Keybridge Capital (ASX:KBC) - Case Update

The Supreme Court of New South Wales has addressed the issue of costs arising out of two previous decisions in the administration of Keybridge Capital, refusing to order personal costs against the company’s former administrator but also also declining to indemnify him for 15% of his costs from the company’s property due to his non-neutral stance on certain issues.

In March, the Court ruled that the appointment of Gideon Rathner of Lowe Lippmann as voluntary administrator of the company was not for an improper purpose, despite finding that he was conflicted due to his previous dealings with the company. Mr Rathner had been appointed the night before a scheduled shareholders’ meeting called by one faction of the company’s dueling shareholders to remove certain directors from the board.

The Court agreed that there were issues with respect to Mr Rathner’s independence arising from his previous dealings with Keybridge, and that Mr Rathner did not adopt a position of neutrality in respect of the issues arising in the administration proceedings. However, this did not provide a sufficient basis to conclude that the appointment was invalid, since it could not be said that Mr Rathner and the incumbent directors had come to some unspecified understanding about how the administration would unfold, and that Mr Rathner would not have been proposed as administrator absent this improper purpose.

The Court also also found that the adjournment of the shareholders’ meeting was invalid, outside the scope of the company constitution and not made in good faith or for a proper purpose. However, the Court concluded that the meeting was validly continued and that the resolutions removing and appointing directors were validly passed.

In April, the Court ordered that the voluntary administration of Keybridge Capital be brought to an end, finding the company solvent following the offer of a bridge funding facility by its largest shareholder WAM Active (ASX:WAA). WAM Active is the shareholder that called the shareholders’ meeting to replace certain incumbent directors and challenged the validity of Mr Rathner’s appointment.

Now, the Court has awarded costs based on the conduct and level of success of the parties throughout the proceedings. The Court found that WAM Active and its directors succeeded in their main objectives: confirming that their directors were validly appointed and terminating the administration of Keybridge. They were awarded costs against the incumbent directors on the ordinary basis, since those parties had actively opposed the their claims but were unsuccessful on the substantive issues.

As for Mr Rathner, the Court declined to award costs against him personally, recognising that his conduct did not warrant such an order. The Court accepted Mr Rathner’s contention that he was not required to adopt a stance of neutrality in respect of criticisms of his own conduct, and that he was entitled to advance submissions regarding the challenges made to his independence. However, because he had, prior to 3 March 2025, engaged in non-neutral conduct—such as coordinating defence efforts with the former directors—the Court held he was not entitled to be indemnified for 15% of his costs from the company’s property.

Ultimately, the Court declined to stay the costs orders pending appeal, stating there was no immediate risk of enforcement and that any such orders could be varied depending on the outcome of the appeal, which is set to be heard today.

Read the decision HERE.

Professionals involved: 

• Daniel Krochmalik of 3 St James' Hall Chambers and David Monteith of Banco Chambers (instructed by Mills Oakley) for WAM and the other plaintiffs

• Gideon Gee of New Chambers (instructed by Tisher Liner FC Law) for Keybridge and the administrator

• Andrew Broadfoot KC of Dever’s List and Andrew Byrne of 7 Wentworth Selborne of Sixth Floor Selborne Wentworth Chambers (instructed by Cornwalls) for Mr Bolton, Mr Patton and Richard Dukes

• Jonathan Burnett of Eleven Wentworth for Frank Catalano

• David Weinberger of 9 Wentworth Chambers (instructed by KCL Law) for Yowie Group