New South Wales Supreme Court CITATION : ASIC v Australis Mining Corp Ltd [2005] NSWSC 1109 HEARING DATE(S) : 02/11/05 JUDGMENT DATE : 2 November 2005 Equity Division JURISDICTION : Corporations List JUDGMENT OF : Barrett J DECISION : Proceedings adjourned CATCHWORDS : CORPORATIONS - winding up - application by ASIC for winding up on ground of insolvency - defendant ASX listed company - administrators appointed shortly before hearing of interlocutory application for appointment of provisional liquidator or receiver - whether proceedings should be adjourned LEGISLATION CITED : Corporations Act 2001 (Cth), s.440A(3) Australian Securities and Investments Commission - Plaintiff PARTIES : Australis Mining Corporation Limited - First Defendant Australis Mining Operations Qld Pty Limited - Second Defendant FILE NUMBER(S) : SC 5416/05 Mr C.R.C. Newlinds SC/Mr D.R. Stack - Plaintiff COUNSEL : Mr M.R. Speakman SC - Defendants Kim Turner - Plaintiff SOLICITORS : HAL Lawyers - Defendants LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J WEDNESDAY 2 NOVEMBER 2005 5416/05 AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION v AUSTRALIS MINING CORPORATION LIMITED & ANOR JUDGMENT 1 I have before me an interlocutory process by which Australian Securities and Investments Commission ("ASIC") applies for the appointment of either a provisional liquidator or a receiver in respect of the defendant companies, Australis Mining Corporation Limited and Australis Mining Operations Qld Pty Limited. 2 This is one of the relatively rare examples of cases in which ASIC's underlying winding-up application is advanced on the ground of insolvency. The circumstances are perhaps even more unusual in that the first defendant is a company that has been admitted to the official list of the Australian Stock Exchange. Its shares are listed for quotation and traded on the stock market of that exchange. 3 When ASIC's interlocutory process came on for hearing this morning, the court was informed that the directors of each defendant had, on 31 October 2005, acted under Part 5.3A of the Corporations Act 2001 (Cth) to appoint voluntary administrators. In those circumstances, s.440A(3) applies in relation to the application for the appointment of a provisional liquidator. As a practical matter, corresponding considerations apply in relation to the application for the appointment of a receiver. 4 Section 440A(3) says that the court is not to appoint a provisional liquidator if the company is under administration and "the Court is satisfied that it is in the interests of the company's creditors for the company to continue under administration rather than have a provisional liquidator appointed". 5 Mr Speakman SC has appeared for the defendants and has filed in court an affidavit of Mr Elliott, one of the joint administrators of both defendants. Mr Elliott deposes to investigations he has made concerning the affairs of the defendants. He reports, in particular, that the two companies have been reliant upon financial support from a major shareholder, Nikiticorp Ltd, a company based in Malaysia. He has been told by Mr Tzovaras, a director of the first defendant and of Nikiticorp, that: "Australis relies on Nikiticorp to fund its operations. Australis has a $2 million line of credit of which $1.1 million is drawn". 6 Mr Elliott has formed the opinion, on the basis of what has been said by Mr Tzovaras and the content of announcements by the first defendant to the Australian Stock Exchange, that Nikiticorp is willing to continue to extend financial assistance while the companies continue under administration. Mr Elliott is informed by Mr Tzovaras and believes that an adjournment of the current application for a period of 28 days will see $300,000 released to the administrators by Nikiticorp for the purposes of the continued funding of the operations of the defendants' mines. Mr Elliott says that the administrators would propose to use those funds for the next month. He also says that he is informed by Mr Tzovaras that Nikiticorp will make available a further $500,000, provided that the administrators can establish that the Australis mining venture is proving its feasibility through the administration. 7 Further, Mr Elliott deposes that, on the basis of his discussions with directors, he has formed a preliminary opinion that the directors' expectations that the affairs of Australis can be dealt with under a deed of company arrangement are realistic. 8 Finally, Mr Elliott is informed by Mr Tzovaras that Nikiticorp will not continue to fund any ongoing Australis operations in the event that the company is placed in liquidation, a provisional liquidator is appointed or a receiver and manager is appointed. 9 In the light of that evidence, I am satisfied that it is in the interests of the companies' creditors that each of the defendants should continue under administration at this point, rather than have a provisional liquidator or receiver appointed. 10 The application now before me is that the hearing of the application for the appointment of a provisional liquidator or receiver be adjourned to 28 November 2005. That application made by the defendants is not opposed by ASIC. Continuation of the administration is likely to see financial support from Nikiticorp continue, whereas an appointment by the court is likely to see that support terminated. There is at least a possibility that a deed of company arrangement proposal may emerge if the administration continues. 11 The originating process and the interlocutory process are accordingly stood over to 28 November 2005 at 10am before the Corporations List judge. It will, of course, be expected that the administrators will, on that occasion, inform the Court of the circumstances of the defendants as they then see them. 12 All parties have liberty to apply on two days notice. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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