Federal Court of Australia

Ashby Mining Limited, in the matter of Ashby Mining Limited (In liquidation) v Anderson [2025] FCA 1246

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 477(2B) of the Corporations Act 2011 (Cth), approval is granted for the first and second plaintiffs to enter into a fee agreement and costs disclosure with Watson Webb, in the form provided to the Court in Confidential Exhibit RA-2.

2.    Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), on the ground that it is necessary to prevent prejudice to the proper administration of justice, mark Exhibit RA-2 as “Confidential” on the Court file and order that it not be published or accessed other than by duly authorised staff of the Court for the purpose of their work for the Court, until such time as any litigation (including any appeal) arising out of the winding up and affairs of the first plaintiff is concluded or until otherwise ordered.

3.    The costs of this application be costs in the liquidation of the first plaintiff.

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

REASONS FOR JUDGMENT

OWENS J:

1    By originating process filed on 3 September 2025, Richard Albarran and Cameron Shaw, in their capacity as joint and several liquidators of Ashby Mining Limited, commenced proceedings against various former directors and officers of that company. Interim relief was also claimed, by which the plaintiffs sought approval from the Court to enter into, on behalf of Ashby Mining, a proposed conditional costs agreement with solicitors, Watson Webb.

2    Court approval is sought for the costs agreement because the term of the agreement extends beyond three months: s 477(2B) of the Corporations Act 2001 (Cth). Further steps in the proceedings will only be taken if that approval is obtained.

3    This judgment deals with the liquidators’ application for interlocutory relief, and was heard ex parte.

4    In support of the application, the liquidators relied upon an affidavit of Richard Albarran sworn 3 September 2025, and accompanying Exhibit RA-1 and Exhibit RA-2. They also relied upon a further affidavit of Mr Albarran sworn 3 October 2025 with accompanying Exhibit RA-3.

5    A copy of the conditional costs agreement was contained in Exhibit RA-2. The liquidators sought a confidentiality and non-publication order pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) in respect of that agreement.

6    In Mr Albarran’s 3 October 2025 affidavit, he deposed to the steps taken by the liquidators to notify the company’s creditors of this application and the responses received from some creditors. None of the notified persons or entities sought to be heard on the application.

7    For the reasons set out below, orders will be made substantially in the terms sought by the liquidators.

background

8    Ashby Mining was a mineral exploration and project development company registered on 5 November 2014. Until it entered administration, it was engaged in the business of exploring and developing gold mining projects in Papua New Guinea and in Australia.

9    The directors of the company over time included: Gregory Robert Anderson (the first defendant), Ian Gordon Mathieson (the second defendant), Mark Warren Fisher (the third defendant) and Genesio Circosta (the fourth defendant). Nicholas John Harding (the fifth defendant) was the secretary of the company from 5 December 2022 to the date the administrators were appointed.

10    On 23 August 2024, a secured creditor appointed receivers and managers over all of the assets of Ashby Mining and its related entities. On 24 August 2024, the same secured creditor appointed Mr Albarran and Mr Shaw as voluntary administrators of Ashby Mining and the related companies. On 29 October 2024, Mr Albarran and Mr Shaw issued a report to the creditors of Ashby Mining setting out, among other things, their opinions on the matters set out in s 438A of the Corporations Act. The report included a statement of the administrators’ views about potential claims against officers and former officers of the company.

11    On 6 November 2024, following the second meeting of the creditors of the company, the creditors resolved to appoint Mr Albarran and Mr Shaw as the liquidators of the company.

12    Based on a review of the company’s books and records and the proofs of debt received (although not yet adjudicated), the liquidators identified total creditor debts of $155,243,338. This comprised of $19,763,721 to secured creditors, $794,202 to priority creditors, $55,935,415 to unsecured creditors and $78,750,000 to contingent creditors.

13    Mr Albarran deposed that, in his view, the company:

a. was in severe financial distress for several years before the [appointment of the administrators];

b. was both cashflow and balance sheet insolvent for several years, specifically the financial years ending 30 June 2022, 30 June 2023 and 30 June 2024;

c. had been trading at a loss for a significant period, likely from incorporation, as it had not commenced any income generating activities;

d. had no operating revenue and could not generate any until mining projects successfully restarted and production began;

e. owed debts, the majority of which were aged. More specifically, 80% of its debts were over 6 months old and 66% of its debts were aged more than 12 months as at the [date the administrators were appointed];

f. raised capital through convertible note agreements in 2022, 2023, and 2024, and recorded these as non-current liabilities. Despite this, the working capital deficiency deteriorated over these years, which suggests that additional capital was insufficient to meet the Company's needs;

g. attempted to raise funds through an IPO in early to mid-2023, which was aimed to address the working capital deficiency. However, even if successful, the IPO would not have rectified the Company’s financial position due to the substantial existing liabilities; and

h. was further limited in its ability to manage its short-term obligations due to the undrawn debt facility, which was contingent on securing the IPO.

14    The liquidators have investigated potential claims available to the company against the directors of the company, as well as Mr Harding, who Mr Albarran considers was acting in the position of a director from his appointment as secretary of the company on 5 December 2022. The claims that have been identified, in broad terms, are:

(a)    breaches by the directors of their duty to the company under s 180 of the Corporations Act (and possibly breaches of s 1041H, or s 18 of the Australian Consumer Law) by:

(i)    commencing an initial public offering process (and incurring expenses in relation thereto) when there were reasonable grounds to conclude from the company’s accounts that the IPO would not restore the company to solvency and resolve its endemic working capital deficiency; and

(ii)    creating the potential for investors to be misled or deceived by way of failing to disclose material matters in the prospectuses, such as payment plans to which the company had committed, as well as the company’s insolvency and the endemic working capital deficiency that the IPO could not solve; and

(b)    breaches by the directors of the prohibition on insolvent trading set out in s 588G of the Corporations Act from at least 30 June 2022 and possibly earlier.

15    Mr Albarran deposed that he regarded the prospects of those claims as good. He also gave evidence that, in the event the claims were successful, he believed there are good prospects of at least partial recovery against the directors. He referred to the company’s directors’ and officers’ liability insurance policy for the period of 21 April 2024 to 21 April 2025 which has an aggregate liability limit of $5,000,000. He also referred to the identification of a number of potential real property holdings of the directors and officers of the company.

16    The liquidators estimate that, without any recoveries, there would not be a dividend to priority or ordinary unsecured creditors. The liquidators estimate that if the limit of the directors’ and officers’ insurance policy is recovered, being $5,000,000, together with the value of the properties potentially owned by the directors and officers, there would be a dividend of 100 cents in the dollar for priority creditors, and a dividend to ordinary unsecured creditors of an as yet unascertained amount.

17    The liquidators have instructed Watson Webb to prepare a statement of claim in respect of the claims against the directors of the company and will instruct Watson Webb to file that claim if the Court grants the liquidators leave to enter into the costs agreement with Watson Webb.

The application for Court approval under s 477(2B) of the CORPORATIONS Act

Relevant principles

18    Section 477 of the Corporations Act grants a liquidator express powers to bring or defend any legal proceedings in the name of and on behalf of the company (s 477(2)(a)) and to appoint a solicitor to assist in the liquidator’s duties (s 477(2)(b)).

19    Section 477(2B) governs Court approval of a liquidator’s entry into agreements on a company’s behalf and states as follows:

Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company’s behalf (for example, but without limitation, a lease or an agreement under which a security interest arises or is created) if:

(a) without limiting paragraph (b), the term of the agreement may end; or

(b) obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance;

more than 3 months after the agreement is entered into, even if the term may end, or the obligations may be discharged, within those 3 months.

20    The rationale for s 477(2B) and the requirement for approval of long-term agreements it imposes has been explained on many occasions: see, by way of example only, In the matter of One.Tel Limited [2014] NSWSC 457 at [30] (Brereton J); Hundy (liquidtor), in the matter of 3 Property Group 13 Pty Ltd (in liq) [2022] FCA 1216 at [23]-[24] (Wigney J), Naidenov, in the matter of AJW Interiors and Constructions Pty Ltd (in liq) [2024] FCA 25 at [85]-[86] (Cheeseman J).

21    The Court’s role in considering an application under s 477(2B) is to review the course of action proposed by the liquidator, paying due regard to his or her commercial judgment and knowledge of all the circumstances of the liquidation, and satisfy itself that there is no error of law or ground for suspecting bad faith or impropriety, and weigh up whether there is any good reason to intervene in terms of the “expeditious and beneficial administration” of the winding up: Corporate Affairs Commission v ASC Timber Pty Ltd (1998) 29 ACSR 109 at 118 (Austin J).

22    In Lewis (liquidator), in the matter of Concrete Supply Pty Ltd (in liq) [2020] FCA 841, White J outlined (at [16]) the following principles which the Court applies when considering an application for approval:

(a)    the Court makes its assessment having regard to the purposes for which liquidators’ powers exist, including the serving of the interests of those concerned in the winding up, the achievement of what is necessary for the proper realisation of the assets of the company, and assisting in its winding up: Re HIH Insurance Ltd [2004] NSWSC 5 at [15]; Stewart, in the matter of Newtronics Pty Ltd [2007] FCA 1375 at [26(6)];

(b)    a primary consideration is the impact of the agreement on the duration of the liquidation and whether that is, in all of the circumstances, reasonable in the interests of the liquidation: In the matter of Opel Networks Pty Limited [2013] NSWSC 1245 at [7]; One.Tel Limited at [30];

(c)    the Court’s approval is not an endorsement of the proposed agreement but merely constitutes permission for liquidators to exercise their commercial judgment: Re Bell Group Ltd (in liq) [2009] WASC 235 at [58];

(d)    again, generally, the Court does not refuse an approval unless there can be seen to be some lack of good faith, some error in law or principle or some real and substantial grounds for doubting the prudence of the liquidator’s conduct: Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 at 85;

(e)    a court may also refuse approval if the terms of the proposed agreement are unclear: Re United Medical Protection Ltd (No 4) [2002] NSWSC 516 at [45];

(f)    the role of the Court is to grant or deny approval to the liquidator’s proposal. It is not to develop some alternative proposal which might seem preferable: ASC Timber at 117; and

(g)    nevertheless, the Court does not simply “rubber stamp” whatever is put forward by a liquidator: Newtronics at [26(1)].

23    There exists the potential for uncertainty as to whether s 477(2B) applies to require approval of retainer and costs agreements between solicitors and liquidators in some circumstances. In Kitay v Frigger (No 2) [2024] WASC 113 at [79]-[91], Hill J analysed the topic in some detail, and concluded, at [91]:

…I consider that approval under s 477(2B) of the Act is required for agreements entered into by the liquidator as agent for or representative of the company, as well as agreements in the name of the company. However, approval is not required for entry into agreements by the liquidator in their own name. In determining whether the agreement has been entered into by the liquidator as agent for or representative of the company or in their own name, it is necessary to consider the substance of the agreement, whether the company is a party to the agreement or appears to have the status of a party under the agreement, and who receives the benefit of the services provided under the agreement.

24    Here the costs agreement is proposed to be made between Watson Webb, the liquidators in their capacities as joint and several liquidators of the company, and the company Ashby Mining itself. It is thus clear that approval under s 477(2B) of the Corporations Act is required: Nipps (Liquidator), in the matter of Dimension Agriculture Pty Ltd (in liq) [2024] FCA 1070 at [26].

The conditional costs agreement

25    The purpose of the conditional costs agreement is to allow the liquidators to prosecute the claims referred to at paragraph 14 above. To that end, the purpose for which approval of the costs agreement is sought is ultimately to benefit the company and its creditors.

26    I consider it appropriate to grant approval under s 477(2B) for entry into the conditional costs agreement for the following reasons:

(a)    The terms of the agreement are clear. The scope of work to be undertaken by Watson Webb, the fee estimate provided, and the circumstances in which Watson Webb is entitled to receive payment for its work are sufficiently defined. I accept Mr Albarran’s evidence that the rates to be charged are reasonable, and that Watson Webb is suitably qualified to carry out the engagement.

(b)    There is nothing in the evidence to suggest that entry into the costs agreement is something other than a proper exercise of the liquidators’ powers. There is no evidence of an error in law or principle, a lack of good faith, or any ground for doubting the prudence of the liquidators’ proposal. The fact that the costs agreement is conditional provides a further basis upon which it may be regarded as in the interests of creditors.

(c)    Entry into the costs agreement may reasonably be seen to be in the interests of the creditors and the beneficial administration of the winding up. The proposed litigation will necessarily prolong the liquidation, but I am satisfied that in all the circumstances, such a delay is reasonable for the proper realisation of the assets of the company. While it is not appropriate to express any view as to the prospects of the proposed claims, it is apparent that they are the product of careful and diligent investigation by the liquidators, with the benefit of legal advice, and are brought in good faith. The prosecution of the claims allows for the possibility of a dividend to creditors, which Mr Albarran deposed would otherwise be nil.

(d)    The liquidators have presented evidence that creditors have been notified of the present application and no person has sought to oppose approval of the costs agreement being granted.

The application for Confidentiality orders

27    The liquidators sought a non-publication and suppression order pursuant to s 37AF of the Federal Court of Australia Act in relation to the costs agreement contained in Exhibit RA-2 to the affidavit of Mr Albarran sworn 3 September 2025. The order is sought on the ground that it is necessary to prevent prejudice to the proper administration of justice: s 37AG(1)(a) of the Act.

28    I am satisfied that the confidentiality order sought should be made because: (a) disclosure of the costs agreement may provide the defendants to the litigation with an unfair advantage to the detriment of the company and its creditors; and (b) the disclosure of the costs agreement containing commercially sensitive information regarding the terms on which Watson Webb is engaged by its clients may tend to confer an advantage upon Watson Webb’s competitors.

29    Accordingly, I will make a confidentiality order over Exhibit RA-2 which will remain in place until such time as any litigation (including any appeal) arising out of the winding up and affairs of Ashby Mining is concluded or until otherwise ordered.

Associate:

Dated:    15 October 2025

SCHEDULE OF PARTIES