Federal Court halts receivers' sale in asset-based lending fight

The Federal Court has restrained the receivers of Kimberley Pearl Tours Pty Ltd from selling the company’s tourist vessels after finding it was “reasonably arguable” that claims challenging the lender’s facility, the receivers’ appointment and the proposed sale process should be determined before the assets are realised.

Justice Feutrill granted interlocutory relief in a complex dispute involving Kimberley Pearl Tours, which operated a tourist charter business in northern Australia using the converted fishing trawler Kimberley Pearl and three smaller JimFab boats. The company borrowed from Blackbird Private Equity Pty Ltd, with director Daniel Brown and family members guaranteeing the facility and granting security over company and personal assets, including real property in New South Wales.

Blackbird appointed receivers and managers in January after the company defaulted. The receivers took control of the Kimberley Pearl and the JimFab boats and later began steps toward a sale by online auction. Blackbird also appointed administrators in April, a step Brown challenged on the basis that the appointment was invalid or made for an improper purpose.

The Brown parties allege that aspects of the lending arrangements, including default interest of 48% per annum, establishment and other fees, security terms and conduct in the receiverships, amounted to statutory unconscionable conduct under the ASIC Act. The Court made no final findings on those allegations. However, Feutrill J held that the Brown parties had established a serious question to be tried, including that it was reasonably arguable that the higher interest rate was a penalty or unfair term, that aspects of the receiverships may have been used to exert financial pressure, and that the proposed sale process raised issues under the receivers’ duties. The Court did not hold that the receivers breached their duties, that Blackbird engaged in unconscionable conduct, or that the facility was unenforceable. It held that the case was sufficiently arguable to justify preserving the company’s property pending final determination.

Feutrill J’s reasons also scrutinise the proposed sale process. The receivers relied on evidence that potential buyers had indicated bids of $200,000 to $250,000 for the Kimberley Pearl, while Brown contended that the vessel had a substantially higher value if repaired, properly marketed and sold with the charter business, permits and bookings. The company had acquired the business, including the vessels, for $2.2 million in July 2024 and had contracted bookings for the 2026 tourist season said to exceed $4.5 million.

For interlocutory purposes, the Court accepted that it was reasonably arguable that the vessel had a market value significantly higher than $250,000 with appropriate marketing. It was also reasonably arguable that selling the vessel and boats separately through a short online auction may not obtain market value or the best price reasonably obtainable, particularly where there was evidence that the receivers had not considered a going-concern sale of the business.

The Court also found it reasonably arguable that the receivers’ proposed sale could involve a breach of duties under sections 180, 181 and 420A of the Corporations Act, as well as unconscionable conduct under the ASIC Act. That conclusion was not a finding of liability. It was enough, however, to support an injunction restraining the receivers and Blackbird from selling or otherwise dealing with the company’s property until final judgment or further order.

The relief is conditional. The Brown parties must give the usual undertaking as to damages and undertake to prosecute the proceeding quickly. They must also pay the receivers’ reasonable preservation and storage costs, although that condition is stayed until 31 August.

Feutrill J separately permitted Brown, subject to conditions, to prosecute the company’s unconscionability proceeding and defend the receivers’ validity proceeding in the name of Kimberley Pearl Tours. The Court found it highly unlikely that the administrators, or any liquidator if the company were wound up, would prosecute the claims. If the claims succeeded, the company could be solvent and unsecured creditors could receive full payment.

Those conditions include indemnifying the administrators for costs and expenses arising from the proceedings, paying $10,000 on account of their remuneration and expenses, and providing security for the costs of the receivers and other respondents.

The Court refused to restrain the administrators from performing their functions. However, it modified the voluntary administration timetable by adjourning the second meeting of creditors until ten business days after final judgment in the main unconscionability proceeding, preserving the status quo while the dispute over the lender’s security and receivers’ appointment is resolved.

All three proceedings have been referred to Federal Court mediation, to be completed by 31 August or as soon as practicable thereafter.

Read the decision here.

Counsel for the Brown parties was Zack Mason of Adero Law.

Counsel for the receivers, Richard Albarran and Brent Kijurina of Hall Chadwick, Blackbird and related parties were Brett Le Plastrier of 7 Wentworth Selborne and Amir Chowdhury of 9 Selborne Chambers, instructed by HopgoodGanim.

The administrators, Trajan Kukulovski and Liam Bellamy of Mackay Goodwin, were represented by Salwa Marsh of Level Twenty Seven Chambers instructed by Arrow White Lawyers.