Balamara Resources - Case Update

The Supreme Court of New South Wales has ruled that the liquidators of an Australian mining company were justified in refusing to convene a creditors’ meeting as directed by a group of creditors, finding the creditors’ direction to be unreasonable in light of the delay, increased costs and potential prejudice to creditors it might cause.

The issue arose in the winding up of Balamara Resources, an Australian mining company whose key asset was a potential claim against the Republic of Poland. The liquidators declined to call a creditors’ meeting requested by the creditors, who wished to replace them with alternative nominees. The liquidators argued that the direction was an attempt by former directors implicated in governance failures to regain control and possibly derail investigations into potentially voidable transactions.

The Court held that the liquidators had properly formed the view, in good faith, that complying with the direction would prejudice stakeholders by delaying progress on the company’s most significant asset—the Polish claim—and potentially harming ongoing litigation funding negotiations. The Court emphasized that a liquidator’s refusal to act on such a direction is valid if they genuinely believe it to be prejudicial or vexatious, even if the merits of their reasoning might be debatable.

The Court declined a competing application by the creditors seeking to compel the meeting and found no misuse of the liquidators’ discretion. Ultimately, the liquidators were granted a declaration under section 90-15 of the Insolvency Practice Schedule confirming they were justified in refusing the request, and the creditors’ application was dismissed.

Read the decision HERE.

Professionals involved:

• Steven Golledge SC and Nicola Bailey of 3 St James’ Hall (instructed by Hall and Willcox) for the liquidators, Paula Smith, Andrew Barnden and Geoffrey Reidy of Rodgers Reidy

• Emma Beechey of New Chambers (instructed by CX Law) for Bright Agile and others

• Stefan Balafoutis SC of Tenth Floor Chambers (instructed by KMD Law & Advisory) for Vulpes Distressed Fund