Feature article: Administrator liability and judicial discretion - Lessons from True North Copper

14/04/2026

Contributors:

  • Ranjani Sundar RITP, Partner, HFW Australia
  • With Annelise Hodge, Associate, HFW Australia

 

The Federal Court’s decision in True North Copper Limited (Administrators Appointed) [2024] FCA 1329 provides a timely illustration of the Court’s willingness to exercise its discretion under s 447A of the Corporations Act 2001 (Cth) to facilitate the effective operation of voluntary administration. In circumstances where administrators are required to make commercially significant decisions under conditions of urgency and uncertainty, the decision affirms that the statutory regime does not require them to assume disproportionate personal risk. Rather, the Court will intervene to limit personal liability where doing so advances the objects of Part 5.3A, particularly the preservation of enterprise value and the maximisation of returns to creditors.
 

The case, and its subsequent application in later authorities, underscores that relief from personal liability is not exceptional but forms part of the Court’s supervisory function in supporting administrations that are directed towards creditor outcomes. Central to the exercise of this discretion is a comparative assessment of outcomes: the Court will favour a course that enhances value for creditors, provided that any prejudice arising from the granting of relief is outweighed by the overall benefit. In this context, the evidentiary burden on administrators is critical. Applications must be supported by cogent and detailed evidence addressing both the anticipated advantages of the proposed course and the adverse consequences likely to arise in the absence of relief.

Accordingly, True North Copper reinforces a practical framework for administrators. It highlights the importance of early engagement with the Court where personal liability risks may inhibit value-preserving strategies, and confirms that well-supported applications will be viewed through the lens of facilitating commercial decision-making in the interests of creditors, rather than constraining it.

 

Urgent funding secured to support continued trading during administration

On 21 October 2024, the Directors of the True North Copper Limited (Company) appointed Voluntary Administrators1. Following an urgent assessment of the Company,2 the Administrators found that without additional funding, the Company would be forced to shut down by November 2024. Consequently, there would be a significant loss of potential realisable value for the Company's assets. 

On 6 November 2024, the Administrators entered into a conditional loan agreement with Nebari for the payment of up to US$1.65 million to be applied towards specified purposes with the objective of supporting the continued operations of the Company ("Loan Agreement").3 

The Administrators gave evidence that:

  • it was unlikely that the Company would be able secure a loan from an alternative source on better terms than those contained in the Loan Agreement; and
  • there would not be any material prejudice to the other creditors who would ultimately benefit from the objectives that entry into the Loan Agreement sought to achieve.4 However, if the loan funds could not be accessed, it was likely that the Company would enter into liquidation at the second creditors' meeting.

 

Court limits administrators’ personal liability to facilitate ongoing trading and preserve value

Justice Banks-Smith stated that "it is well established that the court has power under s 447A of the Corporations Act to make orders to limit an administrator's personal liability under s 443A. The courts have been satisfied on a number of occasions that it is not to be expected that the administrators should expose themselves to substantial personal liabilities."5 

By reference to the leading cases discussing the application of s 447A,6 the Court considered the following principles in making orders limiting the liability of the Administrators under the Loan Agreement: 

  • orders limiting an administrator's liability are often made when the Court is satisfied that an administrator has entered into a loan agreement to enable the company's business to continue to trade for the benefit of the company's creditors;7
  • in these cases, it is not expected that the administrators should expose themselves to substantial personal liabilities;8
  • such orders will permit administrators to make commercial decisions to promote continued operations;9
  • the material consideration when deciding whether to make orders limiting the liability of an administrator is whether the proposal is within the interests of the creditors and is consistent with the objectives of part 5.3A of the Act;10 and
  • notice must be given to those who may be affected by the order.11 

Banks-Smith J had regard to the recent matter of IG Power (Callide) Ltd (Administrators Appointed) (No 2) [2024] FCA 1244 at [15] –[16] (per Justice Derrington), in which the above principles were applied. There it was established that "the most important consideration is that the company's creditors are not prejudiced or disadvantaged by the court's exercise of power." 

In considering the above principles, the Court was satisfied that making the order for the limitation of liability of the Administrators in respect of the Loan Agreement was in accordance with the objectives of Part 5.3A and would not prejudice the Company's creditors.12 His Honour gave the following reasons for making this determination:

  • the orders were a condition precedent to the Loan Agreement and therefore were necessary to enable the Company to draw down on the loan funds;13  
  • these funds would support the continued operations of the Company which in turn, afforded additional time to the Administrators for the negotiation of restructuring and sale agreements;14
  • it was accepted that no real prejudice was faced by Nebari, a secured creditor of the Company. Further, the remaining creditors were considered to have received sufficient notice of the Administrators' proposal to enter into the Loan Agreement;15 and
  • given that Nebari was the only secured creditor of the Company (who also held a statutory lien over the funds paid under the Loan Agreement), the orders would not disadvantage other creditors, particularly when considering that part of the loan funds would be directed to paying employee creditors, to ensure the continued operations of the Company.16 

Moreover, Banks-Smith J found that the Administrators acted appropriately in seeking a declaration of their entitlement to enter into the Loan Agreement on behalf of the Company as the circumstances of the application did in fact give rise to questions of propriety and reasonableness.17 

The relevant factors included the urgency of the Application and need for funding, the significant quantum of funds the subject of the Loan Agreement, the complexity of the corporate structure and assets held, and the fact that orders limiting the liability of the Administrators was a condition precedent to entry into the Loan Agreement. 

Ultimately, it was found that the Loan Agreement supported the interests of the creditors given that its objective was to maintain the operations of the business and to maximise its value.

 

Recent application of True North Copper

More recently, the Federal Court delivered its judgment in Jones (Administrator) v Realtek Semiconductor Corporation in the matter of Nuheara Limited (administrators appointed) (No 2) [2025] FCA 276 ("Jones"). In this case, the administrators of the company cited True North Copper in support of their application to enter into a Syndicate Funding Agreement and for orders limiting their personal liability.18 It was submitted that "such orders are standard in insolvency cases and allow administrators to act in the best interests of creditors without undue risk."19 O'Sullivan J accepted the administrators' submissions and granted the orders sought.

 

Relief for liabilities arising in relation to leasing arrangements

The same principles in respect of furthering the objects of part 5.3 may be applied in respect of an administrator's relief from liability arising in connection with lease agreements, where prejudice to lessors is weighed against the overall benefit to creditors.

In the matter of Ron Crouch Transport Pty Ltd [2025] FCA 1688,20 the Administrator of Ron Crouch Transport Pty Ltd ("Company") made an urgent application seeking relief from personal liability for a limited period, in respect of eight leasing agreements held by the Company. The Administrator requested that the Court exercise its general power pursuant to s 447A in making an order pursuant to s 443B(8), such that the Administrator would be excused from personal liability arising under s 443A(1)(c) and s443B(2).21

Under s 447B(3), an administrator may be excused from liability in respect of leasing arrangements, if notice is served on the lessor within 5 business days of their appointment. However, the Administrator elected not to serve the notice as the business was advertised for sale. This strategy was intended to preserve the business as a going concern whilst it continued to trade, for the purpose of realising maximum value for the Company's creditors.22 

The application was made in the following context:

  • The rental payments for the period the subject of the application were to be in the amount of $463,696.23  
  • Despite securities and personal guarantees granted in favor of some of the lessors, the Company owed $2,301,199.99 on account of rent (as at 8 December 2025). This debt, together with ongoing liabilities subject of the leasing agreements substantially exceeded the value of any security provided to the lessors.24

The administrator requested relief from liability from the end of the period in which expressions of interest in the sale were to be submitted, being 22 December 2025, until the conclusion of the convening period for the second meeting of creditors, which was to be on 15 January 2026.25

The Court considered the consequences of rejecting the Administrator's application, which included:

  • The Administrator would immediately cease trading of the Company (as the Company would not be capable of satisfying the administrators indemnity);26
  • 105 employment contracts would be terminated;27
  • the Company would cease occupation of leased premises and in turn, landlords would bear responsibility for the dangerous goods stored on the premises and to facilitate its removal (such activity would require licences, specialised software and plant equipment to transport);28
  • delay in delivery of the stored goods to customers would prejudice creditors by hindering the collection of debts owed to the Company, which were of significant value;29 and
  • sale would be either impossible or for a significantly reduced price.30

The Court accepted the Administrators' views regarding the benefits of continued trade and, accordingly, was satisfied that the proposal was in the interest of creditors pursuant to the objects of Part 5.3A. As such, it was accepted that continued trading would generate a better result for creditors, as opposed to the alternative in which the Company would be wound up immediately.31

The Court considered the potential for prejudice to landlords, if relief was to be granted to the Administrator. In particular it was noted that the lessors that did not hold sufficient bank guarantees would become unsecured creditors in the administration.

Weighing the consequences of a refusal to make the order, against the prejudice faced by the landlords in respect of rental payments for the requested period, the Court determined that the landlords would be no worse off if the orders were not made, and the Company entered into liquidation. The risk of prejudice was mitigated by the inclusion of an order granting liberty for any party to apply to vary the order should circumstances change.32

Similar orders were made pursuant to s 443B(8) in Kanevsky, in the matter of M.A Services Group Pty Ltd (Administrators Appointed) [2025] FCA 1694,33 excusing the administrators from personal liability arising from property leased by M.A Services Group Pty Ltd. 

By application on 23 December 2025, the administrators of M.A Services Group Pty Ltd sought urgent relief in respect of immediate personal liability arising under s 443A for debts incurred under any leases entered into by the company, for a short period ending on 16 January 2026.34

The relief was sought on the basis that the administrators required time to ascertain whether there were leases or financed assets of the company, in addition to those discovered from their preliminary investigations. It was said that the extended period would enable the administrator to assess the full extent of the leases of the company and its property. In turn, these investigations would enable the administrators to determine the best course for the business and its creditors.35

The Court was satisfied that the relief should be granted, noting the limited period in which the administrators had been appointed, and having regard to established principles providing that administrators should not be expected to expose themselves to substantial personal liabilities when acting in the interests of creditors.36

 

Conclusion

The objects of the Act and of the IPS operate to support positive outcomes of administration for the benefit of creditors. Where administrators are taking active steps to maximise enterprise value for the benefit of creditors, they should not hesitate to apply to the Court to limit their personal liability and to have their proposed plan "blessed" by the Court prior to execution.

The caselaw makes clear that the Court is prepared to exercise its discretion to give effect to Pt 5.3A of the Act, to provide much-needed protection to administrators against liabilities which may arise when making commercial decisions, and to ensure administrators are able to discharge their duties effectively. 

 

Read the decision here.

A previous version of this article was originally published on the HFW website.

 

Notes

  1. 22 October 2024, ASC Announcement ASX: TNC.
  2. Ibid.
  3. True North Copper, [14].
  4. Ibid, [16]-[17].
  5. True North Copper, [28] citing Unlocked Ltd (administrators appointed) [2018] VSC 345 ("Unlocked") at [61].
  6. See Unlocked (per. Sloss J), Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 71 (Middleton J) ("Strawbridge"), and Park, in the matter of IG Power (Callide) Ltd (Administrators Appointed) (No 2) [2024] FCA 1244 (Derrington J)("Park").
  7. True North Copper, [28] citing Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (admins apptd) [2011] FCA 1493 ("Secatore"), at [23] (Gordon J). See also Re Mentha (in their capacities as joint and several administrators of the Griffin Coal Mining Company Pty Ltd (admins apptd) (2010) 82 ACSR 142; [2010] FCA 1469, [64] ("Mentha").
  8. Unlocked citing Re Renex Holdings (Dandenong) 1 Pty Ltd [2015] NSWSC 2003, [13] (Black J); Preston, in the matter of Hughes Drilling Limited [2016] FCA 1175 at [18] (Yates J). See also Korda, in the matter of Ten Network Holdings Ltd [2017] FCA 1144, [43] –[44] (Markovic J).
  9. Unlocked, [62]; Re Malanos, [9] and Re View, [17].
  10. Unlocked, [63] citing Re Great Southern Infrastructure Pty Ltd [2009] WASC 161 ("Great Southern"), [13] ; Re View at [18], and also Re Application of Fincorp Group Holdings Pty Ltd [2007] NSWSC 628, [17].
  11. Mentha, [64] citing Great Southern, [12].
  12. True North Copper, [37].
  13. Ibid, [38].
  14. Ibid, [39].
  15. Ibid, [40]-[41].
  16. Ibid, [42]-[43].
  17. Ibid, [36].
  18. Jones, [28].
  19. Ibid.
  20. Ron Crouch Transport Pty Ltd, in the matter of Ron Crouch Transport Pty Ltd [2025] FCA 1688 (Longbottom J) ("Ron Crouch").
  21. Ibid, [24].
  22. Ibid, [9].
  23. Ibid, [14].
  24. Ibid, [14]-[15].
  25. Ron Crouch, [10].
  26. Ibid, [18].
  27. Ibid, [19].
  28. Ibid, [20].
  29. Ibid, [20].
  30. Ibid, [19].
  31. Ibid, [31].
  32. Ibid, [32]-[34].
  33. Kanevsky, in the matter of M.A Services Group Pty Ltd (Administrators Appointed) [2025] FCA 1694 (Dowling J) ("Kanevsky").
  34. Ibid, [2], [27].
  35. Ibid, [28]-[29], [31].
  36. Ibid, [7]-[9], [31].