Ryan, in the matter of Kingsrose Mining Limited (Administrators Appointed)
[2017] FCA 621
•9 March 2017
FEDERAL COURT OF AUSTRALIA
Ryan, in the matter of Kingsrose Mining Limited (Administrators Appointed) [2017] FCA 621
File number: QUD 942 of 2016 Judge: REEVES J Date of judgment: 9 March 2017 Catchwords: CORPORATIONS – application for order pursuant to s 447A to vary the liability of administrators under s 443A of the Corporations Act 2001 (Cth) – application granted Legislation: Corporations Act 2001 (Cth) Cases cited: Mentha, in the matter of Griffin Coal Mining Company Pty Ltd (administrators appointed) (2010) 82 ACSR 142; [2010] FCA 1469 Date of hearing: 9 March 2017 Registry: Queensland Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 6 Counsel for the Applicants: Mr JB Sweeney Solicitor for the Applicants: King and Wood Mallesons ORDERS
QUD 942 of 2016 IN THE MATTER OF KINGSROSE MINING LIMITED (ADMINISTRATORS APPOINTED) (ACN 112 389 910), MM GOLD PTY LTD (ADMINISTRATORS APPOINTED) (ACN 001 962 723) AND NATARANG OFFSHORE PTY LTD (ADMINISTRATORS APPOINTED) (ACN 007 006 877)
MICHAEL JOSEPH RYAN AND IAN CHARLES FRANCIS IN THEIR CAPACITY AS JOINT AND SEVERAL ADMINISTRATORS OF KINGSROSE MINING LIMITED (ADMINISTRATORS APPOINTED) (ACN 112 389 910)
Applicants
JUDGE:
REEVES J
DATE OF ORDER:
9 MARCH 2017
THE COURT ORDERS THAT:
1.Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (“the Act”), Part 5.3A of the Act is to operate, in relation to Kingsrose Mining Ltd (Administrators Appointed) (“KRM”), so that:
(a)the liability of the applicants for the repayment of moneys borrowed pursuant to any loan agreements entered into by KRM with MJ Andrews or other third parties, in the form of or substantially in the form of the draft agreement exhibited as MJR-16 to the affidavit of Michael Joseph Ryan sworn 3 March 2017 (“Convertible Facility Agreement”), is limited as provided for by the provisions of the Convertible Facility Agreement, and without limitation, by clause 17 thereof; and
(b)the operation of sub-sections 443A (1) and (2) of the Act is modified (so far as it applies to the liability of the applicants, in their capacities as the joint and several administrators of KRM, for debts they incur pursuant to any such Convertible Facility Agreements entered into, up to an aggregate amount of US$10 million) so as to permit the liability of the applicants (whether for the repayment of money borrowed, or interest in respect of money borrowed, or borrowing costs) to be limited in the manner provided for by the provisions of the Convertible Facility Agreements.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
EX TEMPORE REASONS FOR JUDGMENT
REEVES J:
Under s 443A(1)(d) of the Corporations Act 2001 (Cth) (the Act), the administrator of a company is liable for any debts he or she incurs in the performance or exercise, or purported performance or exercise, of any of his or her functions or powers as administrator. However, under s 447A(1), the Court has the power to make such order as it thinks appropriate about how Part 5.3A (which includes s 443A) “is to operate in relation to a particular company”.
The administrators appointed to Kingsrose Mining Limited wish to enter into a non-recourse convertible facility agreement (the facility agreement) to allow them to borrow funds to continue to conduct the business of Kingsrose. Accordingly, they have sought to take the benefit of that provision. The principles governing the operation of s 447A were summarised by Gilmour J in Mentha, in the matter of Griffin Coal Mining Company Pty Ltd (administrators appointed) (2010) 82 ACSR 142; [2010] FCA 1469 (Mentha) as follows (at [30]):
(a)the proposed arrangements are in the interests of the company's creditors and consistent with the objectives of Part 5.3A of the Corporations Act …
(b)typically the arrangements proposed are to enable the company's business to continue to trade for the benefit of the company's creditors …
(c)the creditors of the company are not prejudiced or disadvantaged by the types of orders sought and stand to benefit from the administrators entering into the arrangement …
(d)notice has been given to those who may be affected by the order …
(Citations omitted)
His Honour went on to observe that:
Most of the cases where the courts have exercised its power under s 447A to vary the administrator’s personal liability under s 443A have involved administrators borrowing funds during the period of the administration. The orders typically sought have the effect of limiting recourse of the counterparty to the administrator personally to the extent to which he or she is able to be indemnified from the assets of the company.
As Mr Sweeney, for the administrators, has observed, this case is of the type described by Gilmour J above. On the evidence before me, I am therefore satisfied that each of the principles outlined by Gilmour J in Mentha has been met. In particular, I am satisfied that it is in the interests of Kingsrose’s creditors that it be allowed to continue to trade for their benefit and that the proposed facility will allow that to happen. Indeed, the non-recourse nature of the facility is likely to be of particular benefit to them. Furthermore, in case any of the creditors has a concern which has not been identified by the administrations, the proposed orders provide for notice to be given to all the creditors and, if any has a particular concern it wishes to raise, it will be allowed to apply to the Court with respect thereto.
I have also considered the form of the proposed orders. I therefore believe the proposed orders are appropriate to be made. I note, in particular, that Order 1 proposes to modify the statutory liability of the administrators and to replace that with the liability which is expressed in clause 17 of the facility agreement. That clause limits the administrators’ liabilities to the extent of their right of indemnity out of the assets of the company.
For these reasons, I am satisfied that it is consistent with the objectives of the external administration arrangements in Part 5.3A of the Act to make the proposed orders.
I certify that the preceding six (6) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves. Associate:
Dated: 31 May 2017
0
1
1