Abra Mining - Case Update

The Supreme Court of Western Australia has granted an order to the administrators of Abra Mining limiting their personal liability for debts incurred under a loan facility used to support ongoing operations, despite expressing concerns over the administrators’ level of disclosure to the Court.

Abra Mining entered voluntary administration in April 2024 after unsuccessfully seeking to recapitalise the business. In June 2024, the administrators caused the company to enter into a US$7.45 million loan facility provided by Taurus Mining Finance Fund to support ongoing operations. This facility was subsequently increased by a further US$10 million in December 2024. The administrators then applied under s 447A of the Corporations Act 2001 (Cth) for an order limiting their personal liability for debts under the amended agreement.

The Court had previously granted similar relief in June 2024, but became concerned when it emerged that, despite presenting a cash flow forecast showing profitability, the administrators had already decided to draw down the full loan before an urgent hearing to extend the convening period on 26 November 2024, without disclosing that fact to the court. The Court found that the failure to disclose the true position was material, because the information available to the administrators showed not only that they intended to draw down the whole of the US$7.45 million facility (as opposed to it being merely a possibility, as the Court had been informed) but that the company would not operate at a profit over the course of the period for which the third extension of the convening period was sought. Moreover, it occurred in circumstances where the Court had previously indicated that it wished to be informed of the likely costs to the company of continuing to trade during any extension of the convening period.

The Court stated that it expects to be able to place confidence in the evidence of insolvency practitioners, such as the administrators, not least because they regularly make urgent applications to the Court on an ex parte basis, with no real opportunity being given to any other person to oppose the orders being sought by them. Those applications often involve voluminous materials, to an extent that the Court is required to rely on the administrators and those representing them to draw significant matters to its attention.

Despite these concerns, the Court ultimately granted the application, reasoning that: (1) the administrators did eventually attempt to rectify the omission by filing further affidavits and (2) the funding was clearly necessary to allow the company to continue trading for the benefit of employees and creditors. The Court emphasised that administrators should not be expected to bear personal liability for decisions made in good faith to support ongoing operations, and that the loan was crucial to preserving potential restructuring or sale outcomes.

However, the Court did not allow certain of the administrators’ costs, finding that they should not be paid out of the assets of the company.

Read the decision HERE.