Australia, July 14 -- New South Wales Land and Environment Court issued text of the following judgement on June 13:

1. By Interlocutory Process filed on 20 December 2024 ("Liquidators IP"), Mr Reidy, Mr Barnden and Ms Smith ("Liquidators") seek an order, under s 90-15 of the Insolvency Practice Schedule (Corporations) ("IPSC") that they are justified in declining to convene a meeting of the creditors of Balamara Resources Ltd ("Company") as directed by letter dated 9 December 2004 ("Direction") sent by the solicitors for Bright Agile Ltd and several other creditors of the Company ("Directing Creditors"). I will address the converse application brought by the Directing Creditors below.

2. On 13 May 2025, I noted the parties' common position that the question whether it was reasonable (in the requisite sense) for the Liquidators to convene the requested meeting is to be determined as at the date of that request, namely 9 December 2024. On the first day of the hearing, 5 June 2025, I ordered that the Directing Creditors be joined as Defendants to that Interlocutory Process and heard in the proceedings on that basis.

Background and affidavit evidence

3. I first set out the background to these proceedings, drawing in part on the summary in my earlier decision in Re Balamara Resources Ltd [2024] NSWSC 1309. The Company is an Australian based mining company which had or has interests in coking coal deposits in the Republic of Poland. It sought, but did not obtain, the requisite permission from the Polish Government to mine the coal deposits and it appears its only significant asset is potential claims ("Polish Claim") against the Republic of Poland for an allegedly wrongful refusal to issue the requisite permits.

4. The Plaintiff in these proceedings, Vulpes Distressed Fund ("Vulpes"), which took a limited role in this application, has been a significant shareholder in the Company since 2019. On 4 August 2023, Vulpes commenced proceedings seeking, amongst other things, relief against Messrs Hale, Leung, and Lenartowicz for breach of directors' duties and oppressive conduct in respect of the Company (Barnden 26.2.25 [8]). On 26 February 2024, those proceedings were resolved by a Deed of Settlement although there are issues, which I need not resolve, as to the extent to which the parties complied with its terms.

5. By Originating Process filed on 14 June 2024, Vulpes then sought orders for the winding up of the Company and Bright Agile was heard by leave under r 2.13 of the Supreme Court (Corporations) Rules in that application. On the second day of the hearing of that application, the Company indicated that it no longer opposed a winding up order on the just and equitable ground under s 461(1)(k) of the Corporations Act 2001 (Cth); Vulpes then narrowed the relief that it sought to seek that order; and, after hearing submissions from Vulpes, I then made that order and consequential orders, including that the Liquidators be appointed as the liquidators of the Company. In making the winding up order, I found that there were multiple failures with the Company's governance including a failures to prepare financial accounts and a failure to lodge tax returns since 1 July 2018, and I also found that there had also been a breakdown in the working relationship of the directors.

6. Within a week of the appointment of the Liquidators, they met with representatives of the Directing Creditors (Barnden 26.2.25 [177]). On 26 October 2024, nine days after the winding up orders, representatives of the Directing Creditors met with their proposed alternate liquidators. On 14 November 2022, the Liquidators issued a circular to creditors, which included a request for funding of the liquidation.

7. On 22 November 2024, Mr Lenartowicz, who is a former director of the Company and one of the Directing Creditors, sent a misleading letter to the Company's shareholders, which blamed Vulpes for the winding up and failed to disclose the Court's findings of multiple governance failures on the part of the Company and (at least some of) its directors that founded that order. On 9 December 2024, the solicitors acting for the Directing Creditors issued the Direction (Barnden 20.12.24 [21]; Ex L1, CB 223) to the Liquidators that relevantly claimed that the Directing Creditors represented in excess of 25% in value of the Company's creditors and, pursuant to s 75-15 of the IPSC, directed that the Liquidators convene a meeting of creditors of the Company for the purpose of the creditors resolving, if they saw fit, resolutions that:

"1. Pursuant to section 90-35(1)(a) of the IPSC each of [the Liquidators] be removed forthwith as the liquidators of the Company.

2. Pursuant to section 90-35(1)(b) of the Schedule, each of [nominated persons] be appointed as joint and several liquidators of the Company in the stead of [the Liquidators]."

*Rest of the document can be viewed at: (https://www.caselaw.nsw.gov.au/decision/19767d9e516759e04ca7f704

Disclaimer: Curated by HT Syndication.