Tucker (Administrator), in the matter of True North Copper Limited (Administrators Appointed) [2024] FCA 1329

COPPERCORP PTY LTD (ADMINISTRATORS APPOINTED) (ACN 649 946 305) Third Plaintiff NORTH WEST COPPER PTY LTD (ADMINISTRATORS APPOINTED) (ACN 661 786 956) Fourth Plaintiff TNC MINING PTY LTD (ADMINISTRATORS APPOINTED) (ACN 652 408 378) Fifth Plaintiff TNC ASSET HOLDING PTY LTD (ADMINISTRATORS APPOINTED) (ACN 652 599 687) Sixth Plaintiff

order made by: BANKS-SMITH J DATE OF ORDER: 13 november 2024

THE COURT DECLARES THAT:

1. Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations), being Schedule 2 to the Corporations Act 2001 (Cth), the first plaintiffs are justified in causing the second to sixth plaintiffs (the Companies and each a Company) to enter into and perform the Loan Agreement (as defined in the affidavit of Richard Tucker filed 8 November 2024).

THE COURT ORDERS THAT:

1. Pursuant to s 447A(1) of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to the Companies so that: (a) if the first plaintiffs' indemnity (in their capacities as joint and several administrators of each of the Companies) pursuant to s 443D of the Corporations Act out of the property of the relevant Company is insufficient to satisfy any debt or liability incurred by the first plaintiffs (in their capacities as joint and several administrators of the relevant Company) in respect of, or pursuant to, the Loan Agreement, then the first plaintiffs will not be personally liable, and relieved of any personal liability, to pay any such debt or liability to the extent of that insufficiency; and (b) the first plaintiffs' indemnity pursuant to s 443D of the Corporations Act out of the property of any of the Companies is, in the case of each of the Companies, to cover all debts and liability incurred by each company in respect of the Loan Agreement.
2. The first plaintiffs must take all reasonable steps to cause notice of these orders to be given to the known creditors of the Companies within three (3) business days after the making of these orders, by: (a) notifying each known creditor via email of the making of the orders and providing a link to a website where the creditor may download the orders, using the email address of each creditor at such email address as is recorded in the books and records of the Companies; (b) where an email address is not recorded in the books and records of the Companies but a postal address is recorded, notifying each such creditor in writing of the making of the orders and providing a link to a website where the creditor may download the orders, using the postal address for each creditor recorded in the books and records of the Companies; and (c) placing a copy of the sealed orders on the website maintained by the first plaintiffs at https://www.kordamentha.com/creditors.
3. The plaintiffs and any person who can demonstrate a sufficient interest (including any creditor of the Companies) have liberty to apply on three (3) business days' notice being given to the plaintiffs and the Court to modify or discharge any orders made pursuant to orders 1 to 3 above.
4. The plaintiffs' costs of, or incidental to, this application are costs in the administration of the Companies and be paid out of the assets of the Companies. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BANKS-SMITH J: 1 True North Copper Limited (Administrators Appointed) (TNC) is a public company limited by shares. It is the ultimate holding company of a group of entities specialising in mining copper, cobalt and other critical minerals. The other relevant entities are the third, fourth, fifth and sixth plaintiffs respectively. 2 The first plaintiffs are the Administrators of each of the companies. They were appointed to the group on 21 October 2024. The first meeting of creditors has been held and the second meeting has been convened for 18 November 2024. 3 The administration is somewhat unusual in that, based on the administrators' inquiries to date, the likely date of insolvency was very recent being 18 October 2024. It is apparent that the directors moved quickly to appoint the administrators. Further, although the administration involves a group of companies and a range of mining assets, no extension of the convening period for the second meeting was required. A DOCA proposal has already been received by the Administrators and there is potential for other offers to be received prior to the second meeting. 4 Against that backdrop the Administrators brought this urgent application in order to ensure they are able to fund the administration of the companies appropriately whilst a dual-track sale and recapitalisation process for the group ensues. 5 In order to obtain additional funding, the Administrators have entered into a conditional loan agreement with an existing secured creditor, Nebari Natural Resources Credit Fund II, LP (Loan Agreement). By their application the Administrators sought orders under s 447A of the Corporations Act 2001 (Cth) and s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), being Schedule 2 of the Corporations Act, relevantly limiting their prospective personal liability under the Loan Agreement and a direction that they were justified in entering into the Loan Agreement. The urgency arose because the Administrators have some cash available and intend to use it to pay suppliers and employees who are required in order to continue operations (including to transition to care and maintenance as appropriate) so as to preserve the value of the group's assets. However, those funds are expected to run out by mid to late November 2024. 6 I heard the application at an urgent hearing on 13 November 2024, and granted the relief sought. These are my reasons for doing so.

Evidence 7 Richard Tucker (one of the Administrators) provided an affidavit in support of the application. An affidavit was also provided by Zachary Sharp, a solicitor employed by King & Wood Mallesons, who assists with the day-to-day carriage of the matter on behalf of the Administrators. Mr Sharp attached copies of relevant communications including the Administrators' Report to Creditors dated 12 November 2024 and confirmation from Nebari of its support for this application and the orders sought. 8 Mr Tucker deposed relevantly to the following. 9 TNC was listed on the Australian Securities Exchange after a reverse takeover merger with Duke Exploration Limited. It is headquartered in Cairns, Queensland, and has three principal assets. Those are: the Cloncurry Project, centred around the Great Australian Mine Complex in Cloncurry, Northwest Queensland; the Mount Oxide Project, comprising the assets of the Mount Oxide Project, which has established infrastructure; and the Bundarra Project, which includes tenements located in central Queensland. 10 The Administrators have provided information as to the outcome of their preliminary investigations into the financial state of the companies, including details of liabilities and asset levels and the amount owed to the secured creditor. Relevantly, they depose to there being some 75 employees with outstanding priority employee entities, although outstanding wages have been paid by the Administrators. The companies currently hold some A$2,600,000 in cash, but that is insufficient to pay suppliers and employees, especially as liabilities continue to be incurred on a day-to-day basis. Without additional funding, there will be a forced shut-down during November 2024. The operations of the companies would cease, with a loss of potential realisable value for the companies' assets. 11 Mr Tucker also provided evidence of a range of contractual and security obligations entered into by the group. It is not necessary to summarise those. Of more significance is the nature of the assets and the view of the Administrators that there is potential for DOCA proposals, including by way of a recapitalisation or an offer to acquire some or all of the assets of the Companies (including the Cloncurry Project, the Mount Oxide Project, or the Bundarra Project), to be submitted. Such proposals are likely to require substantial negotiation and further investigation by the Administrators and accordingly the Administrators have sent urgent requests for expressions of interest (including inbound and outbound enquiries) to 107 interested parties as part of the Administrators' dual-track sale process (described as a process by which simultaneous processes for a sale of the companies or their assets and a holistic recapitalisation (including equity recapitalisation) of the companies are conducted). 12 The Administrators are of the view that a lack of interim funding might lead to the companies being placed into liquidation at the second creditors' meetings, and it would follow that there will be significant value destruction of the companies' assets, including by reason of the inability to obtain and consider substantive sale and/or recapitalisation proposals. 13 Accordingly, since their appointment the Administrators have engaged in negotiations with Nebari and its advisers in relation to the provision of loan funds by Nebari to the companies to enable them to continue to trade and operate and to realise and protect their assets, including through the dual-track sale process described. 14 On 6 November 2024 the companies as borrowers and Nebari as lender executed the Loan Agreement under which Nebari agreed to provide a total of up to US$1.65 million on the agreed terms. Relevantly the companies must apply all funds borrowed under the facility towards the following limited approved purposes: (a) financing any liabilities, costs and expenses incurred by the Administrators in the performance or exercise of their functions and powers as administrators of the companies including (without limitation) carrying on the business and managing the property and affairs of the companies; (b) payment of the costs and expenses of undertaking a sales process for the shares or assets of the companies or a recapitalisation (including an equity recapitalisation) process including preparing, negotiating, and implementing a DOCA of the companies; (c) payment of the remuneration and disbursements of the Administrators; or (d) payments made for the general corporate purposes of the companies. 15 Mr Tucker states that the Administrators intend to immediately issue a drawdown notice under the Loan Agreement if they succeed in obtaining the orders sought form the Court. 16 Mr Tucker also deposed to the effect that the Loan Agreement is in the interests of creditors because he anticipates that: (a) the Loan Agreement will provide the companies with funding that is intended to allow the Administrators, at least in the short term, to continue to trade the companies' business and pay employees and contractors; (b) borrowing the funds from Nebari and continuing (at least in the short term) to operate and trade the companies' businesses, and generate revenue therefrom, is likely to lead to an increased pool of funds being available to the companies' creditors than would be the case if the Administrators were forced to immediately cease the companies' business operations; (c) borrowing the funds from Nebari under the Loan Agreement is critical to provide appropriate cash certainty for the limited operations that the Administrators intend to continue during the administration period. Without a source of additional funds, the continued incurrence of liabilities by the Administrators would likely require the companies to cease operating before the companies run out of cash. Drawing down under the Loan Agreement will permit the Administrators to run an appropriate dual-track sale process (including an extended process, if needed), as without this cash certainty, the sale process will require a more immediate resolution which I am concerned would likely result in a decreased pool of funds being ultimately available to the Companies' creditors; and (d) borrowing the funds from Nebari will provide a source of funding for the continued employment of at least a portion of the companies' employees and the payment of certain contractors and suppliers, while a further assessment of the options for the companies' futures is undertaken. 17 Mr Tucker states that based on his experience and his understanding of the financial circumstances of the companies, it is highly unlikely that the Administrators would have been able to secure an alternative funding source on better terms than those contained in the Loan Agreement, particularly given the very short timeframe within which the funding is required, the quantum of funding required, and his current view that Nebari is a secured creditor of the companies. 18 Mr Tucker also states that he does not believe any material prejudice would arise from the orders sought in circumstances where he believes that the entry into the Loan Agreement does not disadvantage or prejudice the majority of the companies' creditors, and the majority of those creditors are likely to ultimately benefit from the companies entering into the Loan Agreement.

Statutory context 19 Section 443A(1) of the Corporations Act relevantly provides that the administrator of a company under administration is liable for debts incurred in the performance or exercise or purported performance or exercise of any of the administrator's functions and powers including the repayment of money and interest borrowed and borrowing costs. 20 Section 443A(2) of the Corporations Act provides that s 443A(1) has effect despite any agreement to the contrary, but without prejudice to the administrator's rights against the company or anyone else. 21 Section 443D of the Corporations Act provides administrators with a statutory indemnity out of the property of the company (other than certain retention of title property that is not relevant for present purposes) for, among other things, debts for which the administrator is liable under Subdivision A (which includes s 443A). 22 Section 447A of the Corporations Act provides that the court may make such orders as it thinks appropriate about how Part 5.3A is to operate in relation to a particular company. 23 Section 90-15 of the IPS relevantly provides that the court may make such orders as it thinks fit in relation to the external administration of a company, including an order determining any question arising in the external administration of the company. 24 While it is settled that the court has wide powers under s 447A of the Corporations Act and s 90-15 of the IPS, such orders must be made in pursuit of the objects of Part 5.3A as set out in s 435A: 435A Object of Part The object of this Part, and Schedule 2 to the extent that it relates to this Part, is to provide for the business, property and affairs of an insolvent company to be administered in a way that: (a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or (b) if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company. Note: Schedule 2 contains additional rules about companies under external administration. 25 Where there is recourse to the IPS, regard should also be had to its objects set out in s 1-1 of the IPS which relevantly provide as follows: 1-1 Object of this Schedule … (2) The object of this Schedule is also: (a) to regulate the external administration of companies consistently, unless there is a clear reason to treat a matter that arises in relation to a particular kind of external administration differently; and (b) to regulate the external administration of companies to give greater control to creditors.

Limitation of liability 26 I summarised the principles for such applications in Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) (No 4) [2021] FCA 644, and acknowledge that the following paragraphs adopt for convenience parts of those previous reasons. 27 It is well established that the court has power under s 447A of the Corporations Act to make orders to limit an administrator's personal liability under s 443A. The courts have been satisfied on a number of occasions that it is not to be expected that the administrators should expose themselves to substantial personal liabilities. 28 The considerations and case law relevant to an application under s 447A for modification of the application of s 443A were summarised by Sloss J in Re Unlockd Ltd (administrators appointed) [2018] VSC 345: [60] In the leading case of Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (admins apptd) [2011] FCA 1493 (Secatore), Gordon J stated (at [23]): Section 447A(1) of the Act empowers the Court, in an appropriate case, to modify the operation of s 443A to exclude personal liability on the part of a voluntary administrator, and to provide that a loan taken by the company via the voluntary administrator is repayable on a limited recourse basis. Orders in similar terms have frequently been made in circumstances where the Court is satisfied that an administrator has entered into a loan agreement or other arrangement to enable the company's business to continue to trade for the benefit of the company's creditors: see, for example, Re Ansett Australia Ltd (No 1) at [49]; Re Spyglass Management Group Pty Ltd (admin apptd) (2004) 51 ACSR 432 at [6]; Sims; Re Huon Corporation Pty Ltd (admins apptd) (2006) 58 ACSR 620 at [12]; Re Malanos [2007] NSWSC 865 at [13]. [61] In such circumstances, courts have held that it is not to be expected that the voluntary administrators should expose themselves to substantial personal liabilities: see e.g. Re Renex Holdings (Dandenong) 1 Pty Ltd [2015] NSWSC 2003, [13] (Black J); Preston, in the matter of Hughes Drilling Limited [2016] FCA 1175 (Hughes Drilling), [18] (Yates J). See also Korda, in the matter of Ten Network Holdings Ltd [2017] FCA 1144, [43]-[44] (Markovic J). [62] In Secatore, Gordon J also observed (at [29]) that if orders are made relieving administrators from personal liability in respect of borrowings, it will permit them to make commercial decisions about the ongoing operations by focussing on what is in the best interests of the creditors 'uninfluenced by concerns of personal liability.' [63] In Re Great Southern Infrastructure Pty Ltd [2009] WASC 161 (Great Southern) at [13], Sanderson M observed that: The material consideration on such an application is whether the proposed arrangements are in the interests of the company's creditors and consistent with the objectives of Pt 5.3A of the Act. To put that proposition positively - the question is whether the court is satisfied the proposed arrangements are for the benefit of the company's creditors. To put it negatively - the question is whether the court is satisfied the company's creditors are not disadvantaged or prejudiced by the proposed arrangement. These principles have been confirmed in a large number of cases. [64] In Re Mentha (in their capacities as joint and several administrators of the Griffin Coal Mining Company Pty Ltd (admins apptd) (2010) 82 ACSR 142; [2010] FCA 1469, Gilmour J summarized the principles governing the granting of an application for orders under s 447A to vary the liability of administrators under s 443A 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: Re Great Southern at [13]. (b) typically the arrangements proposed are to enable the company's business to continue to trade for the benefit of the company's creditors: Re Malanos at [9] and Re View at [17]. (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: Re View at [18], and also Re Application of Fincorp Group Holdings Pty Ltd [2007] NSWSC 628 at [17]. (d) notice has been given to those who may be affected by the order: Re Great Southern at [12]. 29 In Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717 Middleton J said: [90] Orders are commonly sought limiting an administrator's personal liability where a company borrows funds from an external financier to fund the ongoing trading of the business during the administration: Korda, in the matter of Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 1144 at [42] ('Ten Network') (Markovic J). [91] There can be no doubt that in the appropriate circumstances, personal liability can be excluded with respect to any arrangement where that enables the company's business to continue to trade for the benefit of the company's creditors. Further, s 447A can also be used to avoid liability before it is imposed: Silvia v FEA Carbon Pty Ltd (2010) 185 FCR 301 at [14] (Finkelstein J). 30 Those authorities were also referred to and followed more recently by Derrington J in Park, in the matter of IG Power (Callide) Ltd (Administrators Appointed) (No 2) [2024] FCA 1244 at [15]-[16]. As his Honour noted at [19], ultimately the most important consideration is that the company's creditors are not prejudiced or disadvantaged by the court's exercise of power. 31 The court has on numerous occasions made orders under s 447A which limit the administrators' personal liability and entitle the creditor to priority for the funding agreement by virtue of the administrators' right of indemnity. For recent examples, see Cameron Hugh Shaw as joint and several administrator of GN Construction (Aust) Pty Ltd (administrators appointed), Ikonstrukt Pty Ltd (administrators appointed), Main Administration Services Pty Ltd (administrators appointed) (No 2) [2024] WASC 190; Freeman, in the matter of Regional Express Holdings Limited (administrators appointed) (No 2) [2024] FCA 968; and Kelly (administrator), in the matter of Lutum Holdings Pty Ltd (administrators appointed) [2024] FCA 554. Such orders also grant the creditor the security of the administrators' statutory lien under s 443F: Lutum Holdings at [47].

Direction justifying entry into Loan Agreement 32 The Administrators also seek a direction pursuant to s 90-15 of the IPS that they are justified in entering into, and causing the companies to enter into, the Loan Agreement and to draw down upon the funding under the Loan Agreement. In doing so, they seek protection from any potential claims that they have acted unreasonably or inappropriately in doing so. 33 Again, these principles were considered in Adaman Resources (at [36]-[38]). 34 Where judicial advice is sought in the context of an administration, the only statutory constraint on the exercise of that power is the need to consider whether or not the provision of that advice advances the objects of Part 5.3A set out in s 435A of the Corporations Act and is not inconsistent with the objects of the IPS. Section 90-15(3)(a) accommodates the determination of substantive rights, provided appropriate notice has been afforded to potentially affected parties: Hill, in the matter of Autocare Services Pty Ltd (administrators appointed) [2021] FCA 167 at [44]. 35 Although as a general rule notice should be given to those affected or who may be affected, where the circumstances are urgent it may not be practical to seek those views and the court is justified in acting on the evidence of the voluntary administrator. 36 It is well established that there must be something more than the making of a business or commercial decision before a court will give directions in relation to that decision. It may be a legal issue of substance or procedure, or it may be an issue of power, propriety or reasonableness - but some issue of this nature is required to be raised: In the matter of Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556 at [7]-[9] (Black J). The protection afforded by such an order must be predicated on the external administrator having made full and fair disclosure of all relevant facts and circumstances to the court: In the matter of Ansett Australia Limited and Korda [2002] FCA 90; (2002) 115 FCR 409 at [44] (Goldberg J).

Consideration - limitation on Administrators' personal liability appropriate 37 I am satisfied that the Loan Agreement is in the interests of the creditors as a whole and that making the proposed orders is consistent with the objectives of Part 5.3A of the Corporations Act for a number of reasons. 38 First, as approval of the personal liability limitation is a condition precedent to the Loan Agreement, such limitation is necessary in order to access the relevant funding and so will further the objectives of Part 5.3A for the benefit of creditors. 39 Second, I accept, having regard to the evidence of the financial position of the group, that there is insufficient cash to meet liabilities. I accept Mr Tucker's evidence that the chances of achieving a sale of the group's assets or other arrangement will be enhanced if the companies continue to trade, and that such course will likely result in a better return for the creditors than if the entities were to be wound up. 40 Third, as Nebari is the companies' only major secured creditor, there is unlikely to be any prejudice or disadvantage to creditors by limiting the personal liability of the Administrators in connection with the Loan Agreement. Absent such relief, the Administrators cannot be expected to continue to trade and incur debts personally. 41 Fourth, as the circumstances were urgent it was not practical to seek the views of all creditors, but I am satisfied that it is appropriate to act on the evidence of Mr Tucker. I also note that the Australian Securities and Investments Commission was informed of the application. Having regard to Mr Sharp's affidavit, the creditors have also received relatively fulsome information by way of the report to creditors, information that creditors often do not have at the time the Court makes orders such as these. However, in all of the circumstances it is appropriate to make an order (order 3) which has the effect of giving other creditors and sufficiently interested persons who may not have been notified of the application an opportunity to be heard on three days' notice if they seek to object to the relief sought. 42 Fifth, there is also no real prejudice in Nebari being entitled to the Administrators' statutory priority and statutory lien over other creditors in respect of the amounts to be provided under the Loan Agreement, given that Nebari is the only major secured creditor and it supports the making of such orders. 43 Sixth, while the entitlements of unsecured employee creditors will stand behind the Administrators' statutory lien so far as it is necessary to repay the monies advanced under the Loan Agreement, Mr Tucker has said that the Administrators expect to use a portion of the funds to pay employees. Further, the proposed funding avoids immediate cessation and termination, and ongoing trading provides the possibility of continued employment for some employees.

Consideration - entry into Loan Agreement justified 44 I accept that this is an appropriate matter for the Administrator to seek a direction that they are entitled to enter into the Funding Agreement. In this case, the Administrator submitted that the decision to enter into the Loan Agreement gives rise to questions of propriety and reasonableness because of: (a) the urgent need for funding to improve the chances of a sale of some or all of the assets of the Companies and/or recapitalise and restructure the Companies through a DOCA; (b) the quantum of the funds to be provided under the Loan Agreement, being US$1,650,000; (c) the corporate structure of the group of Companies, consisting of an ASX listed parent company and its subsidiaries, with mining assets held throughout the group; and (d) the requirement to obtain the orders sought in the application is a condition precedent to drawing down any funds under the Loan Agreement and although entitled to do so, the Administrators do not intend to waive this condition precedent. 45 I accept those submissions. I also accept that the Court has the power to provide the relief sought. 46 Entry into the Loan Agreement is in the creditors' interest as a whole because it will allow the group to trade on and place it in the best position to maximise the value of the business for the benefit of creditors, including employees. 47 I am satisfied that there has been appropriate disclosure by the Administrators and that, having regard to the urgency of the application, there has been adequate notice. 48 I consider that the actions of the Administrators in entering into the Loan Agreement and causing the companies to enter into the Loan Agreement are both reasonable and justified in all the circumstances, and that the making of the orders sought is consistent with the objectives of the IPS.

Orders made 49 For those reasons, orders (including standard ancillary orders) were made. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Banks-Smith.