In the matter of ACN 004 410 833 Ltd (formerly Arrium Limited) (in liq) & Ors

[2023] NSWSC 461

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

In the matter of ACN 004 410 833 Ltd (formerly Arrium Limited) (in liq) & Ors [2023] NSWSC 461

Hearing dates:

4-6 April 2023

Date of orders:

03 May 2023

Decision date:

03 May 2023

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Parties to bring in agreed minutes of order to give effect to judgment.

Catchwords:

PRACTICE AND PROCEDURE – application for extension of time for service of Originating Process despite non-compliance with Uniform Civil Procedure Rules 2005 (NSW) r 6.2(4) and r 2.7 of the Supreme Court (Corporations) Rules 1999 (NSW) – where delay in serving Originating Process – where prejudice to several Defendants has occurred as result of delay – whether the proposed Statement of Claim referred to in the Originating Process adequately identifies the case the Defendants must meet – whether issue estoppel prevents that case being brought against financier Defendants.

Legislation Cited:

- Civil Procedure Act 2005 (NSW), ss 56-59, 63, 67, 182, Pt 10

- Corporations Act 2001 (Cth), ss 439A, 439C, 444H 444B, 447A, 447D, 536, 1337H, 1337L, Pt 5.3A, Pt 5.9

- Federal Court (Corporations) Rules 2000 (Cth), r 1.10

- Insolvency Practice Schedule (Corporations), ss 5-5, 5-30, 90-15, 90-20

- Supreme Court (Corporations) Rules 1999 (NSW), rr 1.10, 2.7

- Uniform Civil Procedure Rules 2005 (NSW), rr 1.12, 6.2, 12.11, 13.4

Cases Cited:

- Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41

- Agricultural & Rural Finance Pty Ltd v Kirk [2011] NSWCA 67

- Allatech Pty Ltd v Construction Management Group Pty Ltd (2002) 41 ACSR 587

- Arnold v National Westminster Bank plc [1991] 2 AC 93; [1991] 3 All ER 41

- Arthur Anderson Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104

- Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256; [2006] HCA 27

- Bidald Consulting Pty Ltd v Miles Special Builders (2005) 226 ALR 510

- Blair v Curran (1939) 62 CLR 464

- Brewer v Brewer (1953) 88 CLR 1

- Brisbane South Regional Health Authority v Taylor (2006) 186 CLR 541

- Choy v Tiaro Coal Ltd (in liq) [2018] NSWCA 205

- Commonwealth of Australia v Cockatoo Dockyard Pty Ltd [2006] NSWCA 322

- Commonwealth v Rocklea Spinning Mills (2005) 145 FCR 220

- Ekes v Commonwealth Bank of Australia (2014) 313 ALR 665; [2014] NSWCA 336

- Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International (2021) 389 ALR 612; [2021] FCAFC 77

- Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23

- Habrok (Dalgaranga) Pty Ltd v Gascoyne Resources Ltd (subject to Deed of Company arrangement) (2020) 149 ACSR 1; [2020] FCA 1395

- Hastie Group Ltd (in liq) v Moore [2016] NSWSC 1682

- Hoath v Comcen Pty Ltd (2005) 53 ACSR 708

- Honest Remark Pty Ltd v Allstate Explorations NL (2006) 234 ALR 765; (2006) 58 ACSR 234; [2006] NSWSC 735

- Hoysted v Commissioner of Taxation [1926] AC 155

- Hoysted v Federal Commissioner of Taxation (1925) 37 CLR 290

- Iacullo v Iacullo [2013] NSWSC 1517

- Jackson v Goldsmith (1950) 81 CLR 446

- Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1; [2001] 1 All ER 481

- Kogan v Rogulj, in the matter ofRogulj Pty Ltd (in liq) [2021] FCA 1137

- Liquor National Pty Ltd (in liq) v Australia and New Zealand Banking Group Limited [2020] NSWSC 122

- Mentha v Epic Energy South Australia Pty Ltd, in the matter of ACN 004 410 833 Limited (formerly Arrium Limited) [2017] FCA 1530

- Mentha v Epic Energy South Australia Pty Ltd, in the matter of ACN 004 410 833 Limited (formerly Arrium Limited) (No. 2) [2018] FCA 925

- O’Toole v Charles David Pty Ltd (1991) 171 CLR 232; [1991] HCA 14

- Paton v Campbell Capital Ltd (1993) 46 FCR 30

- Pell v Hodges [2007] NSWCA 234

- Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589

- QBI Corp Pty Ltd v Plantation Rise Pty Ltd (2010) 77 ACSR 573

- Re Graziers Pastoral Pty Ltd [2021] NSWSC 1680

- Re Milner; ex parte Milner (1885) 15 QBD 605

- Re Nillumbik Community Church Inc (in admin) [2010] VSC 136

- Re Tiaro Coal Ltd (in liq) [2018] NSWSC 828

- Reid v Commonwealth Bank of Australia [2022] NSWCA 134

- Ren v Jiang (2014) 104 ACSR 149; [2014] NSWCA 388

- Rexel Electrical Supplies Pty Limited v Mentha (Administrator) in the matter of ACN 004 410 833 Limited (formerly Arrium Limited) (2018) 133 ACSR 236; [2018] FCAFC 229

- Rexel Electrical Supplies Pty Limited v Mentha (Administrator) in the matter of ACN 004 410 833 Limited (formerly Arrium Limited) (No 2) [2019] FCAFC 37

- Scuderi v Morris (2001) 4 VR 125; [2001] VSCA 190

- Shaw v New South Wales [2012] NSWCA 102

- Spencer v Commonwealth of Australia (2010) 241 CLR 118; [2010] HCA 28

- State of New South Wales v Hardy (Final) [2021] NSWSC 900

- Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507

- Weston in his capacity as Special Purpose Liquidator of One.Tel Ltd (in liq) v Publishing and Broadcasting Ltd (2012) 88 ACSR 80; [2012] NSWCA 79

- Westpac Banking Corp v Gollin & Co Ltd [1988] VR 397

Category:

Procedural rulings

Parties:

Atradius Credito Y Caucion S.A. De Seguros Y Reaseguros (Plaintiff)
Mark Francis Xavier Mentha (First Defendant)
Cassandra Elysium Mathews (Second Defendant)
Martin Madden (Third Defendant)
Brian Webster (Fourth Defendant)
Transamerica Life Insurance Company & Others (Fifth to Sixty-Fifth Defendant)

Representation:

Counsel:
D Williams KC/M Cowden/P Santucci (Plaintiff)
V Whittaker SC/I King/A Di Stefano (First to Fourth Defendant)
P Collinson KC/P Meagher (Participating Financiers)

Solicitors:
Polczynski Robinson (Plaintiff)
Arnold Bloch Leibler (First to Fourth Defendant)
King & Wood Mallesons (Participating Financiers)

File Number(s):

2022/00225818

Publication restriction:

N/A

Judgment

The relief sought by Atradius in respect of service of its Originating Process and Supporting Affidavits

1. By Originating Process filed on 1 August 2022, the Plaintiff (“Atradius”) claims the relief set out in a Statement of Claim (“2022 SoC”) contained in Schedule 3 to the Originating Process, which it has not yet filed where no order for pleadings has been made in the proceedings. I address the structure of the 2022 SoC in greater detail below. The Originating Process indicates that Atradius claims relief under s 90-15 of the Insolvency Practice Schedule (Corporations) (“IPSC”), s 447A of the Corporations Act 2001 (Cth) (“Act”), s 536 of the Act (which has been repealed) and in equity. The Defendants to the proceedings are four persons who were previously the voluntary administrators, deed administrators and then liquidators of companies within the Arrium group (“KM Defendants”) and some sixty or so financiers to the Arrium group (“Financiers”). The Defendants were given notice of the proceedings in the course of this application. However, the Originating Process has not been served on them and the time for service provided by r 6.2(4) of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) and r 2.7 of the Supreme Court (Corporations) Rules 1999 (NSW) (“Corporations Rules”) has now expired.

2. By Interlocutory Process initially filed on 2 September 2022, before the time for service of the Originating Process under r 6.2(4) of the UCPR had expired, but after a delay that did not comply with r 2.7 of the Corporations Rules, Atradius sought an order under r 1.10 of the Corporations Rules and r 1.12 of the UCPR that it be:

“relieved from the obligation to serve the Originating Process and Supporting Affidavits on the external administrators of or corporations referred to in Schedule 1 of the Originating Process filed 1 August 2022 or any of the Defendants identified in Schedule 2 of the Originating Process filed 1 August 2022 until further order of the Court.”

3. The relief then sought by Atradius was to defer the service of the Originating Process for an indefinite period. Atradius then sought adjournments of the listing of its Originating Process and that Interlocutory Process until the Court expressed a view that the application should be served on the parties that were potentially adversely affected by it. I address the correspondence concerning that matter below. Following service of that application, the KM Defendants and many of the Financiers (“Participating Financiers”) appeared in order to oppose Atradius’ interlocutory application. The solicitors retained by the Participating Financiers have subsequently been retained to act for additional Financiers, but nothing turns on that for the outcome of these proceedings.

4. By a Further Amended Interlocutory Process filed during the course of the hearing on 5 April 2023, Atradius sought a further order, nunc pro tunc, pursuant to UCPR r 1.12 that the Originating Process was valid for service until the date to which service of its Originating Process and Supporting Affidavits was extended. Atradius also there sought alternative deferrals of the date for service of its Originating Process and Supporting Affidavits to 31 October 2023 or alternatively six weeks from the date of judgment in respect of this application.

5. I address the interlocutory applications brought by the KM Defendants and the Financers below. I have drawn on helpful “roadmaps” prepared by the parties, at my request, summarising the structure of their submissions in ordering the matters addressed in this judgment.

Background and chronology

6. By way of background, the Arrium Group (as defined at 2022 SoC [1]) carried on a large and complex integrated mining, iron ore export, steel manufacturing, steel recycling and steel distribution business, operating businesses at Whyalla and on the East Coast of Australia. The chronology of events in respect of its financing arrangements, voluntary administration, deed administration and liquidation is largely common ground and I have drawn on Atradius’ 2022 SoC, as cross-referenced in the Originating Process and the affidavit and documentary evidence for the chronology which appears below.

7. On 7 April 2016, voluntary administrators were appointed to 94 companies within the Arrium Group (“Arrium Administration Companies”) pursuant to s 436A of the Act (2022 SoC [2]). On 12 April 2016, the KM Defendants were appointed joint and several voluntary administrators of the Arrium Administration Companies in place of the persons initially appointed (2022 SoC [4]).

8. Prior to the commencement of the Arrium Administration, GSO Capital Partners LP had provided a secured facility of US$140 million to two Arrium Group companies, Arrium Finance Pty Limited and Arrium Iron Ore Holdings Pty Limited, by a written secured financing facility dated 22 February 2016 (“GSO Interim Facility”) (2022 SoC [15]). At the commencement of the Arrium Administration (as defined at 2022 SoC [3]), some but not all of the Arrium Administration Companies had executed three separate syndicated facility agreements (“Syndicated Facilities”); six bilateral facility agreements (“Bilateral Facilities”); and two note agreements (“Note Agreements”) (2022 SoC [6]). The unsecured debt due by the Arrium Administration Companies to the Financers was then approximately $2.8 billion (“Financier Debt”) (2022 SoC [17]).

9. Prior to the commencement of the Arrium Administration, certain Arrium Administration Companies had executed one or both of two written Corporate Deeds of Guarantee (“Group Finance Guarantees”), by which each was liable for debts owed to the Financiers (2022 SoC [14]). These comprised a 2008 Group Guarantee dated 9 July 2008 and amendment dated 30 July 2015 which guaranteed obligations under a 2008 USPP Note Agreement and a 2011 Group Guarantee dated 28 March 2011 and amendment dated 30 July 2015 which was a revolving guarantee in respect of nominated financing facilities. At that time, SSX Holdings Pty Limited and seven Arrium Group entities had also executed a Deed of Cross-Guarantee dated 25 June 1999 (“1999 Cross Guarantee”) and Arrium Limited and twenty-eight of the Arrium Group companies had executed a Deed of Cross-Guarantee dated 10 June 2008 (“2008 Cross Guarantee”) (together, “ASIC DOCGs”) by which each was liable for the debts and liabilities of the Arrium Group on winding up (2022 SoC [13]).

10. At the commencement of the Arrium Administration, subsidiaries of the Arrium Administration Companies also operated a business providing consumables to mining companies (“Moly-Cop Business”) (2022 SoC [18]). Several Moly-Cop Entities (as defined at 2022 SoC [18]) were parties to the Group Finance Guarantees (“MC Group Finance Guarantors”) (2022 SoC [19]) and certain Moly-Cop Entities were parties to the 1999 Cross Guarantee and/or the 2008 Cross Guarantee (“MC Cross Guarantors”) (2022 SoC [20]). Several Moly-Cop Entities had executed the ASIC DOCGs and had not executed the Group Finance Guarantees or, alternatively, had not executed the Group Finance Guarantees and were subsidiaries of Arrium Administration Companies, were not MC Group Finance Guarantors and were not liable to meet the claims of the Financiers under the Group Finance Guarantees (2022 SoC [21]).

11. Atradius pleads (2022 SoC [21(e)]) that, by reason that the intermediate holding companies to the Moly-Cop Entities were party to the ASIC DOCGs, their assets were available to meet the claims of creditors of the Arrium Administration Companies. However, Mr Williams, with whom Ms Cowden and Mr Santucci appears for Atradius, fairly accepted in submissions that the ASIC DOCGs only became enforceable if the relevant debtor went into liquidation. That proposition has a significant consequence for the claim brought by Atradius, which Mr Williams also recognised, at least to some extent, in the course of his submissions. That important consequence is that, outside a liquidation of companies within the Arrium Group, neither Atradius nor other unsecured creditors of one company in the Arrium Group could obtain access to the assets of other companies within the group, including the Moly Cop Entities, by reliance on the ASIC DOCGs. Atradius also pleads the value of the Moly-Cop Business and acknowledges it could only be realised by selling the Moly-Cop Business as a going concern; that the Moly-Cop Business could not be sold together as a going concern if the Financiers enforced the Group Finance Guarantees; and could only be sold as a going concern with the consent of the KM Defendants (2022 SoC [24]-[25]).

12. On or about 21 April 2016, certain of the Arrium Administration Companies entered into a written secured facility (“GSO Replacement Facility”) with National Australia Bank Limited (“NAB”) as security trustee, Australia and New Zealand Banking Group Limited, the Commonwealth Bank of Australia and Westpac Banking Corporation (“GSO Replacement Facility Financiers”), refinancing the GSO Interim Facility (2022 SoC [16]).

13. On or about 2 August 2016, the KM Defendants (on behalf of the Arrium Administration Companies) and the Financiers executed three written Standstill Deeds (“Standstill Agreements”) (2022 SoC [51]). These included the Lender Standstill Deed dated 2 August 2016 and the Noteholder Standstill Deed dated 2 August 2016 (Ex J1, 2443-2616); Webster [66]). By cl 3.1 of the Standstill Agreements, the Financiers agreed to forbear from enforcing their rights under the Group Finance Guarantees until 15 March 2017, and, by cl 4.3, the KM Defendants in their capacity as administrators of those holding companies, agreed that certain proceeds realised on the sale of the Moly-Cop business would be paid to the Financiers. Atradius pleads these agreements at 2022 SoC [51]-[52]. In proceedings brought in the Federal Court of Australia (“FCA”) in late 2017 (“FCA Proceedings”), the Financiers contended that the Standstill Agreements reflected rights that the Financiers otherwise enjoyed under the Group Finance Guarantees, since by reason of the existence of those guarantees, the trade creditors (which were creditors at the Arrium level and not creditors of Moly-Cop) were structurally subordinated to the Financers in respect of access to the assets of the Moly-Cop Entities. Importantly, Atradius does not identify any factual basis for any contrary contention, outside a liquidation of the companies in the Arrium Group, in the 2022 SoC as cross-referenced in the Originating Process. I will return to the significance of that matter below.

14. On 30 September 2016, the KM Defendants (on behalf of the Arrium Administration Companies) entered into a deed with the Financiers and the Moly-Cop Entities (“Override Deed”) (2022 SoC [53]). By cl 3.2(d) of the Override Deed (Ex J1, 2668), the parties acknowledged that, despite amendments granted by the Financiers under the document, the total Amount Owing (as defined) remained outstanding until the Financiers had received that amount in full, and each Remaining Obligor (as defined) was liable to pay that amount in accordance with the terms of the Subject Finance Documents (as defined). Schedule 10 (Ex J1, 2714) contained a Proceeds Allocation Schedule, and cl 3 of that schedule provided for allocation of the Offshore Moly-Cop Proceeds (as defined), cl 4 provided for allocation of Australian Moly-Cop Proceeds (as defined), and cl 5 provided for allocation of the non-Moly-Cop Proceeds (as defined). Mr Collinson, with whom Mr Meagher appears for the Participating Financiers, submits that the acknowledgement under cl 3.2(d) of the Override Deed that the total Amount Owing (as defined) remained outstanding until the Financiers had received that amount in full reflected the position arising under the ‘rule’ against double proofs discussed in Westpac Banking Corp v Gollin & Co Ltd [1988] VR 397 and refers to the observations of the Full Court of the FCA in dealing with this matter in Rexel Electrical Supplies Pty Ltd (ACN 000 437 758) v Mentha (in their capacities as joint and several deed administrators of ACN 004 410 833 Ltd (formerly Arrium Ltd) (subject to deed of company arrangement)) (2018) 133 ACSR 236; [2018] FCAFC 229 (“Rexel FCAFC No 1”) at [163] that:

“It has to be observed that the inference to be drawn from the contextual background is that the parties intended the Financiers to be placed in the same position as if the payments were made by guarantors under the Group Guarantees so as to attract the rule against double proof affirmed in Westpac v Gollin. …[I]t is not apt to say that the rights now claimed by the Financiers did not exist as at 7 April 2016. As we have said, the Financiers held the benefit of guarantees from most of the Moly-Cop Sale Entities and by reason of those extant rights, were in a position to condition their consent to the Moly-Cop Transaction (and the release of the Group Guarantees) on their provable debts not reducing, as if all of the proceeds had come directly from guarantors by way of those guarantors selling all of their assets and remitting the proceeds to the Financiers (without the debt being reduced).” [emphasis added]

15. On 25 October 2016, the KM Defendants applied to the FCA for an order under s 477A of the Act modifying Part 5.3A so that the KM Defendants were entitled to prepare a single aggregated report to creditors pursuant to s 439A of the Act (“Aggregated s 439A Report”) and certain directions under s 447D of the Act and Davies J made substantially the orders sought on 25 October 2016 (2022 SoC [28]-[29]).

16. On or about 26 October 2016, the KM Defendants provided the Aggregated s 439A Report to creditors and convened the second creditors’ meeting of the Arrium Administration Companies (2022 SoC [30]), which were to be held concurrently (“Second Creditors’ Meeting”). The Aggregated s 439A Report attached the proposed deeds of company arrangement (“DOCAs”) and expressed the KM Defendants’ view that the optimal realisation of the majority of Arrium Administration Companies’ assets would occur by way of the sale of shares in at least thirteen key trading companies in administration and set out reasons for that view (Webster [67]; Ex J1, 2825). The KM Defendants expressed their opinion that it would be in creditors’ interests for each of the Arrium Administration Companies to execute DOCAs and expressed the view that it would not be in creditors’ interests to bring the administrations to an end or wind up the Arrium Administration Companies (Ex J1, 2827). Section 1.6.1 of the Aggregated s 439A Report described the key features of the proposed DOCAs and noted that a successful sale or recapitalisation would result in reducing the priority claims of employees for the benefit of other creditors and avoid the disadvantage of placing the companies in liquidation at a critical stage of the administration, sale and recapitalisation process and noted that:

“Pre-appointment creditor claims may be extinguished or novated to Arrium Creditor Distribution Company, aggregating all claims. Where they are extinguished, creditors will receive the right to make a claim against the Distribution Fund, consistent with pre-appointment rights… Creditors can be no worse off than if the Arrium [Administration] Companies were placed into liquidation”.

17. Section 1.10 of the Aggregated s 439A Report advised, consistent with relief granted by the FCA, that:

“As the sale and recapitalisation process is still underway, and because of the complexities and sensitivities associated with the sale and recapitalisation process and the incomplete investigations of potential claims, the Administrators are not currently in a position to provide creditors with an indication of the estimated distribution that will be paid by the Arrium [Administration] Companies. However, we are of the view that creditors will achieve a better return under the DOCAs than from a liquidation of the Arrium [Administration] Companies”.

18. Section 3.1.1 of the Aggregated s 439A Report referred to the ASIC DOCGs and their effect in an insolvency and section 3.1.2 referred to the two guarantees provided by certain members of the Arrium Administration Companies to the Financiers. Section 3.3.5 referred to the Moly-Cop Group and noted that it was not subject to voluntary administration, section 4 outlined the conduct of the administration at some length, section 4.6 referred to the refinance of the GSO Facility and section 4.8.1 described the Standstill Agreements as follows:

“As referred to in Section 3.1.2, the Arrium [Administration] Companies’ borrowings were guaranteed by a range of wholly owned subsidiaries including certain of the Moly-Cop Entities [as defined]. To enable the continued trading of businesses not in administration and progression of the agreed sale process for the Mining Consumables division, a formal Standstill Agreement between the Financiers, the Administrators and those relevant companies not in voluntary administration has been negotiated (“the Standstill”).

19. Mr Williams contends that this does not disclose the terms of the Standstill Agreements. He did not, however, explain why those terms were material for disclosure, where Atradius has not identified any impact of them on the distribution of proceeds which would otherwise have occurred in a deed administration and where the Financiers’ retention of the proceeds of the sale of the Moly-Cop business was itself disclosed in the Aggregated s 439A Report.

20. Section 7 of the Aggregated s 439A Report provided a relatively detailed description of the proposed DOCAs, comprising the Transaction Support DOCAs for 93 of the Arrium Administration Companies (“Transaction Support DOCAs”) and the Arrium Distribution DOCA (“Distribution DOCA”) for Arrium Creditor Distribution Company Pty Ltd (“Arrium Distribution Company”). Section 7.2 again described the substitution of claims under the Distribution DOCA for debts owed by operating companies to creditors as follows:

“The Arrium Distribution DOCA and the proposed Transaction Support DOCAs do not propose an identified sale transaction, but instead operate interdependently to support any subsequent sale transaction and restructure of the Arrium [Administration] Companies. The structure will … empower the administrators to extinguish creditors’ debts, to be replaced with an entitlement of the creditor to receive distributions in respect of its admitted claims.”

21. Section 7.2 of the Aggregated s 439A Report also disclosed that creditors would not share in the proceeds of the Moly-Cop sale and described the process by which that would occur as follows:

“Proceeds from the sale of Moly-Cop assets and businesses will be assigned to one of the Arrium [Administration] Companies selected as part of the process of sale for the Moly-Cop business to receive proceeds on the sale or initial public offering for shares in certain of the Moly-Copy Entities. No Moly-Cop assets or proceeds of sale will form part of the Arrium Distribution Fund, unless otherwise agreed by the Financiers.

The sale of Moly-Cop assets and businesses and the novation, release and extinguishment of the claims of Moly-Cop creditors will not be subject to approval by the Deed Creditors’ Committee.”

That description plainly identifies a transaction involving Metpol Pty Ltd (“Metpol”) which Mr Williams emphasised in submissions, and which I address below. The Aggregated s 439A Report in turn identified the waterfall applicable to payment of creditors’ entitlements. In submissions, Mr Williams identified a number of matters which he contended were not disclosed in that description: again, he did not explain why those matters were material, where Atradius has not identified whether, or how, unsecured creditors other than the Financiers could have accessed Moly-Cop Proceeds in a deed administration, absent the arrangements with the Financiers of which it complains.

22. Section 7.3.1 of the Aggregated s 439A Report in turn describes creditors’ claims under the DOCAs, as follows:

“The Deed Administrators will have the ability to novate, extinguish or release the liabilities against Arrium [Administration] Companies’ assets or businesses. Any claim against the Arrium [Administration] Companies which is extinguished or released by the Deed Administrators will entitle that creditor to make a claim against the Distribution Fund, in an amount equal to their extinguished or released claim.

The effect of this is that the creditor will no longer have a claim against the original debtor company, however will have an entitlement to receive the amount of their claim against the Distribution Fund.”

23. Section 8 of the Aggregated s 439A Report described the alternatives available to creditors, including liquidation, and explains why the KM Defendants considered that liquidation was not in the best interest of creditors. A corporate structure contained at Appendix 4 to the Aggregated s 439A Report (in relatively small font dictated by its size) disclosed which entitles were subject to guarantees in favour of Financiers, although I recognise that a creditor would have had to undertake a very close analysis of that document to understand its implications. However, the existence or non-existence of those guarantees in respect of particular companies, including the Moly-Cop Entities, does not assist Atradius, where it does not identify any mechanism by which unsecured creditors other than Financiers could have accessed the sale proceeds of the Moly-Cop business in a deed administration, absent the arrangements with the Financiers of which Atradius complains.

24. An affidavit of Mr Webster dated 21 October 2016 was filed in the FCA Proceedings and then made publicly available on the website of the KM Defendants’ legal representatives (Webster [77]) and also disclosed that the proceeds of the sale of the Moly‑Cop Entities would not be part of the Arrium Distribution Fund (as defined), and would be paid to the Financiers (Webster [77]-[78]).

25. On 4 November 2016, at the Second Creditors’ Meeting, the creditors of the Arrium Administration Companies resolved that the Arrium Administration Companies execute deeds of company arrangement pursuant to s 439C of the Act (2022 SoC [32]). Over 98% of Arrium Group creditors by number and value voted in favour of the DOCAs (Webster [80]).

26. Also on 4 November 2016, certain of the KM Defendants executed the Distribution DOCA and the 93 Transaction Support DOCAs for the remaining Arrium Administration Companies (2022 SoC [33]; the Transaction Support DOCA in respect of Arrium Ltd is at Ex J1, 5588 and the Transaction Support DOCA in respect of OneSteel Holdings is at Ex J1, 5781). Mr Collinson helpfully summarises the structure of the DOCAs as follows:

“The DOCAs, in summary, provided that the assets of the Arrium Administration Companies would be sold; in order to facilitate the sale of the assets at their best price, liabilities of the Arrium Administration Companies could be assigned, novated or extinguished; proceeds realised on the sale of assets were to be paid into a fund established to facilitate the distribution of the proceeds to Arrium creditors, being the Arrium Distribution Fund; creditors of Arrium Administration Companies had an entitlement to make claims on the Arrium Distribution Fund; each creditor’s claim was to be adjudicated by the Administrators as at 7 April 2016; and the Moly-Cop entities, and the assets of those entities, would not form part of the Arrium Distribution Fund and were not available to pay any creditor entitlements.”

27. Specifically, Clause 14 of the Distribution DOCA (and also the Transaction Support DOCAs) provided that:

“Notwithstanding any other term of this DOCA, the Moly-Cop Assets and any shares in the Moly-Cop Entities held by AdminCo, are not: (a) available to pay any Entitlements or Claims; (b) part of the Arrium Distribution Fund; or (c) subject to the decisions of the Arrium Creditors’ Committee”.

28. Clause 15 of the Distribution DOCA provided for the Arrium Distribution Fund to be established, consisting of the proceeds generated from Arrium Assets (as defined). The definition of Arrium Assets excluded the Moly-Cop Assets (as defined); shares in the Moly-Cop Entities; and any Moly-Cop Assets novated to an Arrium Administration Company. Clause 18.2 incorporated the rule against double proofs in the deed administration, which is relevant to a priority dispute addressed in the FCA Proceedings and again by Mr Williams in submissions in this application.

29. Clause 19 of the Distribution DOCA dealt with entitlements from the Arrium Distribution Fund and provided for each Arrium Group Creditor’s (as defined) entitlement to receive a distribution from that Fund. Clause 19.1 provided that:

“Notwithstanding any other provision of this DOCA or the Other Arrium DOCAs, each Arrium Group Creditor’s Entitlements are to be adjudicated by the Deed Administrators as at the Appointment Date [defined as at 7 April 2016] and, regardless of whether the Arrium Group Claim has been subsequently novated, released or extinguished by (i) the Deed Administrators pursuant to this DOCA or the Other Arrium DOCAs; or (ii) any other party or parties, provided that the Deed Administrators determine to exercise their power under this clause to allow the Arrium Group Claim to remain provable notwithstanding its novation, release or extinguishment.”

30. Clause 19.3(a) and (d) provided that:

“‘the Deed Administrators will ensure that the Arrium Group Unsecured Creditors of each Arrium [Administration] Company, or any of them, are not materially and unfairly prejudiced when compared to the position they would be in if they were proving in a liquidation of that Arrium [Administration] Company ...

For the avoidance of doubt, each Arrium Group Unsecured Creditor will receive a payment from the Arrium Distribution Fund which is not less than the estimated payment that Creditor would have received in a liquidation of the relevant Arrium Group Company after having regard to the estimated costs and expenses of a liquidation of that company”

31. Clause 20.2 of the Distribution DOCA provided that all of the creditors’ claims were discharged and extinguished if the KM Defendants had paid to an Arrium Group Creditor its full entitlement under this DOCA, to the extent already extinguished by the Deed Administrators (as defined) pursuant to the DOCA and Other Arrium DOCAs (as defined). I will return to the significance of this clause below.

32. On 4 November 2016, by operation of s 444B of the Act, the KM Defendants were appointed as joint and several deed administrators of each of the Arrium Administration Companies (2022 SoC [35]).

33. Also on 4 November 2016, the KM Defendants executed a Sale Agreement providing for the sale of the shares in the Moly-Cop Entities (“Moly-Cop Sale”) and completion of the Moly-Cop Sale occurred on 3 January 2017 (2022 SoC [36]-[37]). Attachment E of the Share Sale Agreement provided that, in conjunction with the Moly-Cop Sale, the Moly-Cop Entity receivables were assigned to Metpol, which was an Arrium Administration Company, a party to the Group Finance Guarantees and not a party to the ASIC DOCGs; loans owing to other members of the Arrium Group by the Moly-Cop Entities were to be assigned to Metpol; and Moly-Cop Entities with cash on hand were to transfer that cash to Metpol (“Metpol Transfer Terms”) (2022 SoC [38-39]). Pursuant to the Metpol Transfer Terms approximately $80 million in cash was paid to Metpol and at least an aggregate of US$175 million of intercompany receivables was assigned, assumed by, novated or transferred to Metpol (2022 SoC [40]). Following completion of the Moly-Cop Sale, the Moly-Cop Proceeds (as defined at 2022 SoC [43]) were distributed by payment of approximately US$108 million to the GSO Replacement Facility Financiers in discharge of the GSO Replacement Facility and approximately US$1.024 billion to the Financiers (2022 SoC [44]).

34. Between 5 July 2017 and 31 August 2017, the KM Defendants sold further assets of the Arrium Administration Companies and realised net proceeds of approximately $664 million (2022 SoC [45]). In particular, the KM Defendants sold the Arrium Sale Entities (as defined), being the Arrium Administration Companies to which the assets of the Australian business had been transferred (Webster [88]-[92]).

35. On 17 July 2017, the KM Defendants lodged notices with the Australian Securities & Investments Commission (“ASIC”) inviting proofs of debt to be lodged by the creditors of the Arrium Administration Companies and, between 17 July 2017 and 21 September 2017, the KM Defendants determined whether to admit proofs of debt lodged by creditors (2022 SoC [46]-[47]).

36. By the Required Consent Report dated 17 November 2016 (Ex J1, 3612), executed as a deed poll in a form required by schedule 11 to the Override Deed, the KM Defendants confirmed matters surrounding the sale of the Moly-Cop business to the Financers. By cl 5.1(a), the KM Defendants, the Appointment Entities (as defined) and the Appointment Obligors (as defined) acknowledged that any proceeds or distributions received by the Financiers in connection with the Proposed Transaction (as defined) would not prejudice their right to prove for the Amount Owing (as defined) as of the Relevant Date or receive distributions under the DOCAs. The “Relevant Date” was 7 April 2016 and “the DOCAs” referred to the Distribution DOCA and the Transaction DOCAs.

37. By a further Deed Poll dated 30 December 2016 (Ex J1, 3662) (“December 2016 Deed Poll”), each “Remaining Obligor” (as defined) acknowledged (cl 3(a)) that:

“(a)   At the Transaction Implementation Date (as defined in the Required Consent Report), each Remaining Obligor acknowledges and agrees that notwithstanding any amendment, variation, waiver, release or consent granted by the Financiers pursuant to the Required Consent Report:

(i)   the Proceeds from the Proposed Transaction (as defined in the Required Consent Report) being paid to the Global Agent are insufficient to discharge the Amount Owing in full;

(ii)   until such time as the Financiers have received the total Amount Owing in full, the total Amount Owing remains outstanding;

(iii)   each such Remaining Obligor is jointly and severally liable to pay the Amount Owing in accordance with the terms of the Subject Finance Documents; and

(iv)   each such Remaining Obligor’s obligations under the Subject Finance Documents are not affected by the variation, waivers, releases or consents granted.”

38. By letter dated 11 May 2017, the solicitors now acting for Atradius, who then acted for certain trade creditors and their credit insurers, wrote to the KM Defendants raising complaints of failures to disclose in respect of applications made in the FCA and the Aggregated s 439A Report and contended that the Moly-Cop Proceeds should not be provided solely to the Financers and that the Financers should not be permitted to prove the full amounts claimed in the deed administration, despite their receipt of amounts in respect of the Moly-Cop sale. The solicitors acting for the Deed Administrators responded to that letter on 26 May 2017 (Ex J1, 3683) and by further letter dated 15 August 2017 (Ex J1, 3687) and further correspondence followed.

39. A first distribution to creditors was made in the amount of 14.7 cents in the dollar on 14 September 2017; a second distribution of 3.9 cents in the dollar was made on or about 15 December 2017; and further distributions were made in September 2018, on or about 11 November 2020, and on or about 24 November 2021, and, after these proceeding were commenced by Atradius but before notice of them was given to the KM Defendants (or the Financiers), on 17 August 2022 (2022 SoC [48]; Webster [98]).

40. On 15 September 2017, the KM Defendants brought the FCA Proceedings (Ex J1, 3714), which were subsequently determined by Davies J by her judgment delivered on 15 December 2017 in Mentha v Epic Energy South Australia Pty Ltd, in the matter of ACN 004 410 833 Limited (formerly Arrium Limited) [2017] FCA 1530 (“Mentha v Epic Energy No 1”). The first defendant in the FCA Proceedings, Epic Energy South Australia Pty Ltd (“Epic”), was appointed to represent the interests of all unsecured creditors. Epic was a trade creditor insured by a credit insurer other than Atradius, but Atradius fairly takes no point as to that matter (T14); Epic was then represented by the solicitors then and now acting for Atradius; and Atradius fairly accepts that Epic should be treated as its privy (T49).

41. On 7 November 2017, Epic filed an Interlocutory Process in the FCA Proceedings seeking orders under s 90-5 or s 90-10 of the IPSC (“Epic Interlocutory Application) (Webster [108]; Ex J1, 4086) and, on 22 December 2017, Epic filed a Statement of Claim in the FCA Proceedings in support of the relief sought in the Epic Interlocutory Application (“2017 SoC”) (Ex J1, 4970). As the KM Defendants point out, in the 2017 SoC, Epic claimed substantially the same relief on the same basis as that now sought by Atradius in the 2022 SoC. In particular, the 2017 SoC and the 2022 SoC both plead substantially the same breaches of duties by the KM Defendants, and both plead the Standstill Agreements and the Override Deed (2017 SoC at D.2 and D.3; SoC at V.1 and V.2); the existence of the MC Available Entities (2017 SoC [14](c); 2022 SoC [21]); the alleged Moly‑Cop Proceeds Effect (2017 SoC [56](a)-(b); 2022 SoC [54](a)-(b)), the Metpol Asset Loading Effect (2017 SoC [44]; 2022 SoC [41]) and the No Deduction Effect (2017 SoC [56](c) and (d); 2022 SoC [54](d)); and each plead the alleged “Administrators’ Duties” (2017 SoC [52]; 2022 SoC [57]), “Application Disclosure Duty” (2017 SoC [58]; 2022 SoC [60]), “439A Report Duty” (2017 SoC [61]; 2022 SoC [64]); and “DOCA Execution Duty” (2017 SoC [64] and [78]; 2022 SoC [68]). The 2017 SoC also pleads a “True Up Breach” (at [54] and [76]) and a “Transparency Duty” (at [71]), which are not included in the 2022 SoC, and the 2022 SoC pleads “Uberrimae Fidei Dut[ies]” (at [50]) which are not included in the 2017 SoC. The matters underlying the 2017 SoC were in turn addressed by a lengthy affidavit of Mr Richard Lyne dated 7 November 2017, a solicitor in the firm then acting for Epic and Atradius and now acting for Atradius in these proceedings (Ex J1, 4090) (“Lyne Affidavit”).

42. By her judgment delivered on 15 December 2017 in Mentha v Epic Energy No 1, Davies J determined a questions as to construction of the Override Deed, the Required Consent Report and the Deed Poll (Ex J1, 4889), namely whether:

“On a proper construction of the [Override Deed, the Required Consent Report and the Deed Poll] … each of the Financiers [are] entitled to prove under the [Distribution DOCA] for the amount (if any) of its Arrium Group Claim (as defined in the DOCA), without deducting its share of the Moly-Cop Proceeds or any part thereof?”

The answer to that question was a determination of that matter on a final basis, and was not limited to giving judicial advice to the KM Defendants, although her Honour then went on to answer a second question which had the character of judicial advice An appeal from that decision, continued in the name of another of Atradius’ insureds, Rexel Electrical Supplies Pty Limited, was dismissed in the two decision in Rexel FCAFC No 1 and Rexel Electrical Supplies Pty Limited v Mentha (Administrator) in the matter of ACN 004 410 833 Limited (formerly Arrium Limited) (No 2) [2019] FCAFC 37.

43. Subsequently, on 18 June 2018, Davies J dismissed the Epic Interlocutory Application “without adjudication on the merits” in Mentha v Epic Energy South Australia Pty Ltd, in the matter of ACN 004 410 833 Limited (formerly Arrium Limited) (No. 2) [2018] FCA 925 (“Mentha v Epic Energy No 2”), on the basis it was not appropriate to determine it in the FCA Proceedings. That decision did not address the question whether the claims made in the Epic Interlocutory Process, at least against the Financiers, had by then already been determined by her Honour’s decision in Mentha v Epic Energy No 1. Epic or Atradius did not then, or until these proceedings were filed by Atradius in August 2022, bring a separate proceeding seeking the relief sought in the 2017 SoC.

44. On or about 5 April 2022, Atradius entered into a Deed of Assignment of Debt dated 5 April 2022 (“Stirling Assignment”) with one of its insured trade creditors, Stirling Holdings Pty Ltd as trustee of the Stirling Metals Unit Trust (“Stirling”) (SoC [9], Ex J1, 5552). Recital E provided that Stirling has agreed to “assign to [Atradius] all of its rights, titles and interests in the Debt including all amounts owing pursuant to the Debt on the terms set out in this Deed.” Clause 1.4 defines “Debt” to mean “the total sum owed to [Stirling] as at the date of this Deed for the goods it supplied to the Arrium Group in the invoices as identified in Schedule 1 of this Deed” and Schedule 1 lists invoices which were issued to OneSteel Trading Pty Ltd (“OneSteel Trading”). By an undated Notice of Assignment (Ex KM2), Atradius then gave notice to the KM Defendants that, by the Stirling Assignment, Stirling had assigned to Atradius “all their rights, title and interest, legal and equitable in the debts due and owing… to [Stirling]” arising out or in connection with certain invoices and directed that the KM Defendants pay the “debt” to Atradius. The deed administrators did not then seek to address the question whether what Stirling had assigned to Atradius was not a debt, but a right to claim under the Distribution DOCA.

45. As I noted above, by its Originating Process filed on 1 August 2022, Atradius claims the relief set out in the 2022 SoC. By letter dated 17 August 2022, Mr Webster, one of the KM Defendants, advised “Atradius as the creditor in place of Stirling” of the declaration of the sixth and final dividend under the Distribution DOCA, recording a payment of the sum of $209.65 and total dividend payments in the sum of $10,945.86 against an amount claimed of $64,684.77 and an amount allowed of $58,667.77 in respect of OneSteel Trading. Importantly, that dividend was paid after the Originating Process was filed by Atradius but before it notified the KM Defendants of the existence of the proceedings or served this application. I return to the significance of that matter below.

46. As I noted above, by Interlocutory Process initially filed on 2 September 2022, Atradius sought an order under r 1.10 of the Corporations Rules and UCPR r 1.12 that it be relieved from the obligation to serve the Originating Process and Supporting Affidavits until further order of the Court. On 23 September 2022, Atradius’ solicitors wrote to the Court indicating that the Defendants had not yet been served with the Originating Process and Supporting Affidavit, or the Interlocutory Process and Supporting Affidavit and that Atradius sought to proceed with a hearing of its Interlocutory Process on 26 September 2022 on an ex parte basis. By email dated 25 September 2022, my Associate advised Atradius’ solicitors, at my request, that:

“His Honour has asked me to advise that his preliminary view is that the orders sought in the Interlocutory Process have the capacity adversely to effect the Defendants to the proceedings and should not be made without the Interlocutory Process being served on the Defendants, with orders providing for service by email or other appropriate means being made if necessary given the number of defendants, and excluding those Defendants which have been deregistered and no longer exist. His Honour draws this to your attention in case you wish to submit orders that can made in chambers for service of the Interlocutory Process, rather than incurring the costs of an appearance tomorrow.”

47. By an email dated 26 September 2022, Atradius’ solicitors responded that they proposed that the proceedings be adjourned for two weeks to 10 October 2022 to enable them to affect service of the Interlocutory Process and Supporting Affidavits on the Defendants and provided short minutes of order to that effect, which were then made. By a further email dated 26 September 2022, Atradius’ solicitors advised that they did not seek specific orders for service at that stage and would engage with the representatives for Defendants to ascertain whether agreement could be reached as to the appropriate method of service of this application. A further month then elapsed before Atradius’ solicitors contacted the solicitors who had acted for many of the Financiers to ask whether they were instructed to accept service of this application and supporting documents. Atradius provides no explanation for that delay. It appears that several of the Financiers were not served with this application until late February and early March 2023 and one was not effectively served with this application until 3 April 2023.

48. By an Originating Process filed in separate proceedings on 1 November 2022, Atradius sought an order issuing examination summonses to numerous persons and orders for the production of documents, in its capacity as a person authorised by ASIC to conduct such examinations. Those examination summonses have not yet been issued, pending the determination of these proceedings, although I was advised in the course of the application that time had been set aside for examinations in September 2023. It is common ground that the KM Defendants have now sought administrative review of ASIC’s decision to authorise Atradius to conduct such examinations. Having regard to that application, it is likely to be a considerable time before examination summonses and orders for production are issued by the Court and there is little likelihood that examinations would proceed in September 2023.

Affidavit evidence

49. Atradius reads the affidavit dated 1 August 2022 of its solicitor, Mr Polczynski, filed at the same time as the Originating Process. That affidavit exhibited a copy of the 2022 SoC, and numerous company searches for the Arrium Administration Companies in compliance with a requirement of the Corporations Rules. Atradius also read the affidavit dated 11 August 2022 of Ms Carter, also a solicitor acting for it in the proceedings, which exhibited a number of facility agreements, other financing documents in respect of the Arrium Group and documents relating to the deed administration. I have referred to several of those documents in the chronology which appears above.

50. Atradius reads the affidavit dated 1 September 2022 of Mr Polczynski in support of its application to extend the time for service of the Originating Process. Mr Polczynski refers to his causing the Originating Process attaching the Statement of Claim at Schedule 3 (“2022 SoC”) to be filed on behalf of Atradius. His evidence (Polczynski 1.9.22 [4]) is that:

“The Originating Process was filed principally to avoid any potential limitation of action issues for the causes of actions which may be available to [Atradius] (and the aggrieved creditors) against the Defendants.”

51. Several matters should be noted here as to that observation. First, neither Atradius nor any other party identified how the limitations issue would arise under a claim under s 90-15 of the IPSC or s 447A of the Act, although it is at least possible that such an issue might arise in respect of a claim in equity. Second, Atradius expressly did not accept in this application that any limitation issue would defeat its claim, if the relief sought in this application was not granted, and the Defendants equally reserved their position as to limitation defences. Third, although Mr Polczynski refers to a claim by “aggrieved creditors” and foreshadows an intent by Atradius to bring a representative action, Atradius has not presently sought to establish any basis on which it would be permitted to do so. I address that matter further below.

52. Mr Polczynski referred (Polczynski 1.9.22 [9]ff) to the conduct of the FCA Proceedings and to the judgment of the Full Court of the FCA delivered on 20 December 2018 in Rexel FCAFC No 1. He indicated (Polczynski 1.9.22 [10]-[11]) that, since that time (I interpolate, for nearly four years):

“[Atradius] and this firm on behalf of [Atradius] have been exploring funding opportunities for the purposes of this proceeding and proposed public examinations (addressed further below).

Once funding was secured, the Originating Process was filed at the earliest opportunity. Had the proceedings not been filed, potential causes of actions available to [Atradius] (and the aggrieved creditors) may have expired on 2 August 2022. In this regard, I refer to the [2022 SoC] including specifically paragraphs 51 and 52.”

53. This evidence is notable for its lack of detail. Mr Polczynski does not explain what steps were taken to explore those funding opportunities in those four years. He also does not identify which funders were approached in that period, or when they were approached, or what was done to progress funding applications, or when funding applications were accepted or refused. He does not indicate the nature or identity of any funder that is now funding the proceedings or disclose whether that funder is a third party litigation funder or associated with Atradius or its related companies.

54. Mr Polczynski also referred to the fact that the Originating Process and affidavits filed in support of it had not then been served on any of the Defendants and properly recognised that such service was required by rule 2.7 of the Corporations Rules, but indicated that Atradius sought an order relieving it from the obligation to serve the Originating Process and supporting affidavits. He indicated the Originating Process and supporting affidavits were served on ASIC on 1 September 2022. He also referred to a letter dated 7 June 2022 by which ASIC granted Atradius “eligible applicant” status to seek to conduct examinations under Pt 5.9 of the Act and he referred to Atradius’ intention to commence separate proceedings seeking the issue of numerous examination summonses and orders for production. The KM Defendants have now sought to set aside ASIC’s grant of eligible applicant status to Atradius and the Court has not yet issued for examination summonses or orders for production. Mr Polczynski indicated his then expectation that public examinations may not be completed by the end of 2022. As I noted above, they are now unlikely to be completed in the short term.

55. Mr Polczynski’ s evidence, in support of the application to dispense with service of the Originating Process, was that Atradius “requires further time to investigate additional claims and assess whether there needs to be refinement to the existing claims in the [2022 SoC]”. He sought to “adjourn” the proceeding “sine die” or alternatively to March or April 2023, deferring further service of the proceedings, to allow the examinations and the review of documents produced in them to take place. He recognised a possibility that, after the public examination proceedings were concluded, there would be “no utility in this proceeding” and that Atradius would seek to have it dismissed.

56. Atradius also reads the affidavit dated 23 September 2022 of Ms Malnersic, also a solicitor acting for Atradius, which confirmed that the Defendants had not then been served with the Originating Process, the affidavits of Mr Polczynski dated 1 August 2022 or Ms Carter dated 11 August 2022, or the Interlocutory Process filed 2 September 2022 and Mr Polczynski’s affidavit dated 1 September 2022. She also updated the position as to Atradius’ application for orders for public examinations and indicated that she expected that applications for such examinations would be filed by 30 September 2022.

57. Atradius reads the affidavit dated 29 March 2023 of Ms Tate, another solicitor acting for Atradius, which exhibits a copy of Atradius’ policy for trade credit insurance and a schedule of claims that Atradius paid to its insureds in relation to the Arrium Group. I accept that that evidence establishes that Atradius has suffered an economic loss, in indemnifying its trade creditor insureds, as a result of the administration and subsequent liquidation of the Arrium Group, or at least those companies within it that owed debts to its insured trade creditors. I address the question whether that is sufficient to establish standing under s 90-15 of the IPSC below.

58. Atradius also reads a second affidavit dated 4 April 2023 of Ms Malnersic, who refers to correspondence with the Court in respect of the earlier stages of this application and correspondence between Atradius’ solicitors and the solicitors acting for the Participating Financiers. Ms Malnersic noted that, on 29 March 2023, several of the Financiers were not represented by the firm that acts for the majority of those Defendants, and notes that the majority of these Financiers were located overseas. She refers to service of the Interlocutory Application on these overseas Financiers. By an affidavit dated 5 April 2023, Mr Dobb, a solicitor also acting for Atradius, advises steps taken towards scheduling examinations in the matter. Atradius also reads the affidavits dealing with service of this application on the overseas Financiers, in Singapore, the United States and the Cayman Islands.

59. The KM Defendants rely on the affidavit dated 30 January 2023 of Mr Webster, who is one of the KM Defendants and was one of the voluntary administrators and subsequently deed administrators and liquidators of companies within the Arrium Group. Mr Webster’s evidence is that many of the Arrium Administration Companies were sold or deregistered and that all monies payable from the administration and liquidation of the Arrium Administration Companies have been distributed to creditors, with the final dividend paid to creditors on 17 August 2022 (Webster [3]). As I noted above, that occurred after the commencement of these proceedings by Atradius, but before Atradius gave notice of the proceedings to the KM Defendants or served this application upon them. I will return to the significance of that matter below.

60. Mr Webster also exhibited several affidavits that had been relied on in the FCA Proceedings. He outlined the structure of the Arrium Group and the nature of its business to which I have referred above. He also referred to the structure of the Moly-Cop Entities, which were not subject to insolvency proceedings, were mostly domiciled in foreign jurisdictions and were trading profitably when the Arrium Group entered administration (Webster [21]). I address the significance of matters concerning those companies to Atradius’ claims below. Mr Webster also outlined the Arrium Group’s external financing arrangements and the position in respect of the Arrium Group Guarantees (as defined) and the ASIC DOCGs, to which I referred above. Mr Webster also referred to the GSO Interim Facility and the substantial debts of the Arrium Group companies, including debts owed to the Financiers.

61. Mr Webster provided a detailed account of the conduct of the administration of the Arrium Group, referring to the first creditors meeting in April 2016, the entry into the GSO Replacement Facility with several Financiers in April 2016, the extension of the convening period for the Second Creditors Meeting and the application made to the FCA on 25 October 2016, seeking relief to permit the voluntary administrators to provide the Aggregated s 439A Report to creditors. Mr Webster also outlined the steps taken by the voluntary administrators to sell the Moly-Cop Entities and the Arrium Sale Entities and the process adopted to secure the Financiers’ consent to the Moly-Cop Sale, including the entry into the Standstill Deeds to which I referred above. Mr Webster observed in that regard (Webster [62]-[65]) that:

“In order to affect an orderly sale of the Moly-Cop entities, we needed the consent of the Financiers. This was so as, a consequence of the Administrator’s appointment, the Financiers had the right to demand, via the Group Guarantees, repayment of the Financier Debt by the Moly-Cop Entities who were Guarantors under the Group Guarantees. The Financier Debt exceeded the enterprise value of the Moly-Cop business. Therefore, had the Financiers not consented to the sale transactions, they could have called on their debts and defectively forced the liquidation of certain Moly-Cop Entities, destroying the value of the Moly-Cop Entities as a going concern.

Due to the impact of Moly Cop’s inter-related customers, suppliers, employees and contracts, a former appointment over the Moly-Cop Entities would have crystalised employee redundancy claims, supplier/creditor claims and would also have negatively impacted the trade on the Arrium Australia business, the stakeholders of which were already facing significant uncertainty following the appointment of Administrators.

In this context the Administrators and the Moly-Cop Entities sought forbearance from the Financiers to facilitate an orderly sale of the Moly-Cop Business.

In return for this forbearance, the Financiers required that the proceeds from the sale any Moly-Cop Entity be allocated:

(a) First, to the GSO Replacement Facility Financiers in repayment of the GSO Replacement Facility; and

(b) Second, to the Financiers in respect of the financier debt.”

62. Mr Webster then addresses the Aggregated s 439A Report prepared by the KM Defendants in late October 2016, which contained two forms of deed of company arrangement, being the Transaction Support DOCAs executed by 93 of the Arrium Administration Companies and the Distribution DOCA executed by the Arrium Distribution Company. Mr Webster also outlined the process by which claims were to be made under the Distribution DOCA. He addressed the conduct of the Second Creditors Meeting and approval of the Distribution DOCA and the Transaction Support DOCAs at that meeting and records that 98% of creditors of each and every one of the Arrium Administration Companies voted in favour of the Distribution DOCA and the Transaction Support DOCAs, by value and by number, and Stirling did not vote at that meeting.

63. Mr Webster also refers to the execution of a contract for sale of the Moly-Cop business to a third party for US $1.23 billion on 4 November 2016, which was completed on 3 January 2017, and to the payment of the net proceeds of that sale to the Financiers. He outlined the subsequent sale of the Arrium Sale Entities and referred to subsequent reports and distributions to unsecured creditors. He also outlined, at some length, the conduct of proceedings in the FCA in the second half of 2017, addressing issues raised by Epic and subsequently by Rexel, which were trade creditors insured by Atradius. Atradius accepts that it had conduct of those companies’ role in the FCA proceedings and that they should be treated in privity with it for the purposes of this application. Mr Webster also outlines the history of payment of dividends to Stirling in respect of the administration, and, not surprisingly, points to Atradius’ delay in commencing these proceedings. Mr Webster also notes that the DOCAs for each of the Arrium Sale Entitles were terminated on 31 August 2017 and the proceeds of the sale of the Arrium Sale Entities were paid into the Arrium Distribution Fund for distribution under the Distribution DOCA (Webster [92]).

62. The Participating Financiers read two affidavits, both dated 23 January 2023, of Mr Troiani, a solicitor acting for them, and Mr Gavrilos, the Global Head of Corporate Services in the Corporate Finance Division at NAB. Mr Troiani refers to the FCA Proceedings, the interlocutory application brought by Epic in those proceedings and the appeal brought by Epic to the Full Court of the Federal Court, which was dismissed in December 2018. These matters are relevant to the submissions put by the Participating Financiers as to estoppel which I address below. Mr Troiani also refers to the 2021 annual report for Atradius N.V., the ultimate parent company of Atradius, which establishes that it has substantial assets and plainly had the capacity to fund the conduct of these proceedings by Atradius at relevant times. Mr Gavrilos refers to NAB’s role as “Agent” and “Global Agent” in financing and restructuring documents in respect of Arrium Ltd and the Arrium Group and in distributing repayments to Financers. He notes that NAB as Agent currently holds funds on behalf of the Financiers, and was in the process of paying a final dividend to Financers, which has been held back following notification of Atradius’ commencement of the proceedings. No doubt, NAB was fortunate in having that opportunity to hold back a dividend which, as I noted above, was lost to the KM Defendants by Atradius’ failure to give notice of or serve the proceedings on the KM Defendants promptly after they were commenced.

Whether Atradius has established sufficient reason to extend the time for service of the Originating Process

65. I first address Atradius’ application for an order nunc pro tunc under UCPR r 1.12 that its Originating Process is valid for service until the later dates to which it seeks to extend service. As I noted above, this order is necessary because Atradius has not complied with the requirements of UCPR r 6.2(4) or, in my view, the requirements of r 2.7 of the Corporations Rules in respect of the service of the Originating Process. Unless this order is made, no question of further extending the time for service of the Originating Process arises, because that Originating Process would already be stale and could not now be served. I am not persuaded that the time for service of the Originating Process should be extended, and, indeed, I am affirmatively satisfied that it should not be extended, for the reasons noted below.

66. Rule 6.2(4)-(5) of the UCPR relevantly provide that an originating process is valid for service, in the case of proceedings in this Court, for 6 months after the date on which it is filed; and a failure to serve an originating process within the time limited by these rules does not prevent a plaintiff from commencing fresh proceedings by filing another originating process. Rule 2.7 of the Corporations Rules provides that:

“(1) As soon as practicable after filing an originating process and, in any case, at least 5 days before the date fixed for hearing, the plaintiff must serve a copy of the originating process and any supporting affidavit on:

(a)   each defendant (if any) to the proceeding; and

(b)   if the corporation to which the proceeding relates is not a party to the proceeding – the corporation.”

67. Rule 1.12 of the UCPR (as applied by r 1.10 of the Corporations Rules) authorises the Court to extend the time fixed by r 2.7 of the Corporations Rules for service of an originating process, even after the relevant time expires. Mr Williams submits, by reference to authority, that r 1.12 confers a discretion which is not in terms fettered, but a plaintiff seeking an extension of time must establish a proper reason for it being granted; the plaintiff has the burden of satisfying the Court that good reasons exist for exercising the discretion to extend time; and a defendant has no right to retain the benefit of expiry of the limitation period, but this is a “relevant factor” where a plaintiff is seeking an extension of time. Rule 12.11 of the UCPR in turn permits the Court to set aside an originating process that is stale, in the sense of being incapable of valid service, and s 63(3) of the Civil Procedure Act 2005 (NSW) ("CPA”) authorises the Court to set aside a proceeding or an originating process where there has been a failure to comply with the rules of the Court.

68. In its “roadmap” of its submissions, Atradius submits that the Court would grant orders nunc pro tunc extending the time for service of its stale Originating Process. It submits, uncontroversially, that the Court has a discretion to extend time for service otherwise required by r 2.7 of the Corporations Rules and UCPR r 6.2(4). It summarises its position as that it has demonstrated a proper basis for the exercise of the discretion in its favour because:

[Atradius’] failure to serve in accordance with the Corp[ation]s Rules, and [the] UCPR was intended to conduct the proceeding efficiently; viz, to delay substantive steps until after it had completed investigations authorised by ASIC. Its actions were not capricious. It commenced the proceeding to avoid any potential limitations defence. Its expectation was and is that the [2022 SoC] would be modified following examinations and any steps taken in advance of the examinations would be wasteful ...

the fact that the O[riginating] P[rocess] was allowed to go stale, and not served within the time required by r 6.2(4) UCPR was inadvertent and arose from an unanticipated delay in the time between applying for relief from the obligation to serve the O[riginating] P[rocess] under Corp[oration]s Rule 2.7 and the hearing of this application, including by reason of it being heard at the same time as the [D]efendants’ subsequently filed and related Interlocutory Processes ….

if relief is not granted the Plaintiff may suffer highly material prejudice, viz litigation of an important and serious matter in respect of substantial financial impact on a large body of creditors which warrants determination on the merits …

given that the proceedings were commenced six years after the entry into the Standstill Agreements for the avowed purpose of attempting to avoid the effect of any limitation period, it is reasonable for the Court to infer there is a risk that in any new proceedings the plaintiff would be met with limitation arguments that create substantial uncertainty, and increase costs, without allowing the substance of the claim to be determined …

alternatively, if a new proceeding is commenced, and it is not time barred, the commencement of a new proceeding will necessarily lead to duplicated cost and waste and will not reflect efficient conduct of the litigation ...

[Atradius] has demonstrated that it has standing …

[Atradius] has disclosed an arguable claim appropriate for determination at a trial …”.   

69. I address each of these matters below. As will emerge below, I do not accept several of these submissions. In particular, the proposition that Atradius’ failure to serve the Originating Process was intended to promote efficiency does not address the fact that Atradius identified its proposed claims long ago and has had a long period in which to seek authorised applicant status for examinations and conduct them and does not explain its delay in doing so; there was no “unanticipated” delay in hearing Atradius’ application, but Atradius instead sought its adjournment on several occasions before the Interlocutory Process was served on the Defendants at the Court’s request, and the application could readily have been heard in late 2022 had Atradius sought to have that occur; Atradius’ submission as to prejudice assumes the existence of a limitation period which it does not accept applies, although I accept it will suffer some prejudice by way of wasted costs and a risk that a limitation period in fact applies if the application does not proceed; and Atradius has not sought to show that it should be permitted to conduct the proceedings for creditors other than itself and no issue as to other creditors arises. I also address the issues as to standing and whether Atradius has identified an arguable case below.

70. In their “roadmap” of submissions, the KM Defendants in turn point to several factors which they contend have the result that the Court not exercise its discretion in Atradius’ favour to extend the time for service of the Originating Process, as follows:

“Atradius has not identified any good reason for any indulgence in relation to the O[riginating] P[rocess] whatsoever.

Atradius has not established any prejudice to it if the proceedings were dismissed.

In particular, Atradius has not established the effect of any expiration of any limitation period on its claim. It puts the matter no higher than that it could cause some uncertainty.

There is no evidence before the Court about what Atradius would do if the proceedings were dismissed.

Unlike the cases involving impecunious liquidators, Atradius has not established any public interest in the proceedings continuing. Atradius gets no support from the cases of [Kogan v Rogulj, in the matter of Rogulj Pty Ltd (in liq) [2021] FCA 1137] and [Liquor National Pty Ltd (in liq) v Australia and New Zealand Banking Group Limited [2020] NSWSC 122] upon which it relies most heavily.

Atradius does not even know if it wishes to prosecute these, or any, proceedings. At best, it says it wishes to preserve a potential limitation period so that it can examine some 15 people to establish whether there is any utility (to Atradius) to bring the proceedings.

Atradius has inadequately explained its delay in filing and serving the O[riginating] P[rocess] in evidence. …

It is of consequence that it was apparent from the breadth of the oral submissions at hearing that the [2022 SoC] may not even articulate the case Atradius says it may wish to bring. Atradius is proposing to serve defendants, including those outside the jurisdiction, with its [O]riginating P[rocess] revealing claims it may not propound. In particular, the [2022 SoC] does not allege any 447A claim as foreshadowed in Atradius’ submissions or any impropriety, which, in submissions, was also averted to.”

71. In their “roadmap” of submissions, the KM Defendants also emphasise that:

“Atradius has delayed filing and serving the O[riginating] P[rocess], which is unexplained and has caused prejudice to the [KM Defendants]:

The dispute resolution provisions of the DOCAs (mediation clauses at cl 22 Transaction [Support] DOCAs and 21 of the Distribution DOCA, but more particularly including cl 19.3 of the Distribution DOCA which is to ensure that creditors receive more than on a winding up), could have been used by Atradius’ insureds but were not;

Facsimile proceedings were commenced and dismissed without determination on the merits by Davies J;

Atradius is extremely well resourced and the delay in commencing proceedings cannot be adequately explained, as Atradius seeks to, on the basis of securing litigation funding;

This delay has caused the [KM Defendants] actual prejudice as they have distributed all funds available to creditors when they could have held funds back pursuant to the provisions of the DOCA to indemnify any claim; and

Particularly in respect of delay between filing and notice of these proceedings (even before delay in service, yet to be effected), the final distribution to creditors was made in the sum of around $16,000,000.”

72. In their “roadmap” of submissions, the Participating Financiers summarise their similar position that:

“In order to establish a proper basis for the exercise of the Court’s discretion to grant [Atradius] an extension of time to serve the Originating Process pursuant to UCPR r 1.12, [Atradius] must demonstrate good reason for the extension being granted …

Where an extension of time for service is sought in order to allow [Atradius] to carry out further investigation of its claims prior to service, the failure by [Atradius] to explain why such investigation was not carried out earlier provides a strong discretionary ground for refusing the extension sought …

[Atradius] has failed to demonstrate good reason for any extension of time to serve the Originating Process being granted…

In particular, [Atradius] has failed to proffer an adequate explanation for the delay in service. Insofar as the explanation for the delay in service is that [Atradius] did not (and does not) wish to serve the Originating Process until it has conducted further investigations (including public examinations), the plaintiff has not adequately explained its delay in conducting such further investigations …”

73. The Participating Financiers also highlight their submissions that the limitations period applicable to Atradius’ claims against the Financiers (by statute or by analogy) have likely expired or, alternatively, if it has not expired, then Atradius would not suffer any prejudice if the relief it seeks is not granted; Atradius has made no attempt at formal service upon any Defendant; notice of the intended proceeding was not given to any Financiers prior to the likely expiration of the applicable limitations period; the Defendants will suffer prejudice if an extension of time for service is granted; Atradius has not led evidence of any prejudice it will suffer if an extension of time for service is not granted; the grant of an extension of time for service in the circumstances of this case would be inconsistent with the overarching purpose in s 56 of the CPA and the dictates of justice as set out in s 58 of the CPA; and, importantly:

“there would be no utility in extending the time for service because [Atradius’] claims are liable to be summarily dismissed (and the problems with [Atradius’] claims that justify summary dismissal cannot be overcome or remedied through further investigation or amendment) …”

74. I address the question of delay and Atradius’ explanation for the delay at this point and address issues as to the scope of the claims identified in the 2022 SoC below. I should first note several of the cases to which Counsel referred, before turning to the application of relevant factors in this case. Ms Whittaker, with whom Ms King and Mr Di Stefano appear for the KM Defendants, draws attention to the observations of Handley AJA (with whom Tobias JA and Basten JA agreed in Pell v Hodges [2007] NSWCA 234 at [44] that:

“A plaintiff who issues proceedings just before the limitation period and only then has the merits of the case investigated should not have any expectation of obtaining an extension of time to enable investigations to continue. There should also be no expectation that time spent in this way after the statement of claim has been issued, especially after it has become stale, will be accepted as an adequate explanation for such delays.”

75. Mr Williams in turn refers to the Court of Appeal’s observation in Arthur Anderson Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 (“Buzzle”) at [43] that:

“Accordingly, the Court should consider, when exercising a discretion such as that under UCPR r 1.12, the attempts that have been made at service, the length of the delay, the reasons for the delay, whether the delay was deliberate, whether notice was given to the defendant, the conduct of the parties generally, and the hardship or prejudice caused to the plaintiff by refusing the renewal or to the defendant by granting it.”

76. That summary was approved by Tobias JA (Macfarlan JA and Sackville AJA agreeing) in Agricultural & Rural Finance Pty Ltd v Kirk [2011] NSWCA 67 (“Kirk”) at [62], [94]-[112]. Mr Williams fairly accepts that the Court must take into account the policy considerations underlying the relevant limitations statute, and that defendants or potential defendants should be made aware of claims against them within a reasonable time and parties who do not commence proceedings until just before expiry of the limitation period should be especially diligent in pursuing prompt service: Buzzle at [37]-[39], cited with approval in Kirk at [98]-[99].

77. Mr Williams also points to Weston in his capacity as Special Purpose Liquidator of One.Tel Ltd (in liq) v Publishing and Broadcasting Ltd (2012) 88 ACSR 80; [2012] NSWCA 79 at [20] and to the relevance of ss 56-59 of the CPA and whether the relevant party has diligently pursued the object of disposing of the proceedings in a timely way; used, or could reasonably have used, available opportunities under the rules or otherwise, to avoid delay; and reasonably implemented the practice and procedure of the court with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination.

78. In Hastie Group Ltd (in liq) v Moore [2016] NSWSC 1682 (“Hastie”), Ball J considered a somewhat similar case where statements of claim were valid for service for six months after the date on which each was filed under UCPR r 6.2(4), and a plaintiff sought and a registrar allowed (ex parte) an extension of time for service under UCPR r 1.12, and the defendants applied to discharge the orders granting that extension of time and set aside service of the statements of claim made pursuant to those orders. His Honour observed (at [45]-[47]) that:

“Although the current form of the rule permitting the court to grant an extension of the time for which an originating process is valid for service does not in express terms require the applicant for an extension to show that the applicant has a good reason for seeking the extension, it is generally accepted, and the plaintiffs conceded in this case, that that is one of the matters that must be demonstrated by the applicant for an extension: see Hunter v Hanson [2014] NSWCA 263 at [59] per McColl JA (with whom Macfarlan and Emmett JJA agreed).

The relevant delay is the delay between the time when the proceedings were commenced and the time when the originating process was served; and it is the length of that delay and the reasons for it which are relevant: see Weston at [168]. On commencement of proceedings, a plaintiff becomes bound by the obligations imposed by ss 56-60 of the [CPA]; and a failure to comply with those obligations is relevant to an exercise of the discretion conferred by UCPR r 12.11(1)(e). Consequently, the fact that an originating process remains valid for service for six months does not mean that the plaintiff can wait six months before serving the originating process with impunity. Indeed, as Sackville AJA pointed out in Weston at [20](4), where proceedings are issued just before the expiration of the limitation period, there is an obligation on the plaintiff to proceed more diligently than otherwise: see also Bishopsgate Insurance Australia Ltd (in liq) v Deloitte Haskins & Sells [1999] 3 VR 863 at [32] per Tadgell and Ormiston JJ (with whom Brooking J agreed); Tolcher v Gordon [2005] NSWCA 135 at [3] per Hodgson JA.

That is not to say, however, that events prior to the time when the proceedings were commenced are irrelevant. Those events may shed light on the delay in question. For example, there is a difference between delays that arise from matters that could have been attended to by the plaintiff before proceedings were commenced but were not and delays that arise from matters that only arose after proceedings were commenced.”

79. His Honour also pointed to relevant prejudice which the defendant in that case would suffer, as a consequence of the delay arising from the extension of time for which the originating process was valid for service, and observed (at [49]) that:

“The court presumes that delay by a plaintiff in bringing or pursuing a claim is likely to cause the defendant prejudice. That prejudice includes the risk the defence may be prejudiced because relevant evidence is lost, witnesses may become unavailable and memories are likely to fade: Weston at [167]ff; Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541; [1996] HCA 25 at 552-3. In the case of claims against individuals, it may also be presumed that the defendants will suffer prejudice as a consequence of the stresses and strains that allegations going to their probity or competence are likely to place on them: see Bishopsgate at [60]; Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2004] NSWSC 1219 at [70]; Weston at [173].”

210. Paragraphs 75 and 76 of the proposed 2022 SoC are the only point at which Atradius invokes s 447A of the Act, in seeking to modify Pt 5.3A of the Act so that the IPSC applies or the former s 536 of the Act applies, if the IPSC would otherwise not apply. No party presently suggests that the IPSC does not apply. It became increasingly apparent in Mr Williams’ oral submissions that Atradius would put greater weight on that section, as its lack of standing under s 90-15 of the IPSC emerged, and Mr Williams identified the possibility that the Court would have jurisdiction to grant relief under s 447A by reference to the case law. Mr Williams also submits that the Court has power to invalidate the DOCAs under s 447A of the Act, rather than modifying the DOCAs. The submission does not assist Atradius, where it has presently not sought such relief and, even if it did so, makes no claim that the documents which allow the Financiers the right to the Moly-Cop Proceeds should be set aside.

211. It seems to me that the 2022 SoC does not connect the identified facts to, or provide any indication how the very broad remedies sought would be supported by, an exercise of the Court’s jurisdiction under s 447A of the Act. The only claims under s 447A of the Act that are identified in the 2022 SoC do not support the relief sought in the 2022 SoC and incorporated in the Originating Process. Even if Atradius has standing to pursue a claim under that section, the fact that it has not identified its factual basis and how it supports the relief sought is a further reason not to extend the time for service of the Originating Process, referring to the relief sought in the 2022 SoC, in its present form.

212. It is not necessary to address Mr Collinson’s further submission that s 90-15 of the IPSC does not confer a power on the Court to grant relief adverse to the Financers, given the narrow relief that Atradius presently seeks under that section and the conclusions I have reached on other grounds.

Atradius’ claim to relief under s 536 of the Act

214. The Originating Process also seeks relief under s 536 of the Act. That section has been repealed and Mr Williams did not contend that it had any transitional application in the present facts. I need not address the claim under that section further.

Atradius’ claim to relief in equity

215. Atradius identifies a claim for relief in equity in the Originating Process. Mr Williams also suggests, possibly, that the Court may have power to set aside the arrangements with the Financiers in equity, although Atradius does not seek to have the Court do so or identify any factual basis on which it could do so in the Originating Process or the 2022 SoC to which it refers.

216. Ms Whittaker responds that the 2002 SoC pleads that the KM Defendants owed the KM Uberrimae Fidei Duty to creditors (with the duty pleaded at 2022 SoC [49], with the alleged breach pleaded at 2022 SoC [55]-[56]); the “Diligence”, “Good Faith” and “No Advantage” duties owed to the Arrium Administration Companies (with the duty pleaded at 2022 SoC [57] and the alleged breach pleaded at 2022 SoC [58] and [59], and also relied on at 2022 SoC [63], [67], and [72]); and an alleged “Application Disclosure Duty”, implicitly owed to the Court (with the duty pleaded at 2022 SoC [60] and the alleged breach pleaded at [62]); a “439A Report Duty” to the creditors (with the duty pleaded at [64] and the alleged breach at [66]); and a “DOCA Execution Duty” which does not specify to whom it is owed (with the duty pleaded at [68] and the alleged breach at [71]). I have noted several difficulties with the form of those claims above.

217. Ms Whittaker submits that Atradius lacks standing to bring those causes of action, presumably on the assumption that they are properly characterised as claim to relief in equity rather than matters relied on to support the claim under IPSC s 90-15 which I have addressed above. Ms Whittaker submits and I accept that the KM Uberrimae Fidei Duty and 439A Report Duty are pleaded to be owed to creditors and, as Atradius is not a creditor, it does not have standing to bring such a claim against the KM Defendants, assuming such a claim could properly be treated as a claim in equity. She submits that the Diligence, Good Faith, and No Advantage Duties would be owed to the Arrium Administration Companies, and that Atradius does not explain how it has standing to pursue a claim on behalf of one or more of those entities, all of which have been sold or deregistered, other than for nine that are in liquidation and controlled by the KM Defendants as their liquidators. I bear in mind that a derivative claim may be available in equity, although Atradius has not presently sought to establish that it should be permitted to pursue it.

218. Ms Whittaker also submits that the Application Disclosure Duty is pleaded to be owed to the Court and, if anyone has standing to bring an action for breach of that duty, it would be a party to the proceeding in which that duty applied. She accepts that a creditor or other party to the DOCAs might fall in that category but submits that Atradius is neither, and no right to such a claim was assigned by the Stirling Assignment. Ms Whittaker also submits that the DOCA Execution Duty is not pleaded to be owed to any group in particular and is not maintainable on that basis, and that Atradius is not a party to the DOCAs and therefore has no standing in respect of any right or interest arising under their terms. She submits that Atradius lacks standing to seek any relief “in equity”, and that that head of relief in the Originating Process should be “struck out and summarily dismissed”.

219. It seems to me preferable not to decide the question of Atradius’ standing to bring claims “in equity”, where it is not apparent that any of these claims, with the possible exception of the claim referable to the uberrimae fidei duties, are properly characterised as equitable in nature. It seems to me that, for the reasons noted above, Atradius largely does not adequately identify the factual basis for such claims in the 2022 SoC, or how they support the relief sought, and that is a further reason why the Court should not now permit the Originating Process to be served out of time.

Releases, exclusion of liability and exclusive jurisdiction clauses

220. Ms Whittaker also submits that these proceedings are barred by the DOCAs as they are in breach of the releases and exclusion of personal liability clauses.

221. In its “roadmap” of submissions, Atradius identifies its several responses to this submission, namely:

““Neither the termination of the DOCA, nor the releases in the DOCAs provide a bar to obtaining relief, nor would determination of those issues on a summary basis be appropriate.

Relief under s 447A of the [Act] is wide enough to modify the effect of Part 5.3A to ensure that the terms of the DOCAs do not provide an obstacle to necessary relief: QBI [at] [47]-[55].

Further, or alternatively, releases are limited to those matters specifically in the contemplation of the parties at the time the release was given and must be construed having regard to the circumstances to which the relevant instrument was intended to apply. The current claim brought by [Atradius] is not one in the contemplation of the parties, and was not a Claim arising out of circumstances on or before the Appointment Date (as defined in the DOCAs). Additionally, the question of whether the releases in the DOCA for pre-administration claims can be relied on where [Atradius] has an arguable case that the Defendants during the administration breached the [uberrimae fidei d]uty, or whether the releases can be relied on, or ought to be read down or construed in accordance with those circumstances, is not an issue which should properly be determined on a summary dismissal application …

Further, or alternatively, it is not open to the Court to determine on a summary basis that the releases relied upon by the KM [D]efendants in cl 21.2 of the Transaction Support DOCA, or cl 20.2 of the Distribution DOCA are effective.

Those releases must be construed in light of cl 19.1 (a) & (b) of the Transaction Support DOCAs (including the reference to Other Arrium DOCAs) and cl 19.3 of the Distribution DOCA. Construed together, the Court could not conclude that the releases are effective until the KM Defendants have undertaken the process required by cl 19.3 of the Distribution DOCA to ensure the aggrieved creditors are not “materially and unfairly prejudiced”, compared to a liquidation ...

No evidence has been led by the KM Defendants that they have undertaken the work required by cl 19.3. Nor has evidence been led by the KM Defendants as to the position of unsecured creditors in liquidation in order for the Court to determine the question of material or unfair prejudice …

Further even if such evidence had been led, it is not a matter the Court would determine on a summary basis ...

Further, or alternatively, a plaintiff against whom a release is pleaded by way of defence, can possess an equity to restrain an unconscientious reliance on general words in a release by a defendant. If [Atradius] has an arguable case that the Defendants have breached the [uberrimae fidei duty], the question of whether the releases operate as a defence to the Defendants’ claims are unsuitable for determination on summary dismissal …”    

222. Mr Williams in turn submits that, so far as the KM Defendants and the Financiers rely on releases under the DOCAs, the Court could grant relief under s 447A of the Act to ensure that the terms of the DOCAs do not provide an obstacle to relief, and refers to QBI CorpPty Ltd v Plantation Rise Pty Ltd (2010) 77 ACSR 573 in that respect. I will assume, without deciding, that such a claim may be available and that Atradius may have standing to advance it, although it is not presently advanced in the Originating Process or the 2022 SoC to which it refers. Mr Williams also raises the possibility that the terms of the releases might be read down by principles of construction or in equity, referring to cases including Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23 and the decision of the Court of Appeal in Reid v Commonwealth Bank of Australia [2022] NSWCA 134.

223. It is not necessary to address the release provisions of the Distribution DOCA and the Transactional Support DOCAs, to which the KM Defendants refer, having regard to the conclusions which I have reached above on other grounds.

Abuse of process

224. The Participating Financiers also contend that the proceedings, or alternatively the claim for relief against the Financiers, is an abuse of process. They provide in their “roadmap” of submissions that:

“the claim for relief against the Financiers does not disclose a reasonable cause of action, in that the impugned arrangement reflected in the Standstill Agreements and Override Deed cannot give rise to a breach of the alleged ‘uberrimae fidei’ duty by the Financiers, because the arrangement: (i) was neither secret in terms nor secret in fact; (ii) did not confer a relevant advantage upon the Financiers or relevantly disadvantage the other creditors.”

225. I have addressed that issue in dealing with Atradius’ formulation of its claim for breach of that duty above.

226. The Participating Financiers also contend that Atradius lacks standing to seek the relief it claims in the Originating Process (by reference to the 2022 SoC), in that it is not “a person with a financial interest in the external administration of” the 94 companies in respect of which it seeks orders under s 90-15 of the IPSC; Atradius claims relief “on behalf of the Aggrieved Creditors”, but the proceeding is not a representative proceeding, and Atradius has no authority to commence or pursue claims on behalf of other persons; and Atradius is not a person to whom the ‘uberrimae fidei’ duty allegedly breached by the Financiers was owed, because it was not a creditor who participated in “negotiating a composition of the debts of the Arrium Administration Companies” (SOC [50]), and the claim for relief for breach of such duty was not validly assigned to it by Sterling.

227. Atradius summarises its response in its “roadmap” of submissions, namely that the proceeding should not be stayed as an abuse of process, because Atradius has not engaged in forensic manoeuvring for its advantage; and nothing about the prosecution of the claim would bring the administration of justice into disrepute, but rather litigation of an important and serious matter in respect of substantial financial impact on a large body of creditors warrants determination on the merits.

228. I have addressed these issues in dealing with the exercise of the Court’s discretion to extend the time for service of the Originating Process above; and they would also have been relevant to whether the SoC would be struck out, had it been filed. Another relevant factor may have been the arguable unfairness involved in Atradius commencing the proceedings, not giving notice of them to the KM Defendants until after it and other participants to the Distribution DOCA received the sixth distribution, and then seeking to proceed with them without returning the KM Defendants to the position which would have existed had it given prompt notice of the proceedings give rises to an abuse of process. It is not necessary to decide the question of abuse of process given the findings that I have reached above, including as to the relevance of those matters to the Court’s discretion whether to extend the time for service of the proceedings.

Exclusive jurisdiction clauses

229. The KM Defendants initially relied on exclusive jurisdiction clauses under the DOCAs. Mr Collinson, for the Participating Financiers, joined in a submission that the proceedings should be dismissed or permanently stayed as it has been commenced in breach of exclusive jurisdiction clauses in the DOCAs. Atradius summarised its response in its “roadmap” of submissions, namely that is entitled to bring the proceeding in this Court; the DOCAs have been terminated and the exclusive jurisdiction clauses do not survive termination; and, in any event, ss 1337H and 1337L of the Act provides a mechanism for the transfer of the proceeding, if necessary. It seems to me that these clauses are unlikely to have assisted the KM Defendants or the Financiers, where it appears that they do not have any continued operation after termination of the DOCAs. However, it is not necessary to determine that question, given the findings that I reached above on other grounds.

Determination as to Atradius’ Interlocutory Process

230. In summary, it seems to me that the Court should not extend the time to serve Atradius’ Originating Process and should dismiss the proceedings for reasons that include at least five matters. First, Atradius has not provided a sufficient explanation of its delay in seeking litigation funding (to the extent that it wished, as distinct from needed, to obtain such funding) or seeking to undertake examinations, where it identified the large part of the claims it sought to bring several years ago, at least by the point it formulated substantially the same claims in the 2017 SoC. Second, the KM Defendants would suffer substantial and irremediable detriment from Atradius’ delay in serving the Originating Process (or at least notifying the KM Defendants of the commencement of the proceedings) when they paid out the final dividend under the Distribution DOCA, including to Atradius, after Atradius had commenced the proceedings but before it gave notice of them or served them, where that amount would otherwise have been available to fund its defence and possibly any order for compensation sought against it in respect of the Metpol transaction.

231. Third, Atradius has failed to identify, in the 2022 SoC to which the Originating Process refers, either the factual basis of any contention that unsecured creditors would have access to the Moly-Cop Proceeds or other monies paid to the Financiers in a deed administration (as distinct from a liquidation), apart from the Standstill Agreements and Override Deed, or that unsecured creditors received a lesser distribution in the deed administration than they would have received in a liquidation in which they would have had the benefit of the ASIC DOCGs. I recognise that an order for pleadings has not been made and Atradius has not sought to file the 2022 SoC. Nonetheless, the Originating Process identifies the relief that is sought by Atradius as set out in the 2022 SoC, and necessarily implies that relief is sought on the basis set out in the 2022 SoC. Although Mr Williams departed from the 2022 SoC in submissions, as I noted above, I did not understand him to contend that the Court and the Defendants on which the Originating Process and 2022 SoC is to be served should not treat the 2022 SoC as genuinely indicating the case that Atradius seeks to put, but instead as surplusage or a distraction from that case. It seems to me that the Originating Process and the 2022 SoC as incorporated by cross-reference in it would not allow the Defendants to identify the case put against them and does not identify a basis for the large part of the relief claimed. I do not neglect Mr Williams’ submission that the 2022 SoC may be “imperfect” but could be amended at some later point. The issues that I have addressed above seem to me to be too substantial to allow that course, and are an additional reason that the Court should not exercise a discretion to extend the time for service of the Originating Process in its present form.

232. Fourth, Atradius does not have standing to seek the relief it seeks under s 90-15 of the IPSC, and does not identify the basis on which the wide relief that it seeks could be justified on other bases, including under s 447A of the Act and in equity.

233. Fifth, Atradius seeks relief against numerous Financiers, which it could not obtain without setting aside contractual arrangements which it does not seek to set aside and which it could not properly set aside, because of the issue estoppel that arises from the FCA Proceedings as to the operation and effect of those arrangements. I should not extend the time for service of the Originating Process where it seeks to commence proceedings against the Financiers which cannot properly be commenced.

234. These matters individually would likely be sufficient to have the result that the orders sought by Atradius should not be made and the proceedings should be dismissed, but the proper result is clear where all these matters and the other issues I have addressed above in this judgment arise. I will therefore not make the second order sought by Atradius in the Further Amended Interlocutory Process under UCPR r 1.12, that the Originating Process be valid for service for a further period, where it has not been served within the time limits specified in UCPR r 6.2(4) and r 2.7 of the Corporations Rules. For these reasons, I will also not make the first order sought by Atradius by its Further Amended Interlocutory Process filed during the course of the hearing, in alternative forms, to extend the time for service of the Originating Process indefinitely, or to 31 October 2023 or alternatively to six weeks from the date of this judgment. There is also force in the KM Defendants’ further submissions in that respect that an indefinite extension is “completely untenable”; there is no certainty that examinations will be conducted by 31 October 2023, and that date is therefore speculative.

235. I should, for completeness, identify two other issues, which I need not determine. There was reference in this hearing to the fact that ASIC had authorised Atradius to conduct examinations and that Atradius had then brought an application for the issues of examination summonses and orders for production in this Court, which had been deferred pending the determination of these proceedings, and that time had been “reserved” for its proposed examinations in September 2023. No evidence was lead in this hearing as to whether, first, Atradius had drawn ASIC’s attention to the issues that I have addressed above as relevant to the question whether it should be authorised to conduct the examinations; or, second, it had drawn those issues to the Registrar’s attention as relevant to an ex parte application for the issue of examination summonses and orders for production by this Court. I do note that Atradius did not draw these matters to my attention in its evidence or correspondence in support of its initial ex parte application for orders deferring service of these proceedings, which I did not hear on an ex parte basis. I need not address these issues further, where I was informed that the KM Defendants have brought other proceedings challenging the authorisation granted by ASIC to Atradius and the first of them can properly be determined in those proceedings. The second, which may be relevant to whether this Court should authorise the numerous examinations that Atradius wishes to conduct or require production of documents or continue to “reserve” time for Atradius’ proposed examinations in September 2023, is, at least in the first instance, a matter for the Registrar who is dealing with that application in this Court.

Determination as to the KM Defendants’ Interlocutory Process

236. By Amended Interlocutory Process filed on 3 February 2023, the KM Defendants sought an order discharging any order extending the validity for service of the Originating Process. No such order was previously made and this question does not arise. Second, the KM Defendants sought an order refusing leave to file the proposed Statement of Claim. Atradius does not seek leave to file that Statement of Claim, as distinct from cross-referring to the relief sought in it in its Originating Process, so this question also does not arise. Third, the KM Defendants seek an order setting aside the Originating Process and/or the proceedings, an order dismissing the proceedings or alternatively an order that the proceedings be permanently stayed in the Court’s inherent jurisdiction.

237. Ms Whittaker recognised that application is largely the converse of Atradius’ application. I am satisfied that orders should be made setting aside the Originating Process and dismissing the proceedings, consequential upon my finding that the time for service of the Originating Process should not be extended. For completeness, I note that the KM Defendants submit that the public interest favours dismissal of the proceeding, on the basis that the proceedings are antithetical to policy and principle underlying Part 5.3A of the Act. It is not necessary to address that submission in order to determine the application.

Determination as to the Participating Financiers’ Interlocutory Process

238. By their Further Amended Interlocutory Process filed, by leave, on 4 April 2023, the Participating Financiers sought an order that the proceedings be dismissed under UCPR r 13.4, or alternatively in the Court’s inherent jurisdiction, or that they permanently be stayed under s 67 of the CPA or in the Court’s inherent jurisdiction; or that the proceedings and Originating Process be set aside under UCPR r 12.11 (1) or under s 63(3) of the CPA. Mr Collinson submits, and I accept that where the Court does not grant the interlocutory relief that Atradius requires, in order to allow it to proceed with the Originating Process that is now stale, then the Originating Process and the proceedings should be dismissed.

Dismissal of proceedings

239. For the reasons noted above, I am satisfied that the proceedings should be dismissed where they were not served within the times required by UCPR r 6.2(4) and r 2.7 of the Corporations Rules and I have found that those times should not be extended.

Orders

240. I direct the parties to bring in agreed orders to give effect to this judgment, including as to costs, within 7 days or, if there is no agreement between them as to those orders, their respective draft minutes of order and submissions not exceeding 6 pages in Arial font 12 and one and a half spacing as to the differences between them.

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Amendments

15 May 2023 - Edit to case title

Decision last updated: 15 May 2023