Background
Liberty Bell Bay Pty Ltd operated a manganese alloy smelter in Bell Bay, Tasmania. On 29 January 2026, the State of Tasmania appointed receivers and managers of ore in the company’s possession. Three administrators—Morgan Kelly, Samuel Freeman, and Robyn Duggan—were appointed on 23 March 2026. The administrators launched a sale and recapitalisation process, entering into multiple funding arrangements to maintain the business as a going concern during administration.
Four principal funding facilities were utilized: a Receiver Facility for employee costs; a State Facility Agreement predating the administration; an Adroit Facility ($2.5 million committed, though only $500,000 was advanced); and a White Oak Facility for general operating expenses. The administrators sought court orders under section 447A of the Corporations Act 2001 (Cth) to limit their personal liability under section 443A for amounts owing under these facilities.
The Court’s Holding
Justice Younan granted relief limiting the administrators’ personal liability. For the Receiver Facility, Adroit Facility, and White Oak Facility, the court ordered that administrators’ liability under section 443A be limited to the “Pari Passu Share” (a proportional share of available company assets) as defined in each facility. If the Pari Passu Share proved insufficient, administrators would incur no personal liability for shortfalls. For the State Facility Agreement, the court relieved the administrators entirely of liability, as they had not been parties to that agreement and did not cause the company to incur those debts.
The court applied established principles requiring that funding arrangements serve creditors’ interests and be consistent with Part 5.3A of the Corporations Act objectives. The court found all four facilities satisfied this test: they were necessary to maintain the business as a going concern and to facilitate a more advantageous sale process than liquidation would yield. The Adroit default (only $500,000 of $2.5 million advanced) did not defeat the application, as the default was neither foreseen nor foreseeable at the time the facility was entered.
Key Takeaways
- Courts routinely grant relief under section 447A limiting administrators’ personal liability when funding arrangements are necessary to maintain business operations and serve creditors’ interests.
- Lenders’ express agreement to limit recourse to available company assets substantially supports such orders, and courts weigh this heavily in their analysis.
- Administrators need not bear personal liability for partial defaults by lenders if the defaults were unforeseeable at the time the facility was entered into in good faith.
- Relief extends to pre-administration liabilities if administrators are not parties to and did not incur them, provided the liability structure supports the going-concern objective.
Why It Matters
This decision reinforces that administrators can secure essential funding without exposing themselves to personal risk when such funding advances creditors’ interests. By removing personal liability concerns, courts enable administrators to focus on maximizing returns through sale or recapitalisation rather than operating defensively. This case is particularly significant because it confirms that courts will grant relief even when lender defaults occur, provided those defaults were unforeseeable, thus encouraging genuine arm’s-length negotiations over funding terms.
For practitioners, the decision clarifies that the “Pari Passu Share” concept—tying administrator liability to proportional company assets—is an acceptable compromise between lender security and administrator protection. The judgment also emphasizes that Part 5.3A of the Corporations Act, which governs voluntary administration, should be construed to facilitate continued business operations for creditors’ benefit, not to trap administrators in personal liability traps.