MATTER : View Gold Pty Ltd (Subject to Deed of Company Arrangement) (ACN 109 351 439), View Resources Ltd (Subject to Deed of Company Arrangement) (ACN 009 162 949) and View Nickel Pty Ltd (Subject to Deed of Company Arrangement) (ACN 102 771 871)

Corporations Act 2001 (Cth) - Application by administrators for indemnity in relation to certain borrowings - Principles to be applied

Corporations Act 2001 (Cth), s 436A, s 436E(1), s 439A, s 443A, s 443D, s 443E, s 443F, s 447A(1), s 556

1 MASTER SANDERSON: By originating process filed 8 October 2008, the plaintiffs sought the following orders:

1. An order pursuant to section 447A(1) of the Act that:

(a) the liability of the plaintiffs, in their capacities as the former joint and several administrators of View Nickel, pursuant to the document entitled 'A$ facility agreement' between View Nickel as borrower and Austral-Asia Resources & Infrastructural Investments Pty Ltd ACN 110 796 293 (AARII) as lender and dated 11 March 2008 (AARII Facility), will be limited in the manner provided for by the AARII Facility;

(b) the transactions referred to in clause 9.1 of the deed of company arrangement, dated 15 August 2008, in respect of View Nickel (View Nickel DOCA) will have the effect of releasing the plaintiffs, in their capacities as the former joint and several administrators of View Nickel, from any and all personal liability for, or claims in connection with, the debts owing by View Nickel to AARII pursuant to the AARII Facility;

(c) the liability of the plaintiffs, in their capacities as the former joint and several administrators of View Gold, pursuant to the document entitled 'Intercompany loan agreement' between View Gold as borrower and View Nickel as lender (Intercompany Loan Agreement), will be limited in the manner provided for by the Intercompany Loan Agreement; and

(d) the plaintiffs, in their capacities as the former joint and several administrators of View Resources and View Nickel, will not be personally liable for or in connection with the View Facility Agreement that is contemplated by, and defined in, clause 1.1 of the deed of company arrangement, dated 15 August 2008, in respect of View Resources.

1. The costs of this application are costs in the deed administration of each of View Nickel, View Resources and View Gold to be borne equally by each deed administration.

2 The background facts may be summarised in this way. On 8 February 2008, pursuant to s 436A of the Corporations Act 2001 (Cth) (the Act), the plaintiffs (the administrators) were appointed as joint and several administrators of View Gold Pty Ltd, View Resources Ltd and View Nickel Pty Ltd. The first meeting of creditors of each of these three companies were held separately, but each was held on 20 February 2008 in accordance with s 436E(1) of the Act. Amongst other things resolved at the meetings, a committee of creditors was formed in relation to each of the companies.

3 On 17 March 2008, the administrators convened the second meeting of creditors in respect of each of the companies in accordance with s 439A(1) of the Act. At each of these meetings, the creditors resolved to adjourn the respective meetings for a period of up to 45 business days. The adjournments were recommended by the administrators in reports that they issued to the creditors of each of the companies prior to the meetings. This was done to satisfy the requirements of s 439A(4) of the Act. The adjournments were recommended by the administrators on the basis that they had been in discussions with a number of parties regarding the possible restructure and recapitalisation of each of the companies. The administrators advised that an adjournment for a period not exceeding 45 business days would provide interested parties with time to formulate a proposal for a deed of company arrangement (DOCA) in respect of one or more of the companies. It would also provide the administrators with further time to progress the potential sale of the assets of View Gold and View Nickel and to receive valuations in respect of these assets. With more time, the administrators felt they would be able to make a more informed recommendation to the creditors of each of the companies in relation to the likely return under liquidation as against the potential DOCA scenarios.

4 On 25 July 2008, the administrators reconvened the adjourned second meeting of creditors in respect of each of the companies. Prior to the second meeting of creditors in respect of the companies, the administrators caused supplementary reports and notices of these meetings to be sent to the creditors of each company. The supplementary report and notice of meeting in respect of View Gold contained a recommendation by the administrators that it would be in the interests of the creditors of the company to accept a DOCA proposed by Austral-Asia Resources & Infrastructural Investments Pty Ltd (AARII). The report outlined the reasons for that recommendation. A similar recommendation was made with respect to each of the other two companies. In each case, the deed was proposed by AARII.

5 The meetings were duly held and in each case the creditors resolved to execute the DOCA.

6 On 15 August 2008, the administrators caused View Nickel to execute the approved DOCA. One of the matters provided for by the terms of the DOCA was the treatment of the 'AARII Debt'. The AARII Debt comprised the debts owing, or which may become owing, by View Nickel to AARII pursuant to the terms of a document entitled 'A$ facility agreement' dated 11 March 2008 between View Nickel (as borrower) and AARII (as lender). This is the facility agreement referred to as the 'AARII Facility' in par 1(1) of the application.

7 As at the time of the appointment of the plaintiffs as administrators, View Gold had borrowings of approximately $13,819,951 with Investec Bank (Australia) Ltd and Investec Bank (UK) Ltd (Investec). These borrowings were secured by a number of charges registered against the property of all three companies. On 19 February 2008, in the interest of its rights pursuant to several of the securities, Investec appointed joint and several receivers and managers to the property of View Nickel and View Resources. It reserved its rights to make a similar appointment in respect of the property of View Gold.

8 To retire the Investec appointed receivers and managers, and to facilitate the possibility of a restructure of the View Group of Companies for the benefit of the creditors of each of these entities, the administrators of View Nickel entered into the AARII Facility and obtained an advance from AARII of sufficient funds to discharge the debt outstanding to Investec. This course of action was approved by the committee of creditors of View Resources.

9 On 12 March 2008, as a result of the agreement reached with AARII, AARII advanced sufficient funds to View Nickel to discharge the Investec debt. Investec then assigned its security, to the extent they constituted security over the assets and undertakings of View Gold and View Resources, to View Nickel. View Nickel (as lender), View Gold (as borrower) and View Resources (as security provider) then entered into an intercompany loan agreement in order to govern the terms on which the Investec debt would be payable by View Gold to View Nickel. This is the 'Intercompany Loan Agreement' referred to in par 1(c) of the application. The receivers and managers appointed to View Resources and View Nickel then retired.

10 Clause 3.1 of the AARII Facility states that the administrators of View Nickel entered into the AARII Facility only in their capacities as administrators of View Nickel, and not in their personal or any other capacity. The provision also seeks to limit the liability of the administrators pursuant to, or in connection with, the AARII Facility, to the extent to which such liability can be satisfied out of the Administrators' Right of Indemnity (as defined in cl 1.1 of the AARII Facility) and to the extent that the administrators are actually indemnified for those liabilities out of the Administrators' Right of Indemnity. Clause 9.1 of the View Nickel DOCA outlines the means by which the debts owing by View Nickel to AARII pursuant to the AARII Facility are proposed to be discharged during the course of the View Nickel DOCA.

11 On 15 August 2008, the administrators caused View Gold to execute the View Gold DOCA. One of the matters provided for by the terms of the View Gold DOCA is the treatment of the 'Intercompany Loan Agreement' referred to above. The Intercompany Loan Agreement documents the liability of View Gold to View Nickel in the light of the 'refinance' and associated transactions referred to above. The Intercompany Loan Agreement provides that the administrators of View Gold entered into the Intercompany Loan Agreement only in their capacities as administrators of View Gold, and not in their personal or other capacity. The Intercompany Loan Agreement also seeks to limit the liability of the administrators pursuant to the Intercompany Loan Agreement to the extent to which such liability can be satisfied out of the Administrators' Right of Indemnity and to the extent that the administrators are actually indemnified for these liabilities out of that right of indemnity.

12 On 15 August 2008, the administrators caused View Resources to execute the View Resources DOCA. One of the matters provided for by the View Resources DOCA is the View Facility Agreement, being a facility agreement pursuant to which AARII agreed to advance sufficient funds to View Resources to fund the Proponent Contributions (as defined in the DOCA) and the AARII Debt Extinguishment by View Nickel (also defined in the DOCA). The View Facility Agreement has not yet been prepared or executed.

13 Section 443A(1) of the Act provides that an administrator of a company is liable for debts he or she incurs in the performance or exercise, or purported performance or exercise, of any of his or her functions as administrator, including the repayment of money borrowed. Section 443A(2) provides that the liability of administrators under s 443A(1) of the Act cannot be excluded by agreement. But this does not prejudice the administrators' right to bring an action or make a claim against the company or anyone else.

14 Section 443D of the Act provides that an administrator of a company is entitled to be indemnified out of the company's property for:

(a) debts for which the administrator is liable under Subdivision A or a remittance provision as defined in subsection 443BA(2); and

(aa) any other debts or liabilities incurred, or damages or losses sustained, in good faith and without negligence, by the administrator in the performance or exercise, or purported performance or exercise, of any of his or her functions or powers as administrator; and

(b) his or her remuneration as fixed under section 449E.

15 Section 443E of the Act provides that subject to s 556 of the Act, a right of indemnity under s 443D of the Act has priority over all of the company's unsecured debts and, in certain circumstances, debts secured by a floating charge on the property of the company. Section 443F provides that to secure the right of indemnity under s 443D of the Act, the administrator has a statutory lien on the company's property. This lien has priority over a charge only insofar as the right of indemnity under s 443D has priority over the debt secured by the charge.

16 Section 447A(1) provides that the court may make such orders as it thinks appropriate about how pt 5.3A is to operate in relation to a particular company. This section has been widely used by the courts in a variety of contexts: see O'Donovan's Company Receivers and Administrators [44.1950]. The High Court has supported a broad operation of the section: see Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270, 279 - 280. Section 447A(1) of the Act may be used to modify the operation of pt 5.3A of the Act in certain circumstances. It is open to a court to order an indemnity where the indemnity available to the administrator under s 443D of the Act is insufficient to satisfy the debts for which the administrator is personally liable pursuant to s 443A(1): see Re Spyglass Management Group Pty Ltd [2004] FCA 1469.

17 The courts have been willing to grant orders similar to those outlined above in circumstances where the court is satisfied that the administrator entered into the loan agreement or other arrangement to enable the company's business to continue to trade and for the benefit of the company's creditors. Re Malanos [2007] NSWSC 865 was such a case. The administrator formed the view that it was in the interests of creditors that the administrator obtain the funding to allow the company to complete and obtain the benefits of certain contracts. The court was satisfied that the additional funding would permit the company to continue trading and ultimately provide a significant benefit to the creditors. It would also avoid a potential damages claim against the company in relation to breach of contract. The court indicated a willingness to use the 'unusual power' to grant orders that the administrator would not be personally liable under s 443A of the Act to the extent of any insufficiency or residual debt following the exercise of the administrators' rights of indemnity and the lien in respect of the debt.

18 What the cases clearly indicate is that the court will need to be persuaded that the creditors of the company are not prejudiced or disadvantaged by these types of orders. Further, the court must also be satisfied that the creditors actually stood to benefit from the administrator entering into the loans or obtaining the advances: see Re Application of Fincorp Group Holdings Pty Ltd [2007] NSWSC 628.

19 In this case, both the AARII Facility and the Intercompany Loan Agreement were entered into with the full consent of the creditors of each of the respective companies. The AARII Facility and the Intercompany Loan Agreement were entered into to retire the Investec receivers and managers and to facilitate the restructure of the companies for the benefit of the creditors of each of those companies. As a consequence of the administrators entering into these transactions, AARII and the companies were able to execute each of the DOCAs.

20 The View Facility Agreement is contemplated by the View Resources DOCA and the View Nickel DOCA. It is designed to ensure a satisfactory return to creditors of View Resources and View Nickel. The View Facility Agreement has been approved by the creditors of both companies.

21 In the circumstances, I am satisfied that the orders sought were appropriate and I made those orders accordingly.

22 The application related directly to the affairs of each of the companies. Accordingly, the costs of the application should be the costs in the deed of administration of each of the companies on a pro rata and indemnity basis.