ROBERT MICHAEL KIRMAN as joint and several administrators of TIGER RESOURCES LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
CITATION:   ROBERT MICHAEL KIRMAN as joint and several administrators of TIGER RESOURCES LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) [2021] WASC 411
CORAM:   MASTER SANDERSON
HEARD:   19 NOVEMBER 2021
DELIVERED          :   24 NOVEMBER 2021
FILE NO/S:   COR 202 of 2021
BETWEEN:   ROBERT MICHAEL KIRMAN as joint and several administrators of TIGER RESOURCES LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)

ROBERT CONRY BRAUER as joint and several administrators of TIGER RESOURCES LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
Plaintiffs
AND
YINGKOU YANGZHOU TRADE CO LTD
First Interested Party
JINJI RESOURCES FINANCE PTY LTD
Second Interested Party
KIPOI HOLDINGS MAURITIUS LTD
Third Interested Party

Catchwords:

Corporations law - Application by administrators of Deed of Company Arrangement for directions - Turns on own facts

Legislation:

Corporations Act 2001 (Cth)

Result:

Directions given

Representation:

Counsel:

Plaintiffs	:	JK Taylor SC & P Edgar
First Interested Party	:	J Abberton
Second Interested Party	:	J Abberton
Third Interested Party	:	J Hutton

Solicitors:

Plaintiffs	:	Norton Rose Fulbright Australia
First Interested Party	:	Lavan
Second Interested Party	:	Lavan
Third Interested Party	:	Clayton Utz

Case(s) referred to in decision(s):

Re Ansett Australia Ltd (No 3) 115 FCR 409

MASTER SANDERSON:

After hearing argument on this matter, I made the following orders:
1.The time for hearing of the application is abridged.
2.Pursuant to section 90 - 15 of the Insolvency Practice Schedule (Corporations) (IPS) at Schedule 2 of the Corporations Act 2001 (Cth) (Act), the plaintiffs are justified in transferring all of the shares in Tiger Resources Limited (Subject to Deed of Company Arrangement) (Company) to Yingkou Yangzhou Trade Co Ltd or its nominee.
3.The plaintiffs' costs of and incidental to this application be costs in the deed of administration of Company, and be paid out of the assets of Company.
The matter was brought on urgently for reasons that will become apparent later in these reasons. I should note that this application was served on Yingkou Yangzhou Trade Co Ltd (YYT), Jinji Resources Finance Pty Ltd (Jinji) and Kipoi Holdings Mauritius Limited (KHML). Those parties were designated respectively the first, second and third interested parties. YYT and Jinji supported the plaintiff's application. KHML opposed the application to a limited extent.
The background facts were not controversial and can be summarised as follows. The plaintiffs' are the jointly and several deed administrators of Tiger Resources Limited (Subject to Deed of Company Arrangement) (Tiger). On 19 February 2021 the company and the plaintiffs executed a document titled 'Deed of Company Arrangement' (DOCA). Pursuant to the terms of the DOCA, the plaintiffs are required to transfer the shares of Tiger to YYT or its nominee. The point of the application and the effect of the orders that I made was to confirm the administrators were justified in transferring the shares to YYT.
On 28 October 2021 I gave leave pursuant to section 444GA(1)(b) of the Corporations Act 2001 (Cth) for the shares in Tiger to be transferred to YYT. KHML appealed that decision. On 10 November 2021, on the application of KHML, the Court of Appeal granted orders staying the 444GA transfer on certain conditions. One of those conditions included that KHML pay $8,983,000 into Court as security as an undertaking as to damages by 4 pm on 17 November 2021.
On 17 November 2021, KHML through its solicitors provided notice to the deed administrators that the security would not be paid. KHML acknowledged the consequence of the non-payment was that the stay would lapse. The letter from KHML's solicitors specifically reserved to KHML the right to claim relief against the deed administrators (including monetary amounts) arising from any transfer of the shares in circumstances where the deed administrators were on notice of the prospect and the implications of a successful appeal.
On 18 November 2021, YYT's solicitors confirmed it was YYT's position the deed administrators were required to transfer the shares within two business days - that is by 19 November 2021. They further advised that costs in an amount of US $50,000 per day was being incurred in relation to the care and maintenance of the Kipoi copper mine.
Pursuant to clause 10.1 of the DOCA on the Effectuation Date:
(a) The transfer of Tiger shares to YYT had to be effected.
(b) Control of Tiger reverted to its directors and the deed administrators would not have any obligation or responsibility for the affairs of the company.
(c)The DOCA would terminate.
Also pursuant to cl 10.1 of the DOCA the deed administrators and the proponent could agree to amend the Effectuation Date in writing. The deed administrators requested YYT to agree to a short extension of the Effectuation Date. YYT declined to do so. They were perfectly entitled under the terms of the DOCA to take that cause.
The plaintiffs' were in a difficult position. On the one hand, they were satisfied they were contractually bound pursuant to the DOCA to transfer the Tiger shares to YYT. On the other hand, they had been put on notice by KHML that if they took that cause they might well be subject to suit if KHML's appeal was successful. The deed administrators were not in a position to know what the outcome of the appeal might be. A reading of the transcript of the stay application before the Court of Appeal and consideration of the Court of Appeal's reasons for granting the stay indicated the court thought the appeal was arguable but understandably they were not in a position to go further.
It must be said it is difficult to see what cause of action KHML may have against the deed administrators. During the course of his submissions, I asked counsel for KHML if he could identify what cause of action may lie. He indicated it would relate to the administrators being aware that if the shares were transferred to YYT or its nominees any restitutional remedy KMHL may have had against YYT could potentially be lost. This point clearly exercised the minds of the judges of the Court of Appeal and at least in part was responsible for granting the stay. That said, it is difficult to actually find a jurisprudential basis upon which the administrators could be liable if YYT, subsequent to the transfer to them of the shares pursuant to the DOCA, decided to move the shares to a third party. Nonetheless counsel did not askew the prospect of action being taken against the administrators.
Under Schedule 1 of the Corporations Act s 90 - 15 of the Insolvency Practice Schedule (Corporations) (IPS) the court is empowered to 'make such order as it thinks fit in relation to the external administration of a company'. The precursor to this section was s 447D. The authorities in relation to that earlier section inform the proper interpretation of s 90 - 15. The deed administrators had standing under s 90 -15 (2) of the IPS to seek directions.
The proper approach to the giving, of what is effectively judicial advice, was set out by Goldberg J in Re Ansett Australia Ltd (No 3) 115 FCR 409. His Honour said [65]
This review of the authorities satisfies me that the prevailing principle adopted by the courts, when asked by liquidators and administrators to give directions, is to refrain from doing so where the direction sought relates to the making and implementation of a business or commercial decision, either committed specifically to the liquidator or administrator or well within his or her discretion, in circumstances where there is no particular legal issue raised for consideration or attack on the propriety or reasonableness of the decision in respect of which the directions are sought. There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised. It is insufficient to attract an order giving directions that the liquidator or administrator has a feeling of apprehension or unease about the business decision made and wants reassurance. There must be some issue which arises in relation to the decision. A court should not give its imprimatur to a business decision simply to alleviate a liquidator’s or administrator’s unease. There must be an issue calling for the exercise of legal judgment.
The authorities are to the effect that the protections offered to an external administrator by directions of the court are that the administrator will be protected from liability for any alleged breach of duty to a creditor, a contributor or to the company, in respect of anything done by him in accordance with the direction. This protection is predicated on there being full and fair disclosure to the court of all material facts relevant to the direction being sought. The provision is consistent with the protection offered to trustees under the Trustees Act 1962 (WA) and administrators of a will under the Administration Act 1903 (WA).
In my view, there was no question in this case the deed administrators were entitled to the orders they sought. On the one hand they were acting in conformity with the DOCA. If they did not do so they would have been liable to be sued by YYT. In fact, it is difficult to see how they could have resisted an application for a mandatory injunction were YYT to take that step. On the other hand, they were threatened by KHML and although any immediate action is unlikely, it is possible the deed administrators might have been sued months or even years after the transfer was effected. The administrators rightly did not want that prospect hanging over their heads.
During the course of their submissions, counsel for KHML did submit that the direction, if it was made, should be subject to YYT's undertaking to transfer the shares to a third party. Given YYT's attitude, it is difficult to see how any such condition could have been imposed. YYT indicated it would not give such an undertaking. In the circumstances I could see no basis for any order being made conditional.
This was a clear case where the directions sought by the deed administrators were not only reasonable but necessary to protect their position. Accordingly, I made the orders set out above.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AH
Associate to Master Sanderson
24 NOVEMBER 2021

The Supreme Court of Western Australia considered an application by the administrators of Tiger Resources Limited (Subject to Deed of Company Arrangement) to seek directions on the transfer of shares in the company. The matter was brought urgently due to the impending expiration of the Effectuation Date as per the Deed of Company Arrangement (DOCA). The administrators, appointed to manage the company's affairs under the DOCA, sought to transfer the shares to Yingkou Yangzhou Trade Co Ltd (YYT) or its nominee, as stipulated in the DOCA. The application arose because of an appeal by Kipoi Holdings Mauritius Limited (KHML), which had previously secured a stay on the transfer of shares by the Court of Appeal. The stay was contingent on KHML providing security, which it failed to do, causing the stay to lapse. YYT, the intended recipient of the shares, insisted on the transfer proceeding as per the DOCA, while KHML reserved the right to seek relief against the administrators.

The legal issues before the court centred on whether the administrators were justified in transferring the shares to YYT, given the terms of the DOCA and the potential legal consequences if the appeal by KHML were to succeed. The court had to determine if the administrators could obtain directions from the court to proceed with the transfer, thereby protecting themselves from any potential liability arising from KHML's appeal. The court also had to consider the consequences of not granting the directions, including the possible financial repercussions for YYT and the administrators' ongoing obligations under the DOCA.

In delivering the decision, Master Sanderson noted that the administrators were contractually bound to transfer the shares to YYT under the DOCA. The court referenced the principle from Re Ansett Australia Ltd (No 3) 115 FCR 409, which stated that courts should not give directions on business decisions unless a legal issue is raised. However, the court found that the administrators had a legitimate concern due to the threat of future action by KHML if the shares were transferred. The administrators' position was further complicated by their obligation to YYT. Given the imminent expiration of the Effectuation Date, the court concluded that the administrators were justified in seeking directions to proceed with the transfer to protect themselves from potential future claims by KHML. The court made the orders requested by the administrators, confirming their justification to transfer the shares to YYT.

The Supreme Court of Western Australia granted the administrators the directions they sought, allowing them to transfer the shares to YYT. The court also ruled that the administrators' costs of and incidental to the application would be costs in the deed of administration and paid out of the assets of Tiger Resources Limited. The orders provided the administrators with the necessary protection to proceed with the transfer, ensuring compliance with the DOCA while mitigating the risk of future legal action by KHML.

CaseChat Overview and Summary

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Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established