In the recent decision of Allen, in the matter of North East Wiradjuri Co Limited (Administrators Appointed) [2010] FCA 1248, handed down by the Federal Court of Australia, the Court endorsed a novel approach to resolving a situation where administrators had been appointed in an effort to resolve what was in reality a management dispute.

Two companies were involved, and the circumstances of the case were as follows: –

1. The two companies were entities established primarily to receive and distribute royalty payments received in relation to certain native title claims.
2. Administrators were appointed to one of the companies (but not the other). Subsequent to their appointment, the administrators were alerted to a dispute between two factions of members of the two companies. Allegations were made by several members that the directors who purported to appoint the administrators were invalidly appointed.
3. In light of the nature of the dispute, the administrators approached the Court for orders validating their appointment, terminating the administration of the first company, and appointing them as receivers and managers of both companies pending resolution of the dispute.

The Federal Court validated the administrators’ appointment, terminated the administration of the first company and appointed the administrators as joint receivers and managers of both of the companies, with their remuneration and disbursements to be paid from the companies’ pooled assets.

The Court also ordered that the remuneration and disbursements incurred by the administrators be paid out of the pooled assets of both companies, even though one of the companies was never in administration. Whilst his Honour Jacobson J noted that this would give an advantage to the administrators, he accepted the administrators’ submission that it would be appropriate to make the order having regard to the circumstances of the case.

Given that pooling orders are a relatively recent phenomenon and have been exercised only sparingly, this case is notable in demonstrating the Court’s willingness, in appropriate circumstances, to make pooling orders solely for the purpose of dealing with professional remuneration and disbursements, but without pooling the assets of the companies generally.