Federal Court of Australia

Tucker, in the matter of Lucapa Diamond Company Limited (Administrators Appointed) [2025] FCA 686

ORDERS

THE COURT ORDERS THAT:

1. Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), being Sch 2 to the Corporations Act 2001 (Cth) (Act), the first plaintiff (Administrators) were justified in entering into and causing each of the second to fifth plaintiffs (Companies) to enter into and assume the obligations under:

(a) the document titled “Facility Agreement” dated 5 June 2025 with AWD Holdings Pty Ltd (ACN 141 223 618) (at page 395 of Exhibit PJP-1 to the affidavit of Paul Joseph Pracilio affirmed on 13 June 2025) (Pracilio Affidavit);

(b) the document titled “General Security Deed” dated 5 June 2025 with AWD Holdings Pty Ltd (ACN 141 223 618) (at page 437 of Exhibit PJP-1 to the Pracilio Affidavit); and

(c) the document titled “Specific Security Deed” dated 7 June 2025 with AWD Holdings Pty Ltd (ACN 141 223 618) (at page 523 of Exhibit PJP-1 to the Pracilio Affidavit),

(AWD Finance Documents) including (but not limited to) drawing down funds within the facility limit of $1,500,000.00 AUD.

2. Pursuant to s 90-15 of the IPS, the Administrators are justified in entering into and causing each of the Companies to enter into and assume the obligations under:

(a) a funding agreement in, or substantially in, the form exhibited to the Pracilio Affidavit at page 599 of Exhibit PJP-1, with Rockford Equity Pty Ltd (ACN 671 375 974);

(b) a security deed in, or substantially in, the form exhibited to the Pracilio Affidavit at page 636 of Exhibit PJP-1, with Rockford Equity Pty Ltd (ACN 671 375 974); and

(c) a further security deed in, or substantially in, the form exhibited to the Pracilio Affidavit at page 677 of Exhibit PJP-1, with Rockford Equity Pty Ltd (ACN 671 375 974),

(Rockford Finance Documents) including (but not limited to) drawing down funds within the facility limit of $1,250,000.00 AUD.

3. Pursuant to s 65-45 and s 90-15 of the IPS, notwithstanding the operation of Div 65 of the IPS, nunc pro tunc from 22 May 2025:

(a) the Administrators are not required to maintain separate administration accounts for each of the Companies;

(b) s 65-5(1) of the IPS is to operate in relation to each of the Companies such that the Administrators must pay all money received by them, on behalf of or in relation to any one of the Companies, into one of the administration accounts opened by the Administrators for the Companies, including the account set up in the name of the second plaintiff (Companies’ Administration Account);

(c) s 65-15(1) of the IPS is to operate in relation to the Companies such that the Administrators must not pay any money into an administration account for the Companies, including the Companies’ Administration Account, if the moneys are not received by the Administrators on behalf of or in relation to one or more of the Companies; and

(d) s 65-25 of the IPS is to operate in relation to the Companies such that the Administrators must not pay any money out of the administration accounts for the Companies, including the Companies’ Administration Account, other than:

(i) for the purposes related to the external administration of any one or more of the Companies (including to transfer funds from the Companies’ Administration Account to any other administration accounts for the Companies);

(ii) in accordance with the Act; or

(iii) in accordance with any further direction from this Court.

4. Pursuant to s 447A(1) of the Act and s 90-15 of the IPS, Pt 5.3A of the Act is to operate in relation to the plaintiffs:

(a) as if s 443A(1) of the Act provides that the liabilities of the Administrators incurred with respect to any obligations arising out of, or in connection with the AWD Finance Documents and/or the Rockford Finance Documents are in the nature of debts incurred by the Administrators in the performance and exercise of their functions as joint and several administrators of each of the Companies; and

(b) as if s 443A(1) and s 443D of the Act provides that, notwithstanding paragraph 4(a) of these orders, the Administrators will not be personally liable to repay any such debts or satisfy such liabilities to the extent that the indemnity under s 443D of the Act is insufficient to repay such debts or satisfy such liabilities incurred by the Administrators arising out of, or in connection with, the AWD Finance Documents and/or the Rockford Finance Documents.

5. Pursuant to s 439A(6) and s 447A(1) of the Act, the period within which the Administrators must convene the second meeting of creditors under s 439A of the Act of the Companies be extended until 12:00 am (AWST) on 20 September 2025.

6. Pursuant to s 447A(1) of the Act, Pt 5.3A of the Act is to operate in relation to each of the Companies such that, notwithstanding s 439A(2) of the Act, the second meetings of the creditors of each of the Companies required under s 439A of the Act may be held at any time during, or within five business days after the end of, the convening period as extended by paragraph 5 of these orders or as later varied by this Court.

7. The Administrators, within two business days after the making of these orders, must take all reasonable steps to cause notice of these orders to be given to:

(a) the creditors of each of the Companies (including persons who to the knowledge of the Administrators claim to be creditors), in the following manner:

(i) where the Administrators have an email address for a creditor, by sending a copy of these orders (or a link to a website where the creditor may download these orders) to the creditor by email;

(ii) where the Administrators do not have an email address for a creditor but have a postal address for that creditor (or have received notification of non-delivery of a notice sent by email in accordance with paragraph 7(a)(i) above), by sending a copy of these orders (or a link to a website where the creditor may download these orders) to the creditor’s postal address; and

(iii) placing scanned, sealed copies of these orders on the creditors' portal maintained by the Administrators at https://kordamentha.com/creditors;

(b) the Australian Securities and Investments Commission;

(c) the Deputy Commissioner of Taxation; and

(d) the Attorney-General’s Department (administering the Fair Entitlements Guarantee Scheme).

8. The Administrators’ costs of and incidental to this application be costs and expenses in the administration of the Companies and be paid out of the assets of the Companies, joint and severally.

9. The Administrators have liberty to apply for any purpose connected with the administration of any (or all) of the Companies, including but not limited to seeking a further extension of the convening period referred to in paragraph 5 of these orders.

10. Any person who can demonstrate a sufficient interest to discharge or vary these orders have liberty to apply on not less than three business days’ notice being given to the first plaintiff and this Court, such liberty to be exercised within 21 days of the person becoming aware of the content of these orders and the content of the affidavits and written submission upon which the plaintiffs relied in support of their claims for relief.

11. In the event that no further application is made in this proceeding within six months of the date of these orders then, by this order, any extant application made by way of the originating application is dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

CHARLESWORTH J

1 On 19 June 2025 the Court made orders granting relief in this matter.  Oral reasons were given on that day.  What follows is a written record of those reasons.

2 The first plaintiff, Mr Richard Tucker and Mr Paul Pracilio, bring this application in their capacities as joint and several administrators of four Companies, Lucapa Diamond Company Limited, Heartland Diamonds Pty Ltd, Brooking Diamonds Pty Ltd and Australian Natural Diamonds Pty Ltd.  Lucapa is the ultimate holding company of the other entities.  The Companies hold interests in diamond mines and projects in Southern Africa, the Northern Territory and Western Australia.

3 The administrators seek declarations and orders under the Corporations Act 2001 (Cth) and the Insolvency Practice Schedule (Corporations) (IPS) being Sch 2 to the Act.

4 The application is supported by two affidavits of one of the administrators, Mr Pracilio affirmed on 13 June 2025 and 18 June 2025.  Mr Pracilio has made the affidavits on behalf of both administrators and the views expressed in them are held by each of them.  I am satisfied that the opinions expressed in the affidavits are properly formed having regard to the administrators’ experience and work in the administration and the documents upon which they relied.

5 The facts stated in these reasons should be understood as findings based on the two affidavits.

Facts and administrators’ opinions

6 The administrators were appointed voluntarily on 22 May 2025 (Appointment Date).

7 As at the Appointment Date, the Companies were in a precarious financial position, such that:

(1) they had less than $20,000.00 cash at bank;

(2) an existing secured loan facility with New Azilian Pty Ltd (New Azlian Facility) was fully drawn down;

(3) the Companies’ attempts to secure further funding had been unsuccessful;

(4) the Companies had significant levels of unsecured debt and significant ongoing monthly expenses.

8 It is the administrators’ view that if the Companies were placed into liquidation at the second creditors’ meeting, there would be a significant destruction of the value of the Companies’ assets. They have formed the opinion that in order to maximise the outcome for creditors and members of the Companies, there should be a “dual-track sale and recapitalisation process” so as to offer all participants the opportunity to conduct due diligence and put forward a Deed of Company Arrangement proposal or offers to acquire all or some of the assets.

9 Under a sale process already commenced, 12 interested parties have access to a data room and are undertaking due diligence and several of them have requested meetings with the Companies’ management. Non-binding indicative offers are due to be presented by 3.00pm 20 June 2025.

10 Unless extended, the time for convening a second meeting of creditors will expire on the same day: Act, s 439A(5).

11 It is the administrators’ view that a three month extension of the period in which to convene the second creditors’ meeting would provide them with sufficient time to negotiate, agree and execute a transaction by reference to the non-binding indicative offers.  They seek an order under s 439A of the Act, extending that period to 12:00am (AWST) on 20 September 2025.

12 In addition, the administrators have required (and continue to require) urgent funding to meet the ongoing expenses of the Companies whilst the sale process is underway  To that end, they entered into (and caused the Companies to enter into and assume obligations under) three agreements with AWD Holdings Pty Ltd, referred to as the Facility Agreement, the General Security Deed and the Specific Security Deed.  Together, those agreements may be referred to as the AWD Finance Documents.  They were executed by the administrators on 5 and 7 June 2025.

13 The Facility Agreement created a loan facility with a limit of $1,500,000.00 (AWD Facility) for limited purposes.  Those purposes may be summarised as follows:

(1) to repay all amounts outstanding under the New Azilian Facility;

(2) to fund the Companies’ working capital needs or any reasonable costs and expenses associated with the administrators’ operation of the Companies’ businesses;

(3) to fund the marketing and the possible sale and recapitalisation of the Companies’ business assets;

(4) to pay fees, costs, expenses and applicable taxes arising out of the administration of the Companies (including administrators’ remuneration); and

(5) any other purpose that AWD Holdings approves in writing.

14 By Recital C and clause 14 of the Facility Agreement, it is the intention of the parties that the administrators recourse for repayment shall be limited to the assets from which the administrators are indemnified under s 443D of the Act.

15 The administrators drew down the whole of the amount under the AWD Facility, applied $1,057,540.00 to the repayment of the New Azilian Facility and deposited the balance of $442,460.00 into Lucapa’s bank account. On the same day, the administrators entered into a Deed of Termination and Release with New Azilian.  As at the Appointment Date New Azlian was the Companies’ only major secured creditor.  It is no longer a secured creditor by virtue of the above transactions.

16 The administrators now propose to enter into (and cause the Companies to enter into and assume obligations under) a further funding agreement and two further security deeds with Rockford Equity Pty Ltd. Those further agreements may be referred to as the Rockford Finance Documents. The effect of those documents would be to provide further finance to a limit of $1,250,000.00 on substantially the same terms as the AWD Facility (save that there is no requirement to repay the New Azilian Facility).

GRANT OF RELIEF

17 Part 5.3A of the Act contains provisions relating to the administration of a company’s affairs with a view to executing a deed of company arrangement.  The objects of Pt 5.3A (and the IPS to the extent that it relates that it) is to provide for the business, property and affairs of an insolvent company to be administered in a way that (Act, s 435A):

(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.

18 In light of those objects I am satisfied that the orders sought by the administrators on this application should be made.

19 The administrators’ application was served on the Australian Securities and Investments Commission (ASIC) on 16 June 2025.  ASIC has not sought to be heard in relation to the application.  Mr Pracilio’s second affidavit sets out the notifications given to creditors and interested parties.  As at the date of the hearing, Mr Pracilio was not aware of any objections raised by any creditor or other interested person in relation to the relief sought.  Neither AWD Holdings nor Rockford Equity have sought to be heard.

20 I am satisfied that the Court should proceed to make the orders sought, notwithstanding the short notice given to some of them.  It is appropriate to make an order granting liberty to apply to any interested person to set aside the orders, on the condition that the liberty be exercised within a short specified timeframe.

Extension of time for the second creditors’ meeting

21 The power to make an order extending the period for convening a second creditors’ meeting is conferred by s 439A of the Act.  The principles relevant to the exercise of that power were summarised in Anderson, in the matter of NT Port and Marine Pty Ltd (Administrators Appointed) [2023] FCA 3 (at [10] – [16]).  An appropriate balance must be struck between the expectation that an administration will be carried out in a quick and summary manner with the need for there to be careful consideration of options directed toward maximising returns for creditors (including employees) and shareholders.  As Banks-Smith J observed in Reid (Administrator), in the matter of Northern Iron Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2025] FCA 525 (at [16]), the administrators’ opinions on such matters should carry weight, especially where the administration is complex (as appears to be the case here).

22 In the present case, the extension of the convening period will optimise the chances the Companies’ businesses will be sold as going concerns, enhancing the likely return for unsecured creditors.

23 I accept the administrators’ view that a three month extension is warranted given the circumstances described in the affidavits.  The sale and capitalisation process could not otherwise be achieved.  I accept the administrators’ view that a restructure or sale will likely lead to significantly better outcomes for creditors by maximising the prospects of the Companies’ employees retaining their employment and enhancing the return for the general body of unsecured creditors by achieving the greatest possible sum for the Companies’ assets.

24 In addition, I am satisfied that the administrators will not be able to properly report to creditors at the next meeting until they know the outcome of the sale process.  It is in the interests of creditors generally that they receive a meaningful and fully informed report.

25 No creditor foreshadowed an objection to the extension of the convening period when the first creditors’ meeting was held.  The extension sought is appropriate to the tasks the administrators have set themselves.

Authorisation and limitation of liability

26 Under s 447A of the Act, the Court may make such orders as it thinks appropriate about how Pt 5.3A of the Act is to operate in relation to a particular company.  Section 90-15 of the IPS is in similar terms, empowering the Court to make such orders as it thinks fit in relation to the external administration of a company.

27 The administrators seek orders to the effect that they were justified in entering into (and causing each of the Companies to enter into and assume obligations under) the AWD Finance Documents and that they will also be justified in executing the Rockford Finance Documents.  They seek orders limiting their liability, expressed in the following terms:

4.    Pursuant to s 447A(1) of the Act and s 90-15 of the IPS, Part 5.3A of the Act is to operate in relation to the plaintiffs:

(a)    as if s 443A(1) of the Act provides that the liabilities of the Administrators incurred with respect to any obligations arising out of, or in connection with the AWD Finance Documents and/or the Rockford Finance Documents are in the nature of debts incurred by the Administrators in the performance and exercise of their functions as joint and several administrators of each of the Companies; and

(b)    as if s 443A(1) and 443D of the Act provides that, notwithstanding paragraph (a) of this order, the Administrators will not be personally liable to repay any such debts or satisfy such liabilities to the extent that the indemnity under s 443D of the Act is insufficient to repay such debts or satisfy such liabilities incurred by the Administrators arising out of, or in connection with, the AWD Finance Documents and/or the Rockford Finance Documents.

28 The orders sought are in the nature of judicial advice, having the effect of protecting the administrators from claims that might otherwise be made in connection with their justified acts or omissions.  In making such orders the Court must consider whether the provision of the advice advances the objectives of Pt 5.3A and is not inconsistent with the objects of the IPS.

29 It is appropriate to make the orders, given that it has been necessary for the administrators to act quickly when embarking on the sale and recapitalisation process and given what I have said about the potential for those processes to maximise the potential returns to creditors.  The orders align with the statutory objective that as much of the businesses of the Companies continue in existence.  Without the finance provided under the agreements, there would be insufficient funds to meet the Companies’ liabilities, including in the continuing operation of the businesses whilst a purchaser is identified.

30 The administrators are unwilling to incur further costs and expenses in respect of the funds to be drawn down in the AWD Facility or to draw down on funds under the Rockford Finance Documents without the protection of the orders.  That is not an unreasonable position for the administrators to adopt.  I am satisfied that the finance facilities will enable the Companies to maintain the employment of their employees, meet the ongoing costs associated with its mining operations and to conduct the sale processes leading to a better outcome than would otherwise be achieved by an immediate sale of assets in the context of a winding up.

31 The affidavits raise issues of proprietary and reasonableness given the urgent need to obtain finance, the quantum of the finance obtained and the corporate structure of the Companies, including the holding of mining assets and intermingling of accounts throughout the group.  There is an appropriate factual foundation for the claim for relief.

32 On the material before me, I am satisfied that the limitation of the administrators’ liability in connection with the facilities would be unlikely to prejudice or disadvantage creditors.  I am reinforced in that view by the absence of opposition to the sale and recapitalisation process foreshadowed to creditors at the first creditors’ meeting.  That process necessarily comes at a cost and creditors ought not reasonably expect the administrators to expend precious time researching and negotiating alternative sources of finance on the assumption that more attractive terms might be secured elsewhere.

Administration of accounts

33 The Court may give directions under s 65-45 of the IPS regarding the payment, deposit or custody of money payable to or held by an external administrator.  The administrators seek an order that they are not required to maintain separate administrative accounts for each of the Companies, and further orders about how ss 65-5, 65-15 and 65-25 are to operate in relation to them.

34 The orders reflect the circumstance that Lucapa is the ultimate holding company.  The funds drawn from the AWD Facility have been paid into its account and are for the benefit of the group as a whole.  There is obvious inefficiency in raising inter-company invoices to enable payments received on behalf of Lucapa to be used to pay liabilities of its subsidiaries.  The orders sought by the administrators are appropriately limited to the use of funds for the purposes related to the administration of the Companie and no other purpose.

35 That relief should also be granted.

Other relief

36 It is appropriate to make other orders sought by the administrators, including an order that the administrators’ costs and expenses be paid out of the assets of the Companies jointly and severally.  The administrators should be granted liberty to apply for any purpose connected with the administration of any or all of the Companies, including for the purpose of seeking a further extension of the convening period for the second meeting of creditors.  I have already mentioned that there will be a grant of liberty to apply in favour of any person who can demonstrate a sufficient interest to discharge or vary any one of the orders made today.  That liberty should be exercised on not less than three business days’ notice being given to the plaintiffs and the Court.  It is appropriate to require that the liberty be exercised within 21 days of the person becoming aware of the content of the orders and the affidavits and the written submissions relied upon by the administrators in support of their claims for relief.

37 There should be a further order that in the event that no further application is made in this proceeding within six months, then any extant application made by way of the originating application is dismissed.

Associate:

Dated:    19 June 2025

SCHEDULE OF PARTIES