RE NAUTI-CRAFT LTD (ADMINISTRATOR APPOINTED); EX PARTE BRYAN KEVIN HUGHES AS ADMINISTRATOR OF NAUTI-CRAFT LTD (ADMINISTRATOR APPOINTED) [2025] WASC 516 (5 December 2025)

1. At the time the originating process was filed, a certificate of urgency was also filed stating the application was of such urgent nature that it was required to be listed 'on or before 14 November 2025.' For this reason, the matter was listed before me this morning on an urgent basis and then has been stood down to this afternoon.
2. In support of the application, the plaintiff relied on three affidavits, being:

(a) two affidavits of Bryan Kevin Hughes, the first plaintiff, filed on 13 November 2025 and then earlier today; and

(b) an affidavit of Michael Richard Crommelin, a solicitor employed by the plaintiff's solicitors, confirming service of the application and relevant court documents on the Australian Securities and Investments Commission (ASIC).

1. The plaintiffs have also filed a short outline of submissions on 13 November 2025 in support of the orders that are sought.
2. On the basis of Mr Crommelin's affidavit, I am satisfied that notice of the hearing was given to ASIC, creditors and shareholders of the Company, as well as to the proposed funders under the Funding Deeds. No one appeared at the hearing today to oppose the orders sought, although ASIC raised a query in relation to a term of the Funding Deeds, which I will address subsequently.

1. The factual background to the application is set out in the affidavits of Mr Hughes and can be summarised as follows.
2. On 24 October 2025, the first plaintiff was appointed as administrator of the Company pursuant to s 436A of the Corporations Act 2001 (Cth) (Act).[1] The Company trades as a commercial marine suspension technology provider, which enables boatbuilders to access the hydraulic suspension system licensed by the Company (Technology).[2]
3. The evidence before me is that the Company has experienced financial difficulty due to a lack of debt or equity funding. The investors in the Company have expressed concerns about the length of time it has taken the Company to commercialise the technology.[3]
4. From his initial review of the Company's books and records, the first plaintiff (or Administrator) believes the Company has five employees (four full-time and one casual) (Employees) and owes approximately $5.9 million to creditors, comprising:[4]

(a) approximately $5.5 million to convertible noteholders;

(b) approximately $50,000 to trade creditors; and

(c) approximately $350,000 to a secured creditor. The secured creditor's security is limited to a prototype boat, trailer and towing apparatus, all of which the first plaintiff believes have since depreciated and now have minimal value.

1. In addition to these debts, from his investigations and discussions with the Australian Tax Office (ATO), the first plaintiff believes the Company has a tax debt of approximately $19,000 to the ATO.
2. The first plaintiff believes that the Company's most valuable asset is the Technology, which is unique and consists of 81 pending and granted patents. Other than the Technology, the Company has minimal assets, being the secured assets, cash at bank of approximately $850, and accounts receivable of approximately $700,000.[5]
3. From his initial investigations and review of the Company's books and records, the first plaintiff believes the commercialisation of the Technology is well-progressed and that there are a number of opportunities in the near future which may allow the Company to maximise or at least preserve the current value of its assets, including by means of further boat sales to clients and new avenues for licensing. However, in order for these opportunities to be realised, the Company requires immediate funding to continue to trade as a going concern and ensure the ongoing payment of its Employees. The evidence before me is that without additional funding, the Company will not be able to retain its Employees after tomorrow, 15 November 2025. If the Employees are not retained, the Administrator believes this will result in a loss of goodwill and value of the Company as the Employees have created and are intimately familiar with the Technology.[6]
4. In addition to the payment of wages, funding is also required for the first plaintiff to undertake a marketing campaign and sales process to enable a potential deed of company arrangement (DOCA) to be proposed or for a sale of assets to be considered at the second creditors' meeting of the Company, which is required to be convened and held by 20 November 2025. Mr Hughes' evidence is that he has already engaged in discussions with key stakeholders of the Company in relation to a potential DOCA.[7]
5. On 7 November 2025, the first plaintiff sent a letter to the noteholders and shareholders of the Company with a funding proposal. In response, he has received commitments totalling $400,000.[8] The letter proposed as a term of the funding that each funder have a last right of refusal to acquire the business at market value.
6. On 11 November 2025, the first plaintiffs provided each of the parties who committed to providing funding with a copy of a draft Funding Deed. Of these parties, all but one has confirmed (either in writing or orally) their agreement to the terms of the Funding Deeds. The first plaintiff believes, based on previous discussions with the only outstanding party, that this party will also agree to the terms.[9]
7. Each of the Funding Deeds is conditional on orders being made by the court to relieve the first plaintiff from personal liability as well as for directions to be given justifying entry into the Funding Deeds. Mr Hughes' evidence is that he does not intend to enter into the Funding Deeds unless the directions and orders sought are made by the court today.[10]
8. The first plaintiff believes these funds are required to enable the Company to continue to operate as a going concern during the administration (including by enabling the retention of the Company's employees) and will enable a proposed DOCA to be progressed.

Should directions be given for approval to enter in the Funding Deeds and to relieve the first plaintiff from personal liability?

1. Pursuant to s 443A of the Act, an administrator is personally liable for any debts incurred in the performance or exercise, or purported performance or exercise, of their functions and powers as administrators.
2. Pursuant to s 443D of the Act, an administrator is entitled to be indemnified out of the company's property for the debts for which they are liable under s 443A.
3. Where an administrator enters into a loan agreement, the loan and the interest payable on it are not considered to be a debt falling within the terms of s 443A and the indemnity that is the subject of s 443D. For this reason, unless an order is made by the court modifying the operation of part 5.3A of the Act, the administrator will be personally liable for the loan and any interest payable on it.
4. It is well-accepted by the courts that s 447A of the Act empowers the court to make orders limiting the personal liability of an administrator, where it is satisfied that the loan agreement is made for the purpose of allowing the Company and administrator to trade, or to continue operating for the benefit of creditors.[11]
5. Where these circumstances arise, courts have generally expressed the view that administrators should not be expected to expose themselves to substantial personal liability. Where orders are made relieving administrators from personal liabilities in respect of borrowings, the orders permit the administrators to make commercial decisions about the ongoing operations of the company under administration by focusing on what is in the best interests of creditors, without any influence on their decision-making as to any concerns as to their personal liability.
6. The factors that the court will take into account on an application under s 447A of the Act to vary the liability of administrators under s 443A were summarised by Gilmour J in Mentha, Re Griffin Coal Mining Company Proprietary Limited (admin appt). These factors include:[12]

(a) the proposed arrangements being in the best interests of the company's creditors and consistent with the objectives of part 5.3A of the Act;

(b) typically, the arrangements proposed need to enable the company's business to continue to trade for the benefit of the company's creditors;

(c) the creditors not being prejudiced or disadvantaged by the types of orders sought and stand to benefit from the administrators entering into the arrangement; and

(d) notice being given to those who may be affected by the order.

1. In this case, the key terms of the Funding Deeds can be summarised as follows:

(a) the first plaintiff is entering into the Funding Deeds in his capacity as administrator of the Company;

(b) the Lenders collectively will make available to the company a facility of $400,000 at an interest rate of 10% per annum;[13] and

(c) the terms of the Funding Deeds set out what the funds can be used for and includes provisions for its repayment.

1. The Funding Deeds also include a term giving each of the Lenders a last right of refusal. In essence, the first plaintiff has agreed not to accept any offer from any party to purchase the assets or business of the second plaintiff without the first plaintiff first having given notice to each of the Lenders of their intention to accept a sale offer and giving each of the Lenders 48 hours to offer a greater amount.
2. In their email correspondence with the Company's solicitors, ASIC expressed the opinion that this was a novel term. When the matter initially came on for hearing before me this morning, no explanation had been provided in the evidence then filed as to why this term was included by the first plaintiff in the offer to each of the Lenders. For that reason, I stood the matter down until 2.15 pm this afternoon to enable the plaintiffs to file further evidence.
3. Since that time, Mr Hughes has filed a further affidavit. His evidence is that since his appointment, he has had a number of discussions with the directors, shareholders and noteholders of the Company, as well as high net worth individuals, about the possibility of providing funding to the Company for the administration process. At this stage, the only option available to the Company is the Funding Deeds. Mr Hughes' evidence is that because of investor fatigue, which had arisen from the delay in commercialising the Technology, an incentive needed to be provided to parties in order to obtain interim funding. Mr Hughes believes, based on the conversations he has had with these parties, that the terms of the Funding Deeds are the best terms available to the Company and that there is no other alternative.
4. On the basis of the evidence before me, I am satisfied it is appropriate to make the orders sought by the plaintiffs for two primary reasons.
5. First, I accept the purpose of the funding is to provide working capital for the administration and to fund the continuing operation of the Company during the period of the administration. Without this funding, I accept the Company will be unable to continue to trade or to employ the Employees and that, as a consequence, there is a significant risk that the value of the Company's assets will be severely diminished.
6. Second, on the evidence before me, I accept that the Funding Deeds are the only option available to the Company to enable it to keep trading for such time as will enable a marketing campaign and sale process to be undertaken and/or for a DOCA to be proposed. On this basis, I accept the proposed orders are consistent with the interests of unsecured creditors as well as the objects of pt 5.3A of the Act.
7. The plaintiffs also seek orders pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (sch 2 to the Act) (IPS) that they are justified in causing the Company to enter into the Funding Deeds.
8. Pursuant to s 90-15(1) of the IPS, the court may make 'such orders as it thinks fit in relation to the external administration of the company.' It is accepted by the courts that this power is broad and is at least as extensive as the powers formally available to it under s 479(3) and s 511 of the Act.
9. The principles which govern the exercise of this power can be summarised as follows:

(a) first, the power to give advice is intended to facilitate external administrators' performance of their functions and should be interpreted widely to give effect to that purpose.

(b) second, the court may give a direction where it is just and beneficial to do so.

(c) third, the function of the power is to give an external administrator advice as to the proper course of action to take in the external administration.

(d) fourth, the court will not give a direction as to a matter of commercial or business judgment. There must be a legal issue of substance or procedure, including an issue of power, proprietary or reasonableness.

(e) fifth, the power would generally not be used to determine substantive rights or make binding orders, although it is possible to do so if the necessary parties are before the court.

1. The evidence of Mr Hughes is that without entry into the Funding Deeds, it will be necessary to terminate the Company's employees. This is likely to result in a reduction of the Company's goodwill and the value of the Company.
2. The direction which is sought by the plaintiffs goes to the reasonableness or propriety of the plaintiffs entering into the Funding Feed. For the reasons I have already given, I accept that in the circumstances of this case, it is appropriate to make the directions sought.
3. On the evidence before me, it is clear that creditors (and other interested parties) were only given short notice of this hearing and the application. While I accept on the evidence before me that the application is urgent, in my view, the interests of creditors can be adequately preserved through an order permitting creditors to apply to vary or discharge the orders, which is provided for in the minutes of proposed orders.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Affidavit of Bryan Kevin Hughes filed 13 November 2025 [1] - [4], 'BKH-1' - 'BKH-2'.

[2] Affidavit of Bryan Kevin Hughes filed 13 November 2025 [9].

[3] Affidavit of Bryan Kevin Hughes filed 13 November 2025 [11].

[4] Affidavit of Bryan Kevin Hughes filed 13 November 2025 [13].

[5] Affidavit of Bryan Kevin Hughes filed 13 November 2025 [17].

[6] Affidavit of Robert Michael Kirman filed 4 April 2025 [32].

[7] Affidavit of Robert Michael Kirman filed 4 April 2025 [54] - [69].

[8] Affidavit of Robert Michael Kirman filed 4 April 2025 [33] - [38], 'BKH-8'.

[9] Affidavit of Robert Michael Kirman filed 4 April 2025 [39] - [44], 'BKH-9' - 'BKH-10'.

[10] Affidavit of Robert Michael Kirman filed 4 April 2025 [45], [47] - [53].

[11] Secatore, Re Fletcher Jones and Staff Pty Ltd (admin appt) [2011] FCA 1493.

[12] Mentha, Re Griffin Coal Mining Company Pty Ltd (admin appt) [2010] FCA 1469; (2010) 82 ACSR 142 [30].

[13] Affidavit of Bryan Kevin Hughes filed 13 November 2025, 'BKH-9', pages 110, 128, 146, 164, 182, 200, 218, 236, 254.