Federal Court of Australia Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) (No 8) [2021] FCA 1260 File number: WAD 95 of 2021 Judgment of: BANKS-SMITH J Date of judgment: 8 October 2021 Date of publication of reasons: 15 October 2021 Catchwords: CORPORATIONS - administration - where issues raised as to validity of resolution to appoint administrators to group of seven companies - where administrators sought relief under s 447A of the Corporations Act 2001 (Cth) - where orders as to appointment of administrators previously made as to five of the companies - where defendant no longer opposes relief sought by administrators as to appointment to remaining companies - where defendant discontinued related proceedings against administrators - consideration of matters relevant to exercise of discretion - orders made Legislation: Corporations Act 2001 (Cth) ss 447A, Part 5.3A Cases cited: Hayes v Doran (No 2) [2012] WASC 486 Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) [2021] FCA 520 Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) (No 3) [2021] FCA 628 Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) (No 5) [2021] FCA 645 Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) (No 7) [2021] FCA 813 Smolarek v McMaster (as administrator of Eznut Pty Ltd) [2006] WASCA 216 Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 24 Date of hearing: Determined on the papers Solicitor for the Plaintiffs: Gilbert + Tobin Counsel for the Defendant: The Defendant did not appear ORDERS WAD 95 of 2021 IN THE MATTER OF ADAMAN RESOURCES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 620 314 007) between: JEREMY NIPPS AND BARRY WIGHT IN THEIR CAPACITY AS JOINT AND SEVERAL ADMINISTRATORS OF THE SECOND TO EIGHTH PLAINTIFFS First Plaintiffs ADAMAN RESOURCES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 620 314 007) Second Plaintiff ADAMAN MINERALS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 628 877 609) (and others named in the Schedule) Third Plaintiff and: REMAGEN LEND ADA PTY LTD (ACN 636 602 849) Defendant order made by: BANKS-SMITH J DATE OF ORDER: 8 October 2021 THE COURT ORDERS THAT: 1. Pursuant to s 447A of the Corporations Act 2001 (Cth) (Act) that Part 5.3A of the Act is to operate in relation to the second and third plaintiffs as if Mr Nipps and Mr Wight were validly appointed as joint and several administrators of each of the second and third plaintiffs on 1 May 2021 pursuant to s 436A of the Act. 2. The plaintiffs' costs of and incidental to this application, in so far as they relate to the second and third plaintiffs, are to be costs in the administration of the second and third plaintiffs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT BANKS-SMITH J: 1 On 8 October 2021 I made orders (which were not opposed) relating to the validity of the appointment of the first plaintiffs, Jeremy Nipps and Barry Wight (Administrators) as joint and several administrators of each of the second plaintiff (Adaman Resources) and third plaintiff (Adaman Minerals). 2 These are my reasons for doing so. 3 These proceedings were commenced by originating process dated 3 May 2021 by the Administrators, seeking relief under s 447A and s 447C of the Corporations Act 2001 (Cth) and s 90-15 of the Insolvency Practice Schedule (Corporations), being Schedule 2 of the Corporations Act. The Administrators relevantly sought orders as to the validity of their appointments to each of the second to eighth plaintiffs, and that they were justified in continuing to act as administrators of each of the second to eighth plaintiffs. The companies are referred to generally as the Adaman Group. 4 Over the course of a number of decisions, various orders have been made relating to the Adaman Group, the administrations and the proposed entry into a deed of company arrangement. It is not necessary to refer to all of those decisions, although the findings and history reflected in them remain relevant to this application. The decisions are collected in Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) (No 7) [2021] FCA 813 (Adaman 7) at [16]-[22]. 5 Relevantly, in Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) [2021] FCA 520 (Adaman 1) I made orders under s 447A validating the appointment of the Administrators to each of the fourth to eighth plaintiffs. It was agreed by the parties at the time that the balance of the application would be deferred until certain issues that had been raised by the defendant (Remagen) had been fully ventilated. Remagen is a shareholder of Adaman Resources. 6 The issues to which I referred were summarised in Adaman 1 (at [10]) as follows: (1) whether the removal of Simon Raftery as a director of Adaman Resources on 30 April 2021 and a dilution of his shareholding was invalid; (2) whether the incumbent directors of Adaman Resources were entitled to rely upon an emergency power in the constitution to resolve to appoint the Administrators; (3) whether the board of Adaman Resources was entitled to resolve to appoint administrators to Adaman Resources in the absence of a resolution of its shareholders, having regard to the terms of a shareholders' agreement dated 18 November 2019 between itself and its shareholders on incorporation; (4) whether the board of Adaman Resources acted bona fide in exercising their powers to pass the resolution in that they relied upon a demand made by a related company, SMS Innovative Mining Pty Ltd as the catalyst for the appointment in circumstances where (Remagen contends) the debt to SMS was not owed; (5) whether Adaman Resources and Adaman Minerals were insolvent; and (6) whether the independence of the Administrators was compromised in some manner. 7 Separately, Remagen and Mr Raftery, as first and second plaintiffs respectively, lodged an originating process by way of an oppression action (WAD 106 of 2021) (Separate Proceeding). They sought mandatory injunctive relief relating to the issue of shares in Adaman Resources, the dilution of Mr Raftery's shareholding, his removal as a director of Adaman Resources and other alternative relief. Relevantly, each of Adaman Resources, Adaman Minerals and the Administrators were joined as defendants. The Separate Proceeding is substantial and it was apparent when it was filed that it would not be resolved quickly. Meanwhile, the Administrators remained in a position where they were undertaking the role of administrators of all companies in the Adaman Group, but with questions remaining over the validity of their appointment to Adaman Resources and Adaman Minerals, questions which it appeared could not be resolved until the Separate Proceeding was resolved. 8 In Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) (No 5) [2021] FCA 645 (Adaman 5) I made orders as to the payment of and indemnity for the Administrators' costs, irrespective of questions that remained outstanding as to the validity of their appointment. 9 Similarly, in Adaman 7 I made orders facilitating entry into a deed of company arrangement proposal and certain underlying transactions, orders that were sought by the Administrators because of the questions as to the validity of their appointment. 10 Subsequently, on 19 August 2021, Remagen filed a notice of discontinuance in the Separate Proceeding, discontinuing the proceeding as against Adaman Minerals. Mr Raftery discontinued the whole of his proceedings. 11 On 29 September 2021 by the consent of the relevant parties, I made an order that the Separate Proceeding be dismissed against the Administrators and Adaman Resources. 12 It follows that to the extent issues arise and remain in the Separate Proceeding, they do not extend to any claim for relief against Adaman Resources, Adaman Minerals or the Administrators. 13 Also on 29 September 2021, the solicitors for the Administrators wrote to my Chambers informing the Court that Remagen's solicitors had informed them that Remagen no longer opposed the orders sought in the balance of the originating process in this proceeding. 14 After considering the principles and the history of the application, I determined it was appropriate to make the orders as proposed by the Administrators under s 447A of the Corporations Act. 15 Section 447A relevantly provides: General power to make orders (1) The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company. (2) For example, if the Court is satisfied that the administration of a company should end: (a) because the company is solvent; or (b) because provisions of this Part are being abused; or (c) for some other reason; the Court may order under subsection (1) that the administration is to end. (3) An order may be made subject to conditions. 16 Orders under s 447C of the Corporations Act are declaratory rather than curative: Smolarek v McMaster (as administrator of Eznut Pty Ltd) [2006] WASCA 216 at [25]. Orders under s 447A are curative. 17 The relevant principles in relation to the exercise of the power conferred by s 447A to cure defects in administrator appointments were considered and usefully collected in Hayes v Doran (No 2) [2012] WASC 486 at [406] (Kenneth Martin J). I extracted the principles as referred to in Hayes v Doran in Adaman 1 at [29]. I adopt that collection of the principles again. Importantly, the Court has a broad discretion conferred by s 447A and it is to be exercised having regard to all the circumstances, including whether the purposes of Part 5.3A are served by making the relevant order. 18 I am satisfied that it is appropriate to make the orders sought, having regard in particular to the following matters. 19 First, I have previously considered whether there was evidence of abuse of process in the context of Part 5.3A of the Corporations Act. In Adaman 7 I noted that: [148] I have acknowledged elsewhere that Remagen may have legitimate contentions about the steps which led to the appointment of the Administrators, contentions that may need to be determined in due course (see Adaman 1 at [46]). In making the directions in this matter, the Court is not pre-determining or making any assumptions as to the merits of the Separate Proceeding or the relief sought. No such determination can properly be made until, assuming the action is pursued, the issues are fully pleaded, evidence is presented and witnesses are cross-examined. I cannot at this point resolve the questions that underlie the challenge to the validity of the Administrators' appointment to Adaman Resources and Adaman Minerals. [149] However, having carefully considered the evidence before me, I have found no basis to conclude that the Part 5.3A regime is being used in manner that comprises an abuse of process. No person sought to make a submission before me that I should draw such a conclusion. 20 Second, the Separate Proceeding has been discontinued against the Administrators, Adaman Resources and Adaman Minerals, and Remagen no longer opposes the relief sought in this proceeding. 21 Third, to the extent Remagen maintains claims against other defendants in the Separate Proceeding relating to the circumstances of the appointment of the Administrators, it remains open to it to do so. 22 Fourth, Remagen has had the opportunity to ventilate and press the issues raised earlier by Mr Raftery in the proceeding insofar as they relate to the independence of the Administrators, but has chosen not to do so. Mr Raftery has seen the Administrators' Declaration of Independence, Relevant Relationships and Indemnities (see Adaman 1 at [24]). Importantly, Mr Raftery has also had access to a number of documents that on their face are relevant to the allegation of any absence of independence on the part of the Administrators and that preceded their appointment. So much is apparent from Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) (No 3) [2021] FCA 628 (Adaman 3), in which I dealt with legal professional privilege claims in the context of a notice to produce documents that was issued by Remagen to the Administrators, Adaman Resources and Adaman Minerals in this proceeding: see in particular [15], [47]-[48], [64]. Remagen has therefore made its decision not to oppose the orders currently sought having had the benefit of such information. 23 Fifth, no party sought to remove the Administrators at the creditors meetings convened for the purpose of Part 5.3A of the Corporations Act: see Adaman 1 at [18]; and Adaman 7 at [69]-[70], [93], [104] and [135]. 24 In all of the circumstances, and despite the fact that there were purported issues that were formerly ventilated in this proceeding but not determined as to the circumstances of the appointment of the Administrators, I considered it appropriate to make the orders sought. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Banks-Smith. Associate: Dated: 15 October 2021 SCHEDULE OF PARTIES WAD 95 of 2021 Plaintiffs Fourth Plaintiff: ADAMAN GOLD HOLD CO PTY LTD (ADMINISTRATORS APPOINTED) (ACN 628 443 470) Fifth Plaintiff: ADAMAN GOLD PTY LTD (ADMINISTRATORS APPOINTED) (ACN 626 160 316) Sixth Plaintiff: GOLDLAKE HOLDINGS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 620 531 133) Seventh Plaintiff: HOPSTORM PTY LTD (ADMINISTRATORS APPOINTED) (ACN 620 534 957) Eighth Plaintiff: KIRKALOCKA GOLD SPV PTY LTD (ADMINISTRATORS APPOINTED) (ACN 626 160 816)