]
    On 15 December 2020, Mr Sparke sent Mr Wolters an email suggesting:

“I think it would be best for you to talk to Alex [Becconsall] again first.

We ran through this all today and the best thing forward would be:

Update a contract with [GSD] instead of the film.  So you are secured with all the money [GSD] is getting.”

  1. [67]
    On 10 January 2021, Mr Wolters of IIMP first contacted the Administrators, by email to the first respondent, Mr Rose.  In the email, written as the representative of IIMP, Mr Wolters advised:

“We were contracted by [QMP] and its representatives Carly and Carmel Imrie to produce, design, and supervise the Visual Effects for their film “Occupation Rainfall” in April 2020.”

  1. [68]
    On 29 January 2021, IIMP issued another invoice (Invoice 45) to QMP for USD$737,981.50.  According to IIMP’s written submissions, Invoice 45 included the amount outstanding from Invoice 44 and was “for all of the work undertaken by IIMP in period since invoice 44 was issued.” This suggests that IIMP invoiced QMP for USD$36,443.28 for work performed since about 15 December 2020. 
  2. [69]
    In January 2021, the Film was completed and on 29 January 2021 it was released to cinemas. 

History of the proceeding

  1. [70]
    On 14 July 2021, IIMP commenced this proceeding in the Supreme Court of Victoria.[9]  The respondents applied to have the proceeding transferred to this court.[10]
  2. [71]
    On 20 August 2021, the Supreme Court of Victoria made orders, by consent, with the effect that this proceeding was to be transferred to this Court.  The transfer occurred on 25 August 2021. 
  3. [72]
    By 5 October 2021, QMP and O2 had received a determination and a certificate in relation to the Producer Offset,[11] and requested a “statement of reasons” for the determination.[12]
  4. [73]
    On 6 October 2021, Burns J made an order on an application filed by IIMP filed on 29 September 2021. His Honour directed IIMP to file Points of Claim and the respondents to file a Response to the Points of Claim. The parties were also directed to file any further affidavit material on which they intended to rely, and the matter was set down for hearing for one day on 4 November 2021.
  5. [74]
    On 4 November 2021, the proceeding was heard.

The issue

  1. [75]
    It is common ground that the liability of the Administrators, if any, arises under s 443A, which is in these terms:

443A General debts

  1. (1)
    The administrator of a company under administration is liable for debts he or she incurs, in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator, for:
  1. (a)
    services rendered; or
  1. (b)
    goods bought; or
  1. (c)
    property hired, leased, used or occupied, including property consisting of goods that is subject to a lease that gives rise to a PPSA security interest in the goods; or
  1. (d)
    the repayment of money borrowed; or
  1. (e)
    interest in respect of money borrowed; or
  1. (f)
    borrowing costs.
  1. (2)
    Subsection (1) has effect despite any agreement to the contrary, but without prejudice to the administrator’s rights against the company or anyone else.”
  1. [76]
    No party raised an issue about payment for the use or occupation of property or any liability to the Commissioner of Taxation.[13]  So, relevantly, each of the respondents, as an administrator of QMP, is not liable for QMP’s debts except under s 443A.[14] 
  2. [77]
    The issues in the proceeding are whether Mr Dixon in the period from 7 to 19 August 2020, in the performance or exercise of any of his functions and powers as administrator or the Administrators between 19 August and 3 December 2020 in the performance or exercise of any of their functions and powers as administrators or between 3 December 2020 and 29 January 2021 in the performance or exercise of any of their functions and powers as deed administrator, incurred any debt to IIMP for services rendered. 
  3. [78]
    In its written submissions, IIMP relied on the decision in Hawkins v Bank of China (1992) 26 NSWLR 562 (Hawkins) concerning the meaning of “incurs a debt” in section 566, and the approval of that decision in Shepherd v ANZ Banking Corporation Ltd (1996) 20 ACSR 81 (Shepherd), and in Standard Chartered Bank of Australia v Antico [Nos 1 & 2] (1995) 38 NSWLR 290 (Standard Chartered).  IIMP relied on the decision of the Court of Appeal in McMahon’s (Transport) Pty Ltd v Ebbage [1998] 1 Qd R 185 (Ebbage) about when a receiver incurs a debt within the meaning in the former statutory equivalent to s 419, and the decision in AGL Victoria Pty Ltd v Lockwood (2003) 10 VR 596 (Lockwood), which followed Ebbage.  IIMP also cited the decision in ASIC v Edwards [2005] 220 ALR 148 (Edwards), where the approach in Hawkins was applied to a quantum meruit claim, and Strawbridge; in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) (2020) 144 ACSR 347 (Virgin), where it was applied to an administrator’s liability under s 443A for a contingent debt imposed by a statute.[15] 
  4. [79]
    In accordance with the decisions in Hawkins, Shepherd and Virgin, QMP incurred the liability to IIMP, as a contingent debt, when it entered into the VFX agreement “by which it subjected itself to a conditional but unavoidable obligation to pay a sum of money at a future time”,[16] provided QMP “had no opportunity … to avoid the obligation by any action of its own and could do no more than wait and observe whether the conditions … were fulfilled”.[17]  According to Standard Chartered, “a company incurs a debt when, by its choice, it does or omits to do something which, as a matter of substance and commercial reality, renders it liable for a debt for which it otherwise would not have ben liable.”[18]
  5. [80]
    In accordance with the decisions in Edwards, , Ebbage and Lockwood, a voluntary administrator or receiver is liable for services the administrator or receiver purchased (even if under a pre-appointment contract) and for a liability the administrator or receiver created by some act, omission or circumstance which causes the company to owe the debt,[19] and that does not create personal liability of the administrator or receiver under the common law, e.g. where they are acting as agent for the company as their disclosed principal.[20] 
  6. [81]
    IIMP developed its submission in this way.  It submitted there are “two ways in which such a liability could have been incurred” by the respondents as administrators or deed administrators.  These are that the respondents “did something” or alternatively “omitted to do something which as a matter of substance and commercial reality would render them liable for a debt which would not otherwise have arisen.”  
  7. [82]
    In it written submissions, IIMP explains its case in this way:

“The [respondents] essentially incurred a liability for the VFX supplied by IIMP when they decided to complete the Film.  The Film could only be completed with the VFX that were supplied by IIMP.”

  1. [83]
    According to IIMP:

“The [respondents’] decision to complete the Film is akin to a decision to trade on a business being run by an insolvent company.  By way of any analogy, the [respondents] have entered into possession of car making factory (the factory being QMP) and have allowed the production crew to keep making cars (the Film) and to keep ordering material such as engines (the VFX) required to make the cars (the Film).  The [respondents] would be liable for the costs incurred in making the cars even if they did not themselves order any engines because they have elected to trade the business on.  The purpose for which s 443A was introduced was to make administrators personally liable for the costs incurred in continuing to trade the business.”

  1. [84]
    It is apparent from this concise summary of IIMP’s case that it must fail against Mr Dixon.  He made no decision to complete the Film.  He did not authorise Mr Sparke or Mr Becconsall to approve any budgetary matters for the Film, including any shot sequence costs, or to incur any costs by commissioning any visual effects work from IIMP.  On the evidence, it is not shown that Mr Sparke and Mr Becconsall approved any budgetary matters for the Film on behalf of Mr Dixon, including any shot sequence costs, or incurred any such costs in respect of any work to be undertaken by IIMP in that period. 
  2. [85]
    Against the Administrators IIMP’s case must also fail. 
  3. [86]
    There was no evidence that the Administrators incurred any costs by commissioning or engaging IIMP to do any visual special effects work on the Film.  The Administrators did not authorise Mr Sparke or Mr Becconsall to approve any budgetary matters for the Film, including any shot sequence costs, or any work to be undertaken by IIMP.  They did not do so expressly or impliedly.  In the period between 19 August 2020 and the completion of the Film on 20 January 2021, there is no evidence that Mr Sparke or Mr Becconsall approved any budgetary matters for the Film, including any shot sequence costs, in respect of any work to be undertaken by IIMP.  Rather, Mr Becconsall exchanged communications with Mr Wolters of IIMP about the basis on which he would be prepared to continue to provide visual special effects work for use in completing the Film.  Later, Ms Imrie, was drawn into those exchanges.  It does not appear her communications were frank or clear.  They did not result in any legally effective agreement between QMP (then subject to the DOCA) and IIMP.  Nor could they have done so.
  4. [87]
    It is common ground that additional visual effects work was required to complete the Film.  It is not common ground that any of that work had to be undertaken by IIMP under a direct engagement with the Administrators or with QMP under external administration.  IIMP was unable to make good its contention that the Film could only be completed with the visual effects work that were to be supplied by IIMP. 
  5. [88]
    The Administrators went to some trouble to obtain a reasonable estimate of the costs of the work to complete the Film.  These enquiries involved obtaining an estimate from GSD, analysing it, and assessing it against other sources.  It was the final GSD estimate that the Administrators acted upon.  They negotiated a partially deferred payment arrangement with GSD, giving GSD a limited specific priority in respect of proceeds expected to be received when the Film was completed.  It was the basis of interim finance the Administrators obtained.  The GSD estimate was of all the visual effects work to complete the Film.  This included any work to be carried out by contractors to GSD.  The Administrator’s decision did not include any decision to incur any costs for visual effects work outside of the work included in the GSD estimate and proposal.  In other words, the Administrators’ decision to complete the Film did not include any decision to incur any debt to IIMP for any visual effects work. 
  1. [89]
    IIMP describes the decisions made by the Administrators to cost, negotiate, partly fund, and monitor the completion of the post-production work on the Film through GSD as “akin to a decision to trade on a business being run by an insolvent company.”  This generalisation obscures the quite specific steps and limited decisions made by the Administrators, merging them into the type of “trading on” that might carry with it authorisation for those working for a company to incur liabilities in the ordinary course of the company’s business.  There was no such decision by the Administrators. This was not an instance of “unsuccessful trading by an insolvent company”.[21]
  2. [90]
    IIMP submitted that the Administrators “also incurred liability to IIMP by omission.”  IIMP’s list of alleged omissions is as follows:

“a. the failure to appreciate the significance of the QMP VFX Agreement;

b. the failure to contact IIMP and check with it whether it was in fact the supplier of VFX as per the QMP VFX Agreement;

c. the failure to supervise the directors, Luke and Alex at the point at which they were ordering visual special effects;

d. the failure to make proper enquiries to ascertain the suppliers when they were on notice of the issue.  See in this regard email sent by Darlington to Rose on 23 September 2020 in which she says that:

  1. (i)
    she queries weather [sic] Alex is doing the work himself or simply contracting it out;
  1. (ii)
    Alex confirmed that he is the VFX supervisor for the Film and he reviews all the work with the producers; and
  1. (iii)
    she queries whether all the contactors [sic] are based in Australia;
  1. (iv)
    she has requested copies of agreements from Alex, which were never provided.

e. the failure to stop Luke, Carly, Carmel, and Alex from completing the Film;

f. the failure to enquire as to who the actual suppliers of the VFX were;

g. did not speak with Luke as to what was required to complete the Film; and

h. the failure to apply to the Court to avoid personal liability like the administrators in Virgin did.”

  1. [91]
    For IMP it was submitted that if the Administrators had not “failed” to take these steps, “no debt would have been incurred to IIMP.” 
  2. [92]
    I reject this submission.  Perhaps it was intended to convey that IIMP would not have done the post production work on visual effects for the Film if the Administrators had taken all these steps.  There is no sound basis for reaching such a conclusion.  IIMP had put in place arrangements with GSD and with QMP well in advance of the external administration under which IIMP would continue to produce work for inclusion in the Film on a deferred payment basis.  The arrangements negotiated between the Administrators and GSD were that GSD, would by itself and by its contractors, produce work on a deferred payment basis.  That understanding is reflected in the communications from Mr Becconsall of GSD to Mr Wolters of IIMP.  Mr Wolters and IIMP seemed to understand that arrangement when Invoice 42 was issued to GSD on 15 December 2020. 
  1. [93]
    The VFX agreement was a pre-administration agreement.  There is no evidence that either Mr Dixon or the Administrators adopted it.  Nor is there any evidence that any of them made or authorised any work by IIMP or authorised or allowed anyone else on their behalf to incur any liability to IIMP for any work IIMP undertook pursuant to the VFX agreement.    
  2. [94]
    In the circumstances, I am not satisfied that any of the respondents incurred any debt to IIMP in the performance of or exercise of any of their functions and powers as administrator or as deed administrators for services rendered by IIMP. 

A preliminary point

  1. [95]
    The respondents raised a preliminary contention that IIMP required leave to proceed with its claim against them, pursuant to s 444E(3)(c). 
  2. [96]
    It is common ground that the DOCA has not been terminated.  While the DOCA remains, a person cannot begin or proceed with “a proceeding against the company or in relation to any of its property” except “with the leave of the Court”.[22] 
  3. [97]
    The respondents submitted that any judgment against them for IIMP’s claim in this proceeding would be “expressly” the subject of the respondents’ various rights to be indemnified out of the assets of QMP.[23]  The respondents submitted that IIMP’s claim was “inextricably related to property of QMP subject to DOCA used by the company to answer this statutory indemnity” and “directly impacts the property of QMP subject to DOCA available for distribution to creditor under the Deed.”
  4. [98]
    I reject these contentions.  It is accepted that IIMP makes no claim against QMP in this proceeding.  Nor does it make any claim in relation to any property of QMP.  No order is sought against QMP or in relation to any of its property.   IIMP’s claim is confined to the alleged personal liability of the respondents to IIMP.  The respondents’ respective rights of indemnity against the property of QMP, whatever they may be, are not the subject of this proceeding.  The existence of such rights would not make IIMP’s claim against the respondents a claim in relation to the property of QMP. 

Final disposition

  1. [99]
    IIMP’s application should be dismissed. 

Footnotes

[1]Pursuant to section 436C of the Corporations Act 2001 (Cth).  Except where otherwise indicated, all references to section or part of an Act are to a section or part of the Corporations Act.

[2]Under part 5.3A.

[3]Pursuant to s 436E(4).

[4]Pursuant to s 439A(6).

[5]Pursuant to s 436C(a).

[6]Pursuant to s 444B.

[7]In accordance with s 444B.

[8]Pursuant to s 444D(1).

[9]Pursuant to s 443A.

[10]Pursuant to s 1337H.

[11]Pursuant to s 376-65 of division 376 of the Income Tax Assessment Act 1997 (Cth).

[12]Pursuant to s 28 of the Administrative Appeals Tribunal Act 1975 (Cth).

[13]Under s 443B or 443BA.

[14]See s 443C.

[15]398 at [137] (Middleton J).

[16]Hawkins, 572 (Gleeson CJ).

[17]Shepherd, 89 (Bryson J).

[18]Standard Chartered, 314 (Hodgson J).

[19]Edwards, 172 at [81] (Barrett J); Ebbage, 193 (Pincus JA).

[20]Lockwood, 605 [23] (Byrne J).

[21]Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1, 37-38 at [51] (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ).

[22]See s 444E(3)(a) and (c).

[23]Pursuant to s 443D.

Close

Editorial Notes

  • Published Case Name:

    Re Quirky Mama Productions Pty Ltd

  • Shortened Case Name:

    Re Quirky Mama Productions Pty Ltd

  • MNC:

    [2021] QSC 345

  • Court:

    QSC

  • Judge(s):

    Bradley J

  • Date:

    17 Dec 2021

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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