In the matter of Keybridge Capital Limited

1. [1]

   This proceeding involves a challenge to the appointment of a voluntary administrator to the First Defendant, Keybridge Capital Limited, which occurred on the evening before a meeting of Keybridge’s members to consider resolutions to remove and replace its directors, and a challenge to the purported adjournment of that meeting on the following day, prior to any business being conducted.

2. [2]

   The First Plaintiff, WAM Active Limited, is a public company listed on the Australian Stock Exchange (ASX). WAM, together with its associated entities, currently holds approximately 43.5% of the total shares on issue in Keybridge.

3. [3]

   Keybridge is also a public company listed on the ASX, although its shares are currently suspended from trading (and, with the exception of two days in August 2024, have been so suspended since 1 March 2024).

4. [4]

   On 19 December 2024, WAM issued a notice of general meeting of shareholders of Keybridge pursuant to s 249F of the Corporations Act 2001 (Cth) (the Act) to be held at 10.00am on Monday, 10 February 2025 (the Section 249F Meeting). This notice stated that the business of the meeting was to consider and, if thought fit, to pass resolutions:

   1. (1)

      to remove Mr Nicholas Bolton (the Third Defendant), Mr John Patton (the Fourth Defendant), Mr Frank Antony Catalano (the Fifth Defendant) and Mr Richard Dukes (the Sixth Defendant) as directors of Keybridge (the Incumbent Directors); and

   2. (2)

      to appoint Mr Geoffrey Wilson (the Second Plaintiff), Mr Jesse Hamilton (the Third Plaintiff), Mr Martyn McCathie (the Fourth Plaintiff) and Mr Sulieman Ravell (the Seventh Defendant) as directors of Keybridge (the Proposed Directors).

5. [5]

   On Sunday, 9 February 2025, the Incumbent Directors unanimously passed a resolution to appoint the Second Defendant, Mr Gideon Rathner, as voluntary administrator of Keybridge. This step was taken on the evening before the Section 249F Meeting was to be held, and after the time for shareholders to submit proxy votes on the resolutions proposed for that meeting had closed. At that time, proxies in respect of more than 50% of the total shares on issue in Keybridge had been received in favour of the resolutions to remove the Incumbent Directors (other than Mr Catalano) and to appoint the Proposed Directors.

6. [6]

   On Monday, 10 February 2025 at 9.16am, Keybridge announced to the ASX that Mr Rathner had been appointed as voluntary administrator.

7. [7]

   On the same day at around 4.30pm, the Section 249F Meeting opened as scheduled, with Mr Patton as chairperson. He then purported to adjourn the meeting “to a later date” with details of the new time to be provided “in due course”, without putting any of the resolutions to a vote. Shareholders who were present objected to the adjournment and purported to elect a new chairperson, Mr Hamilton. He proceeded to read out the resolutions and put them to a vote. Mr Hamiton declared that all of the resolutions were passed, with the exception of the resolution to remove Mr Catalano.

8. [8]

   On 12 February 2025, WAM sent a letter addressed to the directors of Keybridge which was headed “Comfort letter with respect to the debts and liabilities of the Company” (Letter of Comfort). In the Letter of Comfort, WAM gave undertakings that, subject to the conditions set out in that letter, if Keybridge requested an amount of equity or shareholder loans from WAM because it was unable or likely to be unable to pay a debt or liability from its own moneys, WAM would provide the requested amount in cash within 15 business days of the request. The conditions, which are discussed further below, included that the Incumbent Directors (other than Mr Catalano) had been removed as directors, and the Proposed Directors had been appointed as directors.

9. [9]

   This proceeding was commenced by WAM on 11 February 2025, the day following the Section 249F Meeting. WAM seeks declarations that, as a result of the resolutions passed at the Section 249F Meeting, the Incumbent Directors (other than Mr Catalano) were removed and the Proposed Directors were appointed. WAM also seeks an order, pursuant to s 447A or s 447C of the Act, that the purported appointment of Mr Rathner as voluntary administrator of Keybridge was void, invalid and of no effect, or alternatively an order that, pursuant to s 447A, the administration of Keybridge is to end with immediate effect. In addition, WAM seeks an order that each of Mr Patton, Mr Bolton and Mr Dukes indemnify Keybridge for the costs, expenses and remuneration of Mr Rathner in his role or purported role as administrator of Keybridge.

10. [10]

    Each of Mr Catalano and Mr Ravell filed a submitting appearance.

11. [11]

    The Plaintiffs served a document headed “Plaintiffs’ issues or contentions”, which identified the propositions which they sought to establish on this application, and which provides a useful framework for determining the dispute. Those propositions fall into two categories, namely, propositions relating to the “purported adjournment” of the Section 249 Meeting and propositions relating to the “purported appointment” of Mr Rathner as voluntary administrator, as follows:

    1. (1)

       Mr Patton, as the initial chair of the meeting, had no power to adjourn the Section 249F Meeting sine die.

    2. (2)

       Mr Patton’s purported adjournment was not in good faith for a proper purpose.

    3. (3)

       By reason of (1) or (2) above, the purported adjournment was invalid, the meeting proceeded and the Court should declare that the results are as have been declared by Mr Hamilton.

    4. (4)

       The board of Keybridge did not properly and genuinely form the opinion that Keybridge was insolvent or was likely to become insolvent at some future time.

    5. (5)

       The board of Keybridge purportedly appointed the voluntary administrator, Mr Rathner, for an improper purpose.

    6. (6)

       Even if the appointment of the voluntary administrator was valid, the Court should order that the administration is to end under s 447A of the Act.

12. [12]

    As regards Issue 4 above, the Plaintiffs acknowledged, in opening written submissions in reply, that the material before the board of directors of Keybridge (Board) on 9 February 2025, which was exhibited to the Defendants’ affidavits, “provided a basis for believing that Keybridge may have been insolvent”. As regards Issue 6, WAM also accepted that “the Court should proceed on the basis that, but for WAM’s letter of comfort, Keybridge may presently be insolvent from a cash flow perspective (even though, on a balance sheet basis, its assets exceed its liabilities)”.

13. [13]

    Before addressing each of the remaining propositions advanced by WAM, I will make some brief comments about the witnesses and then set out the events leading up to the appointment of Mr Rathner as voluntary administrator and the holding of the Section 249F Meeting, based primarily upon the documentary evidence.

Witnesses

1. [14]

   WAM read a number of affidavits in support of its application, including affidavits of Mr Hamilton and of WAM’s solicitor, Ms Reid.

2. [15]

   Each of Mr Hamilton and Ms Reid was cross-examined. There was no substantial challenge to the reliability of any aspect of their evidence.

3. [16]

   Each of Mr Rathner, Mr Patton, Mr Bolton and Mr Dukes was also cross-examined. There was no challenge to the credit of Mr Dukes.

4. [17]

   In respect of Mr Rathner, there were various aspects of his evidence which were said to be unreliable or improbable. I address these issues where they arise below, insofar as they are material.

5. [18]

   In respect of Mr Patton and Mr Bolton, Senior Counsel for the Plaintiffs made the following submission in his closing address in reply:

6. [19]

   While the Plaintiffs challenged numerous aspects of the evidence of Mr Bolton and Mr Patton regarding the terms of conversations or regarding their state of mind at the time of the critical events, the Plaintiffs did not articulate any basis for the Court to make a global credit finding that the evidence of either of them should be disregarded. I have not made any such finding.

7. [20]

   Instead, where the Plaintiffs in the course of cross-examination and submissions challenged specific aspects of the evidence of Mr Bolton and Mr Patton (in particular, concerning their state of mind at the time of the key events), I have assessed such evidence on the basis of contemporary materials, objectively established facts and the apparent logic of events: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31] per Gleeson CJ, Gummow and Kirby JJ.

Events leading up to Section 249F Meeting

1. [21]

   On 27 November 2024, I delivered reasons for judgment in respect of WAM’s application for Keybridge to be wound up, or alternatively for leave to pursue a derivative action against the Incumbent Directors (other than Mr Dukes) alleging breaches of director’s duties (the Winding Up Proceeding): WAM Active Limited v Keybridge Capital Limited (No 2) [2024] NSWSC 1496.

2. [22]

   I granted leave to bring the derivative action, but dismissed the winding up application.

3. [23]

   In respect of the application to wind up Keybridge in insolvency, I found that Keybridge was solvent as at the date of the hearing (at [184]). Relevant matters included that Keybridge had demonstrated an ability to raise equity capital, with WAM having indicated in October 2024 that it was willing to participate to the full extent of its pro rata entitlement in a proposed capital raising; and that Keybridge had demonstrated an ability to obtain bridging finance pending any such capital raising, as shown by an indicative term sheet from Roadnight Capital Pty Ltd (at [183], referring to [125] and [130]). Further, Keybridge had borrowed funds from Yowie Group Ltd, which led to it having significant cash at bank at the time of the hearing (at [176]). Keybridge has a relevant interest of 78.359% in Yowie, and Mr Patton and Mr Bolton were two of the three directors of Yowie, being, respectively, the Chairman and the Chief Executive Officer. The funds loaned by Yowie were repayable on demand. However, WAM’s solvency expert, Mr Olde, acknowledged that, on the basis that Yowie is majority owned by Keybridge, there may be an opportunity to seek forbearance from Yowie in respect of this loan (at [154]). Further, Mr Patton gave evidence at the hearing regarding the financial health of Yowie (at [178]).

4. [24]

   In respect of the application to wind up Keybridge on the just and equitable ground, I found (at [288]) that insofar as there has been mismanagement of Keybridge’s affairs by Mr Bolton, Mr Patton and Mr Catalano regarding the matters at issue in that proceeding (being an issue which I did not determine), this was a matter which could be addressed by the derivative suit; and that, in those circumstances, the grant of leave to bring that suit was a sufficient remedy for any oppression in the management of Keybridge’s affairs by those directors. In reaching this conclusion, I noted (at [287]) that WAM did not advance a submission that, as the largest shareholder, it was shut out of any say in the management of Keybridge.

5. [25]

   In this regard, I referred to the fact that WAM had previously nominated Mr Wilson, Mr Hamilton and Mr McCathie for appointment as directors of Keybridge, but had withdrawn those nominations before the 2022 Annual General Meeting, and added that:

6. [26]

   There was evidence at the present hearing that WAM and its associated entities had a relevant interest of around 43.5% in Keybridge; and that Mr Catalano and his associated entities had a relevant interest of around 10.36% in Keybridge. Mr Patton gave evidence in cross-examination that Mr Catalano had been indicating, since around the middle of 2024, that he might vote with WAM to change the composition of Keybridge’s board. Mr Patton acknowledged that he was aware at all relevant times that, if Mr Catalano agreed with WAM that the directors of Keybridge should be removed and replaced, then they had, between them, the votes to do so.

7. [27]

   On 27 November 2024, being the day that judgment was delivered in the Winding Up Proceeding, WAM served on Keybridge a notice of its intention to nominate each of the Proposed Directors for election to the office of a director of Keybridge and requested a copy of the members’ register of Keybridge.

8. [28]

   On 29 November 2024, Keybridge’s 2024 Annual General Meeting (2024 AGM) was held. On that day, Keybridge announced to the ASX that at the 2024 AGM:

   1. (1)

      the resolution to adopting the remuneration report had not been passed (thereby triggering the requirement to put the spill resolution); and

   2. (2)

      the spill resolution had not been passed, with 48.83% voting in favour, 51.13% against and 0.04% abstaining.

9. [29]

   On 9 December 2024, Mr Bolton refused WAM’s request for a copy of Keybridge’s members’ register.

10. [30]

    On the same day, WAM served a notice on Keybridge pursuant to s 203D(2) of the Act of its intention to move resolutions at the next general meeting of Keybridge to remove each of the Incumbent Directors.

11. [31]

    On 12 December 2024, WAM commenced a proceeding against Keybridge in this Court numbered 2024/462647 (Capital Raising Restraint Proceeding). The relief sought in the Capital Raising Restraint Proceeding included an order that Keybridge provide its members’ register to WAM; a declaration that the spill resolution had been passed at the 2024 AGM; and an injunction restraining Keybridge, until seven days after a meeting of its shareholders is held pursuant to s 249F of the Act, from issuing any equity securities other than by a pro rata issue in accordance with ASX Listing Rule 10.12 Exception 1.

12. [32]

    On 16 December 2024, Keybridge gave undertakings in the Capital Raising Restraint Proceeding, without admission, that it would provide its members’ register to WAM and would hold a spill meeting within 90 days of 27 November 2024; and the Court made orders listing the balance of the relief sought in the Originating Process for hearing before me on 10 February 2025.

13. [33]

    On 17 December 2024, Keybridge announced to the ASX amended results for the resolutions put at the 2024 AGM, including announcing that the spill resolution had passed, with 48.83% in favour, 34.81% against, and 16.37% abstaining. Having regard to the minutes of a Board meeting on 16 December 2024, the change in the outcome of the poll appears to have been explained by Keybridge having initially counted votes cast on the spill resolution which were cast by Mr Bolton, Mr Catalano and their associates, when such votes “ought to have been removed”.

14. [34]

    Although the undertakings in the Capital Raising Restraint Proceeding which are referred to in paragraph [32] above were given without admission, Black J noted, in his judgment on costs in the Capital Raising Restraint Proceeding, that if Keybridge had not given the relevant undertakings:

    1. (1)

       the Court would likely have found that Keybridge had failed to comply with s 173 of the Act as to providing a copy of its members' register, in circumstances where Mr Bolton did not have a basis for refusing or delaying compliance with that section; and

    2. (2)

       the Court would also likely have found, and Keybridge would likely have been obliged to concede, that Keybridge was required to call a spill meeting (having regard to the amended voting result announced to the ASX): In the matter of Keybridge Capital Limited [2025] NSWSC 8 at [8].

15. [35]

    On 19 December 2024, WAM issued a notice of general meeting of Keybridge shareholders under s 249F of the Act, to be held at 10.00am on 10 February 2025 (Section 249F Notice). The notice stated that the business of the Section 249F Meeting was to consider and, if thought fit, to pass resolutions to remove each of the Incumbent Directors and to appoint each of the Proposed Directors.

16. [36]

    The Section 249F Notice specified that proxies must be received by no later than 5.00pm on Thursday, 6 February 2025. The Explanatory Memorandum accompanying the Section 249F Notice identified the reasons why WAM had called the Section 249F Meeting, including WAM’s concerns regarding the transactions which are the subject of the derivative suit.

17. [37]

    On 24 December 2024, Keybridge issued an announcement to the ASX, which referred to the Section 249F Notice and stated that: “Keybridge continues to be disappointed in WAM Active’s ongoing conduct to frustrate the operation of the Company for what appear to be uncommercial purposes.”

18. [38]

    On 3 January 2025, Keybridge issued a notice of a general meeting of shareholders to be held on Monday, 3 February 2025 at 10.00am (that is, one week before the Section 249F Meeting). The resolutions to be put at this meeting (the Spill Meeting) included resolutions for the re-election of each of the Incumbent Directors (other than Mr Bolton) as a director of Keybridge. The Explanatory Statement stated as follows:

19. [39]

    Mr Bolton’s position as Managing Director was not affected by the passing of the spill resolution, by reason of s 250V(1)(b)(ii) of the Act.

20. [40]

    The notice for the Spill Meeting also including the following resolution, described as “Resolution 7 – Approval to issue New Shares” (Resolution 7):

21. [41]

    The Explanatory Statement referred to the number of shares to be issued pursuant to Resolution 7, and indicated that the effect of the proposed placement would be, relevantly, to decrease the voting interest of WAM and its associated entities from 43.52% to 40.11%, and to increase the voting interest of Mr Bolton and his associated entities from 4.29% to 12.38%. The Explanatory Statement said that WAM and its associated entities “were offered 13,615,227 (44.05%) of the total shares proposed for issue and only opted to take up 4,004,479, subject to shareholder approval”.

22. [42]

    The Explanatory Statement further stated that:

23. [43]

    The notice for the Spill Meeting stated that proxies must be received by 10.00am on Saturday, 1 February 2025.

24. [44]

    By an announcement to the ASX dated 10 January 2025, Keybridge stated that the meeting time for the Section 249F Meeting was changed from 10.00am to 4.30pm on 10 February 2025, by reason that there was scheduled to be a hearing in the Capital Raising Restraint Proceeding on that day. The ASX announcement set out the Incumbent Directors’ recommendation that shareholders vote against all of the resolutions at the Section 249F Meeting. In addition, the ASX announcement stated that Keybridge considered that WAM and its associated entities and its nominated director Mr Ravell have “breached s. 606 of the Corporations Act by going from a voting interest in Benjamin Hornigold Limited below 20% to a voting interest above 20% by virtue of the association”.

25. [45]

    Keybridge subsequently issued a replacement notice for the Section 249F Meeting with the changed meeting time. This notice stated that proxies had to be received by 4.30pm on Saturday, 8 February 2025.

26. [46]

    On 14 January 2025, the solicitors for WAM wrote to Keybridge’s solicitors, Gadens, stating (among other things) that WAM wanted a third party scrutineer to be appointed for each of the Section 249F Meeting and the Spill Meeting.

27. [47]

    On 17 January 2025, Mr Bolton provided a copy of Keybridge’s members’ register to WAM.

28. [48]

    On 20 January 2025, WAM filed an application in the Capital Raising Restraint Proceeding, seeking an injunction to restrain Keybridge from holding a general meeting to vote on Resolution 7. In the supporting affidavit, WAM’s solicitor, Ms Reid, deposed that WAM was never invited to, and had not agreed to, participate in “the capital raising in the dilutory form described in resolution 7”; and that WAM was concerned that:

    1. (1)

       Keybridge had, with notice of the Section 249F Meeting, called the Spill Meeting for the week prior to the Section 249F Meeting; and

    2. (2)

       Keybridge was proposing to issue 9.97% of its total issued capital to Mr Bolton (or his nominees), who was the subject of a resolution seeking his removal as a director which was to be put at the Section 249F Meeting.

29. [49]

    On 21 January 2025, WAM’s solicitors repeated the request that Keybridge appoint an independent observer for each of the Spill Meeting and the Section 249F Meeting. (On 28 January 2025, WAM’s solicitors followed up on this request, having not received any response.)

30. [50]

    On 22 January 2025, Keybridge announced to the ASX that the Spill Meeting (including Resolution 7) which had been scheduled for 3 February 2025 at 10.00am would now be held on 4 February 2025 at 4.30pm.

31. [51]

    On 30 January 2025, WAM’s application for an interlocutory injunction restraining Keybridge from putting Resolution 7 to a meeting of its shareholders was heard by Faulkner J (January Court Hearing).

32. [52]

    The evidence at the January Court Hearing included an affidavit sworn by Mr Patton on 24 January 2025, in which he deposed that the Roadnight bridging facility was no longer available to Keybridge; that Keybridge owed $4,483,345 plus interest to Yowie; and that Yowie had informed Keybridge that it would “shortly require [its] loans to be repaid, at least in part, so that it can fund its operations”.

33. [53]

    Mr Patton also gave evidence, by way of an affidavit sworn on 16 January 2025, that restricting Keybridge’s raising of capital “could materially affect its solvency, especially given the loans which have been advanced by Yowie to Keybridge, which are on an at-call basis”.

34. [54]

    In respect of the balance of convenience, Keybridge submitted at the January Court Hearing that it had “urgent needs for capital” to pay discharge liabilities, including to its solicitors, Gadens. However, Keybridge did not, in terms, submit that it was likely to, or might, become insolvent if the Court granted an injunction restraining Keybridge from putting Resolution 7 to a meeting of its shareholders.

35. [55]

    Further, Senior Counsel for Keybridge did not dispute that one option that had been available to Keybridge was to raise capital on a pro rata basis, instead stating that Keybridge was not obliged to do so, and was unwilling to do so, having regard to the “very antagonistic relationship” between Keybridge and WAM “over a very lengthy period”:

36. [56]

    On the day of the January Court Hearing, Mr Bolton sent a number of text messages to Keybridge’s solicitors, Gadens, including the following:

37. [57]

    On 31 January 2025, Faulkner J delivered ex tempore reasons for judgment and made orders restraining Keybridge, until further order, from putting Resolution 7 to any general meeting of its shareholders. His Honour observed as follows (at [100]-[101]):

38. [58]

    His Honour added (at [103]), in relation to Mr Patton’s evidence, that “nowhere does he say that Keybridge does not have other options to raise the necessary funds”.

39. [59]

    On 21 January 2025, Keybridge lodged two applications with the Takeovers Panel, one in relation to the affairs of Benjamin Hornigold and the other in relation to its own affairs. Keybridge submitted, among other things, that WAM, Mr Ravell, Mr Wilson of WAM, and Mr Glennon of Benjamin Hornigold:

    1. (1)

       were acting in concert to gain control of assets in Keybridge;

    2. (2)

       were associates holding collective voting power of 51% in Benjamin Hornigold; and

    3. (3)

       “have obtained that interest in contravention of s606 of the Act and have orchestrated a s249F meeting to further their agenda”.

40. [60]

    On 3 February 2025, the Takeovers Panel declined to conduct proceedings in relation to Keybridge’s applications. The Panel considered “that Keybridge did not demonstrate a sufficient body of evidence of association between all or any” of the persons in question, adding that:

41. [61]

    Further, the Panel considered that even if a contravention of s 606 had occurred, it was unlikely to be in the public interest to make a declaration of unacceptable circumstances, in circumstances where the applications substantially overlapped with matters raised in pending proceedings in this Court and formed part of a broader dispute between WAM and Keybridge.

42. [62]

    For those reasons, the Panel “concluded there was no reasonable prospect that it would make a declaration of unacceptable circumstances”.

43. [63]

    On 31 January 2025, WAM’s solicitors informed Keybridge’s solicitors that WAM had lodged its proxy for the resolutions regarding the re-election of directors to be put at the Spill Meeting, and that it had voted “to remove Mr Patton, only” and had voted “in favour of Mr Dukes and Mr Catalano remaining on the board prior to the 249F Meeting”.

44. [64]

    Also on 31 January 2025, Mr Catalano sent Mr Bolton a text message saying that he was going to vote against Mr Patton at the Spill Meeting, and Mr Bolton passed this information on to Mr Patton. Mr Patton was aware of the significance of this development:

45. [65]

    Mr Bolton confirmed in cross-examination that he, too, was aware that “Mr Catalano’s votes and WAMs votes if counted would be enough to remove Mr Patton”.

46. [66]

    On 2 February 2025, Mr Bolton and Mr Patton exchanged text messages regarding circumstances in which, according to “ChatGPT”, “a director can’t us[e] their shares to vote to change a board”. It is evident, having regard to Mr Catalano’s recent indication of his voting intentions, that Mr Bolton and Mr Patton were considering whether there was some basis to exclude Mr Catalano’s votes.

47. [67]

    At this stage, the Spill Meeting was still scheduled to be held on 4 February 2025. On Saturday, 1 February 2025, Mr Bolton sent an email to the other members of the Board, proposing that the Spill Meeting be postponed. In this email, Mr Bolton stated that the Takeovers Panel had “effectively said whilst we’re in court with WAM on chapter 6 issues we should be raising our [Benjamin Hornigold] chapter 6 issues in that same proceeding”.

48. [68]

    On Monday, 3 February 2025, the Board met via GoogleMeet and approved an ASX announcement postponing the Spill Meeting to 18 February 2025 at 10.30am. The minutes of this meeting record that Mr Bolton noted that, whether or not Resolution 7 was passed, in order “to win a shareholder meeting, WAM need to get the support of any one large shareholder (Catalano, Bolton, ASG or Aurora)”.

49. [69]

    On 4 February 2025 at 8.14pm, WAM’s solicitors sent a letter to Keybridge’s solicitors, referring to the ASX announcement postponing the Spill Meeting. WAM’s solicitors noted that rule 7.1(b) of Keybridge’s constitution (Constitution) contained a power to postpone a meeting, but provided that a meeting which is called in accordance with a member’s requisition under the Act “may not be postponed or cancelled without the prior written consent of the persons who called or requisitioned the meeting”. WAM’s solicitors sought confirmation, by 6.00pm on 6 February 2025, that each of Keybridge’s directors undertakes not to:

50. [70]

    On the same evening at 9.26pm, Mr Patton sent the following text message to Mr Bolton:

51. [71]

    Later that evening at 10.56pm, Mr Patton and Mr Bolton exchanged further text messages, as follows:

52. [72]

    Rule 7.6(d) of the Constitution provided as follows:

53. [73]

    It appears, from Mr Bolton’s reference to rule 7.6(d) of the Constitution, that he and Mr Patton were considering, on 4 February 2025, whether Mr Patton as chairperson could (notwithstanding the terms of rule 7.1(b)) unilaterally postpone the Section 249F Meeting, without WAM’s consent, before it commenced.

54. [74]

    No steps were subsequently taken to postpone the Section 249F Meeting prior to its commencement, whether pursuant to rule 7.6(d) or otherwise.

55. [75]

    Mr Dukes gave unchallenged evidence that, on 4 February 2025, he had a lengthy discussion with Mr Patton and Mr Bolton concerning the level of Keybridge’s debt and whether there was any basis for forming the view that Keybridge would be able to pay its debts which were then currently due. Mr Dukes deposed that, during this discussion, he was informed that Keybridge’s debts had risen mainly due to legal cases which were ongoing; that the equity issue proposed by Resolution 7 would not be able to proceed because of the injunction granted on 31 January 2025; and that the Roadnight proposal for bridging finance pending the capital raising could therefore not proceed. Mr Dukes stated that:

56. [76]

    Late on the evening of 4 February 2025, Mr Bolton and Mr Rathner exchanged text messages, arranging to meet on the afternoon of the following day at around 3.00pm.

57. [77]

    On 5 February 2025, WAM’s solicitors sent an email to the Court, foreshadowing an expansion of the issues which would need to be considered in the Capital Raising Restraint Proceeding which had been listed for hearing on 10 February 2025, and requesting that the matter be listed for directions on 7 February 2025. The Court responded shortly afterwards that the Capital Raising Restraint Proceeding would be listed for directions before me at 3.00pm on 7 February 2025 and that the hearing on 10 February 2025 would be vacated. The parties were notified that the next available hearing dates were 19-21 February 2025 or 5-7 March 2025.

58. [78]

    On 5 February 2025 at 2.35pm, Mr Catalano sent an email to Mr Bolton, Mr Patton and Mr Dukes, which was headed “Financial position”. Mr Catalano stated that it appeared from updates which he had “received over the last few days” that Keybridge “may be in an uncertain financial position”. He referred, among other things, to the injunction restraining Resolution 7 from being put to members and the amount of around $750,000-$800,000 which was owed to Keybridge’s solicitors, who had “put down their pens”. Mr Catalano stated that he was “concerned as a director to ensure that we manage and avoid any risks of trading whilst insolvent in the interests of [Keybridge’s] shareholders and creditors as appropriate”. He outlined various financial information which he required for the purposes of considering Keybridge’s position, and proposed that the provision of this information be discussed at the Board meeting later that day “so that we can be fully up to date on the company’s actions to address its current liquidity issues”.

59. [79]

    On the afternoon of 5 February 2025, Mr Bolton met Mr Rathner. Mr Bolton told him that Keybridge was “asset rich and cash poor”, and there was some discussion regarding the matters which had led to Keybridge’s current position including what had changed since the Winding Up Proceeding. Mr Rathner suggested that Mr Bolton obtain Senior Counsel’s advice in relation to solvency, and indicated that, if Keybridge intended to proceed to voluntary administration, Mr Rathner would obtain his own advice relating to solvency and his ability to take an appointment as voluntary administrator. I deal with WAM’s submissions regarding this meeting and regarding Mr Rathner’s prior dealings with Keybridge when considering below the issue of Mr Rathner’s independence.

60. [80]

    Following this meeting, Mr Bolton took steps to brief Mr Broadfoot KC to provide an advice on the solvency of Keybridge.

61. [81]

    On the evening of 5 February 2025, there was a meeting of the Board of Keybridge. There was an extended discussion regarding the financial position of Keybridge. In the course of this discussion, Mr Catalano “asked if the Company was solvent” and Mr Bolton responded:

62. [82]

    There was also discussion at the Board meeting regarding a claim by Mr Catalano for indemnity in respect of the costs of an investigation by the Australian Securities and Investments Commission (ASIC). In the course of this discussion, there was the following exchange:

63. [83]

    The meeting of the Board was adjourned at around 8.35pm, with a resumption planned to occur on the following day.

64. [84]

    On 6 February 2025 at 1.12pm, Yowie sent a letter of demand to Keybridge in respect of its loan. Yowie demanded repayment of the outstanding principal of $4,483,345 by 5:00pm on 7 February 2025. I address below, when dealing with the challenge to the appointment of Mr Rathner as voluntary administrator, the circumstances which led to this demand being issued.

65. [85]

    On 6 February 2025 at 5.01pm, Mr Catalano sent a text message addressed to Mr Wilson and Mr Hamilton, stating as follows:

66. [86]

    On the same day at 6.28pm, Mr Rathner sent an email to Mr Bolton, with the following query in relation to the Section 249F Meeting:

67. [87]

    Mr Bolton responded a few minutes later, providing the current proxy report, noting that proxies did not close until 4.30pm on 8 February 2025, and stating as follows:

68. [88]

    Around half an hour after this email, the Board meeting resumed at 7.12pm on 6 February 2025. The minutes record that, immediately upon the meeting’s resumption, Mr Catalano “stated that he had contacted Mr Wilson today at 6.00pm to advise that he is voting the same way as WAM and that he had asked [WAM] to support his re-election”.

69. [89]

    There was further discussion regarding the solvency of Keybridge. Mr Patton informed the Board that advice was being sought from Mr Broadfoot. The minutes recorded that: “Directors AGREED to wait for the legal advice”. The meeting then closed at 8.30pm.

70. [90]

    At around 8.44pm on 6 February 2025, WAM and its associated entities lodged their proxy votes for the Section 249F Meeting, voting in favour of all resolutions other than the resolution to remove Mr Catalano.

71. [91]

    Mr Bolton became aware of WAM’s votes later that evening, texting Mr Patton at midnight that: “WAM voted for CAT”. Mr Bolton added the “face with tears of joy” emoji, indicating that he found this turn of events amusing.

72. [92]

    On 7 February 2025 at 5.47am, Mr Rathner sent an email to Mr Bolton stating as follows:

73. [93]

    In the same email, Mr Rathner stated that:

74. [94]

    In cross-examination, Mr Rathner indicated that he asked for this sum to be paid in trust because he was concerned that the administration “had the potential to be highly litigious”.

75. [95]

    On 7 February 2025, Mr Broadfoot provided written advice to Keybridge on solvency and on the appointment of a voluntary administrator. Mr Broadfoot identified, based on his instructions, various matters which had changed since the Winding Up Proceeding. Mr Broadfoot expressed the opinion that:

76. [96]

    Mr Broadfoot emphasised that the opinion as to solvency or likely future insolvency is an opinion for the directors to form and stated that, if the directors did form the opinion that Keybridge was insolvent or likely to become insolvent, “then my advice is that a proper and prudent course of action for them to follow, would be to appoint an administrator”.

77. [97]

    However, Mr Broadfoot added that it would not be a proper exercise of the power under s 436A “if the directors of Keybridge were to appoint an administrator in order to thwart the passing of any resolutions at the [Section 249F Meeting]”.

78. [98]

    Mr Broadfoot’s advice did not address the issue of the postponement or adjournment or the Section 249F Meeting. Mr Patton deposed that he raised this issue with Mr Broadfoot in a telephone conversation at around 3.15pm on 7 February 2025, following receipt of the written advice. Mr Patton informed Mr Broadfoot that he had “concerns that shareholders were not being properly informed regarding some material matters”, namely:

79. [99]

    Mr Patton deposed as follows:

80. [100]

    In cross-examination, Mr Patton accepted that, by 7 February 2025, he had formed the view that if he chaired the Section 249F Meeting, he would adjourn it.

81. [101]

    There is nothing in the brief provided to Mr Broadfoot, or in his advice, or in the Defendants’ affidavits, to indicate that Mr Broadfoot was told that as at 7 February 2025, Mr Patton and Mr Bolton were aware, as a matter of fact, that by reason of Mr Catalano supporting WAM’s resolutions to remove the Incumbent Directors (other than himself) and to appoint the Proposed Directors, those resolutions would succeed if they were put to the Section 249F Meeting.

82. [102]

    Mr Patton set out in his affidavit the background to the dispute regarding “the ownership of ACM”, which had been referred to in his discussion with Mr Broadfoot regarding postponement of the meeting.

83. [103]

    Mr Patton explained that, since March 2024, there had been a dispute regarding who owned a 16.67% interest in Australian Community Media (ACM), with Mr Catalano asserting that he owned this stake and Mr Bolton asserting that Keybridge was the owner. The interest was held by a corporate trustee which was wholly owned by Mr Catalano. In May 2024, Mr Catalano had asked Mr Patton, as Chairman of Keybridge, to take steps to resolve this issue and advice had been obtained which had indicated that Keybridge was the owner of the interest. Mr Patton gave evidence that this 16.67% interest in ACM was worth around $22.5m.

84. [104]

    In each of its Monthly Net Asset Backing Reports since March 2024, Keybridge had made the following disclosure to the ASX:

85. [105]

    On the afternoon of 7 February 2025, WAM served an interlocutory process in the Capital Raising Restraint Proceeding, seeking orders for the appointment of an observer for the Section 249F Meeting and an injunction restraining Keybridge from postponing, cancelling or adjourning the meeting.

86. [106]

    On the same day at 3.00pm, there was a directions hearing before me in the Capital Raising Restraint Proceeding. Keybridge’s counsel indicated that there would be agreement to the appointment of an observer at the Section 249F Meeting. The application for an injunction to restrain Keybridge from postponing, cancelling or adjourning the meeting was listed on Monday, 10 February 2025 at 9:15am.

87. [107]

    On Sunday, 9 February 2025 at 11.02am, Yowie issued a letter of default to Keybridge in respect of Keybridge’s failure to repay the outstanding principal of the Yowie loan by 5.00pm on 7 February 2025, as required by its letter of demand dated 6 February 2025.

88. [108]

    Mr Bolton replied by email shortly afterwards, describing the issue of the letter as “unfortunate”, indicating that Keybridge was “currently working through its liquidity”, and discouraging Yowie “from taking further steps until we have a reasonable opportunity to respond”.

89. [109]

    At 11.30am, Mr Patton convened a meeting of the Board for 5.00pm that day and circulated a bundle of documents including the brief to Mr Broadfoot, Mr Broadfoot’s advice on solvency, the correspondence from Yowie, a summary of aged payables and aged receivables, information on Keybridge’s assets and investments, and a cash flow forecast.

90. [110]

    On the afternoon of 9 February 2025, Mr Bolton and Mr Rathner exchanged text messages regarding Mr Rathner’s potential appointment as voluntary administrator of Keybridge. Mr Bolton asked if Mr Rathner was “okay on conflicts etc” and Mr Rathner responded as follows: “I just need the funding confirmation and I can send my consent”.

91. [111]

    Yowie resolved later that day to provide $150,000 in funding to the administrator of Keybridge.

92. [112]

    At the Board meeting on 9 February 2025, the directors of Keybridge considered the financial position of Keybridge. The minutes record that the Board considered Keybridge to be “Insolvent and wealthy”, with “insufficient cash or liquid resources to pay its debts”, and concluded that Keybridge failed the solvency test in s 95A of the Act. The injunction restraining Keybridge from putting Resolution 7 (which was described as having the effect of “preventing the Company from raising capital”) was said to have “result[ed] in the flow on effect of the offer of a debt facility being withdrawn” (namely the Roadnight bridging facility), and these were identified as “significant events impacting the solvency of the Company”. The directors unanimously resolved that Keybridge was insolvent or was likely to become insolvent. The minutes of the meeting record that:

93. [113]

    The minutes record that Mr Patton identified nine “parties considered for the role of Voluntary Administrator”. The first six names on the list were described by Mr Patton as being “too big and too expensive (by a factor of 3-4 times)”. Two other names on the list were “not independent” as they were, respectively, the current auditor and the proposed auditor. That left one candidate (Mr Rathner).

94. [114]

    The directors unanimously resolved to appoint Mr Rathner as voluntary administrator, effective immediately.

95. [115]

    The minutes recorded that: “The Administrator will likely deal with the s.249F meeting scheduled tomorrow.”

96. [116]

    Later on the evening of 9 February 2025, Mr Rathner received $118,000 in his trust account from Yowie to fund the administration, and provided his consent to act as voluntary administrator.

97. [117]

    At 12.34am on 10 February 2025, Mr Bolton sent an email to Mr Patton, stating as follows:

98. [118]

    On the morning of 10 February 2025, Keybridge sought to make an announcement to the ASX in respect of its dispute with Mr Catalano regarding ACM. The announcement was not released because, as the Head of Listings Compliance at ASX explained in an email to Mr Patton, ASX had concerns regarding various allegations made in the announcement regarding Mr Catalano, adding:

99. [119]

    Shortly after 9.00am on 10 February 2025, Keybridge announced to the ASX that it had received the letter of default from Yowie and that it had entered into administration.

100. [120]

     At 9:15am, the Capital Raising Restraint Proceeding was before Black J. His Honour was informed that Mr Rathner had been appointed as voluntary administrator. The matter was adjourned to 11 February 2025 before me.

101. [121]

     At 11.38am, Mr Patton sent Mr Bolton a photograph of a document entitled “Chairman’s Running Sheet” which had been prepared for the Section 249F Meeting. This was, in effect, a draft script for Mr Patton to use at the Section 249F Meeting. There was another version of this script which includes Mr Patton’s handwritten amendments. The statements made by Mr Patton at the Section 249F Meeting, as recorded in the minutes which he prepared, closely followed his amended script. The script included statements by Mr Patton that the meeting was opened and that he “had a number of concerns about this meeting” (which were set out), and concluded with a statement that Mr Patton was exercising his powers as Chairman to adjourn the meeting “until a later date, with details of the new date to be provided in due course”.

102. [122]

     Mr Rathner provided a written consent for Mr Patton to chair the Section 249F Meeting. Around an hour before the Section 249F Meeting, Mr Patton informed Mr Rathner that he planned to adjourn the meeting. Mr Rathner did not request any such adjournment or express the view that any such adjournment was necessary or endorse the proposed course, stating in cross-examination that: “I had no view in relation to what he was going to do at the meeting other than to ensure any reference to me was properly presented.”

103. [123]

     Mr Rathner confirmed that, although he attended the Section 249F Meeting, he took no active part in it and did not express any views in relation to the business before the meeting or its adjournment:

104. [124]

     WAM’s solicitor, Ms Reid, attended the Section 249F Meeting and took detailed minutes of that meeting. Mr Patton also produced minutes of the meeting.

105. [125]

     There were two main differences between these sets of minutes.

106. [126]

     First, Mr Patton’s record of events concludes at the time that he announced that the meeting had been adjourned, whereas Ms Reid’s note records the events which followed that announcement, including Mr Hamilton nominating himself as chairperson and putting to a vote the resolutions to remove the Incumbent Directors and to appoint the Proposed Directors.

107. [127]

     Secondly, Mr Patton’s minutes included, at the end, a section headed “Chairman’s Statement”. Mr Patton acknowledged that this section did not represent matters said at the meeting, but instead his comments on various issues which he recorded after the meeting.

108. [128]

     Otherwise, insofar as both sets of minutes covered the events leading up to Mr Patton’s statement that the meeting was adjourned, there was only one substantive point of difference which was highlighted in cross-examination of those present, and in submissions, namely, whether Mr Patton indicated that the date of the adjourned meeting would be announced via the ASX (this issue is addressed below).

109. [129]

     At the commencement of the Section 249F Meeting, Mr Patton stated that he had received authority from Mr Rathner to chair the meeting, confirmed that a quorum was present, and declared the meeting to be open.

110. [130]

     Mr Patton then gave an address to the meeting. According to Mr Patton’s minutes of the meeting, he referred to the fact that Keybridge had been placed into voluntary administration on the previous day, and made the following statement:

111. [131]

     As regards the final paragraph set out above, Ms Reid’s minutes record Mr Patton as having made the following statements:

112. [132]

     The main substantive difference between this statement in the two versions of the minutes is that Ms Reid’s minutes do not include the material set out in the parentheses in Mr Patton’s minutes. Each of Mr Reid and Mr Hamilton confirmed in cross-examination that they could not recall Mr Patton adding the words “by announcement to ASX”.

113. [133]

     It is unlikely that those additional words were said. The words “by announcement to ASX” do not appear in the script which Mr Patton prepared for use at the Section 249F Meeting, either in the version sent to Mr Bolton or in the version with Mr Patton’s handwritten amendments. Each of those versions of the script instead contains a statement, consistent with Ms Reid’s minutes, that it was Mr Patton’s decision to adjourn the meeting “until a later date, with details of the new date to be provided in due course”. Further, Mr Patton appears to have used parentheses to record matters which he did not state at the time, but which he has later added by way of comment when preparing the minutes. An example is as follows:

114. [134]

     The minutes record that, in response to Mr Patton’s statement that the director nominees needed more time to consider their position, Mr Ravell pointed out that three of the four Proposed Directors were present at the Section 249F Meeting (namely, Mr Ravell, Mr Hamilton and Mr McCathie) and that none had withdrawn his consent to act.

115. [135]

     Ms Reid’s note records that Mr Hamilton of WAM stated that:

116. [136]

     Mr Patton’s minutes record that the meeting was “very disorderly and unruly” and that this provided a further reason to adjourn the meeting. However, at the hearing before me, no submissions were advanced to the effect that any such “unruliness” provided an independent basis for the adjournment (and, as noted above, the decision to adjourn was made in advance of the meeting).

117. [137]

     Ms Reid’s minute of the meeting records that, after Mr Patton stated that the meeting was adjourned, he rose from the table at the front of the room, closed the telephone line and walked towards the door. Mr Hamilton then walked up and took a seat in front of the meeting.

118. [138]

     Mr Hamilton stated that: “If Keybridge’s outgoing directors are unwilling or unable to continue the Meeting, the shareholders will elect one of their number to act as Chairman.” Mr Hamilton indicated that he was willing to act as chairperson and Mr Ravell seconded his appointment. Mr Ravell then called Mr Catalano’s phone number, with Mr Catalano participating in the events which followed by that means. Mr Hamilton then read out each of the resolutions in the Section 249F Notice to the meeting. Throughout these events, Mr Bolton and Mr Patton remaining in the meeting room.

119. [139]

     A representative of Boardroom, the independent observer who had been appointed to the Section 249F Meeting, recorded the voting of shareholders. According to the poll report, each of the resolutions to remove the Incumbent Directors was passed (other than the resolution to remove Mr Catalano), and each of the resolutions to appoint the Proposed Directors was passed. Approximately 58.08% of shareholders voted in favour of the resolutions that passed, and 41.92% against, with none abstaining.

120. [140]

     On 11 February 2025, Keybridge announced to the ASX that the Section 249F Meeting had, with the consent of Mr Rathner, been convened on the previous day. The announcement continued as follows:

121. [141]

     On the same day, the Plaintiffs commenced this proceeding.

Issue 1: Power to adjourn meeting?

1. [142]

   It is generally accepted that a chairperson has no inherent power to adjourn a meeting in the absence of the consent of the majority of those present: Commonwealth Bank of Australia v Fernandez [2010] FCA 1487 at [27] (Finkelstein J). That is subject to a limited number of exceptions, such as where the chair cannot maintain order or where the meeting place is not large enough to accommodate all those wishing to attend or where a poll has been demanded and it is necessary to adjourn the meeting to enable the poll to be taken: ibid. None of those exceptions was applicable here.

2. [143]

   In the present case, Mr Patton did not seek, or obtain, the consent of the majority of those present to an adjournment.

3. [144]

   The general power of directors, under a corporate constitution, to manage the company and to exercise its powers does not allow the directors to postpone a duly convened general meeting. For the directors to be able to do that, there must be some express power given to them by the constitution: McKerlie v Drillsearch Energy Ltd [2009] NSWSC 488 at [13] (Barrett J), referring to Smith v Paringa Mines Ltd [1906] 2 Ch 193.

4. [145]

   The issue therefore arises as to whether Mr Patton as chairperson adjourned the Section 249F Meeting pursuant to some express power in the Constitution permitting him to do so.

5. [146]

   Mr Patton told the Section 249F Meeting that he was adjourning the meeting using his “powers as chairman under rule 7.6 of the Constitution”. Keybridge’s announcement to the ASX on the following day stated that the meeting had been adjourned “[i]n accordance with rule 7.6(f)(1) of the Company’s constitution”. In written and oral submissions, Mr Patton, Mr Bolton and Mr Dukes (the Director Defendants) relied only on rule 7.6(f)(1) in contending that the adjournment was within power.

6. [147]

   Rule 7.6(f)(1) of the Constitution provides as follows:

7. [148]

   Mr Patton did not adjourn the meeting “to a later time at the same meeting”. Instead, he stated that that he was exercising his power under rule 7.6 by “adjourning to a later date”, with the new date to be provided “in due course”. The issue is whether this amounts to a valid exercise of the power to “adjourn the meeting … to an adjourned meeting”.

8. [149]

   WAM submitted that, in order for there to be a valid adjournment under rule 7.6(f)(1), there needed to be “an adjourned meeting” to which the Section 249F Meeting or the business at that meeting was being “adjourned”. WAM argued that an adjournment “to a later date” which was to be provided “in due course” did not involve the adjournment of the Section 249F Meeting “to an adjourned meeting”, but an adjournment sine die, which was not a valid exercise of the power under rule 7.6(f)(1) and was therefore of no effect.

9. [150]

   In response, the Director Defendants contended that it was not necessary, in order for rule 7.6(f)(1) to be validly exercised, “to specify any particular date or time at the meeting that is adjourned”, and that it was sufficient to state, as here, to undertake to provide shareholders with details of the adjourned meeting in due course.

10. [151]

    In St George Bank Ltd v Rangers Club of NSW Inc (1995) 18 ACSR 370 at 379-380 (affirmed on appeal in Young v Cotter [1996] NSWCA 573), Santow J concluded that a power to adjourn “from time to time” permitted “not only an adjournment for a specified time … but also allows an adjournment ‘at any time’ or, in other words, sine die”.

11. [152]

    In contrast, in Onefone Australia v One.Tel [2010] NSWSC 401 at [24], Barrett J held that a power to adjourn “from time to time” required determination of the time and place at which the adjourned meeting would resume. His Honour observed that: “A valid decision to adjourn involves determination and communication of the time and place at which the adjourned meeting will resume, in the sense that the members of the body will come together again ‘to conclude such business as they had already begun’, to use the words of Le Blanc J in R v Mayor Burgesses and Commonalty of Carmarthen (1813) 1 M&S 697 ; 105 ER 260.” His Honour said that, in contrast, a “decision to adjourn sine die is a decision to terminate”.

12. [153]

    In Investa Listed Funds Management Ltd [2018] NSWSC 1391 at [17] Black J held that a power to adjourn a meeting to “any time and place” included a power to adjourn sine die; and a similar conclusion was reached by Brereton J in Re Re1 and Re2 (No 3) [2014] NSWSC 762 at [8], [11], in respect of a power to adjourn to “such place and time as the chair thinks fit”.

13. [154]

    It was common ground that such authorities were of limited assistance in determining the issue arising in the present case. Ultimately, the task for the Court is to interpret the wording of rule 7.6(f), which is distinct from the wording adopted in those other cases.

14. [155]

    A corporate constitution has the effect of a contract between the company and each of its members, the company and each director and secretary, as well as the members amongst themselves: s 140(1) of the Act. In HNA Irish Nominee Ltd v Kinghorn [2010] FCAFC 57 at [42], Keane CJ, Jacobson and Rares JJ observed that:

15. [156]

    The Director Defendants submitted that the language of rule 7.6(f), which dealt with the power to adjourn a meeting, was to be contrasted with the language of rule 7.6(e), which dealt with the power to postpone a meeting.

16. [157]

    Rule 7.6(e) required that a “postponement … will be to another time … and may be to another place”, thereby requiring that a new time must be specified in order for a valid “postponement” to occur. In contrast, rule 7.6(f) gave the chair a power to adjourn the meeting “either to a later time at the same meeting or to an adjourned meeting”.

17. [158]

    The Director Defendants submitted that this power needed to be read in conjunction with rules 7.6(i)-(k), which provide as follows:

18. [159]

    The Director Defendants submitted that rule 7.6(f) required only that there be an “adjourned meeting” and rules 7.6(i)-(k) provided for the details of the adjourned meeting to be notified by way of an ASX announcement (if adjourned for less than 30 days) or by way of both an ASX announcement and a notice to members (if adjourned for 30 days or more).

19. [160]

    However, as WAM observed, rules 7.6(i) and (k), which require that notice of the adjourned meeting need not be given to anybody other than the ASX (unless the adjournment is for more than 30 days), operate more coherently in circumstances where rule 7.6(f) requires that, at the time of any adjournment pursuant to that rule, the time of the “adjourned meeting” be specified. If rule 7.6(f) permitted an adjournment sine die, shareholders might be put in a position where they were not told at the meeting when the meeting would resume and did not know either whether they would be sent notice of any adjourned meeting or when the date of any adjourned meeting would be announced to the ASX.

20. [161]

    The Director Defendants sought to address those difficulties by contending that Mr Patton informed the meeting that a new date and time would be provided by way of ASX notice and thereby “in effect, committed to the announcement of details for the adjourned meeting (through the ASX) within 30 days”.

21. [162]

    However, I have found that it is unlikely that Mr Patton made any statement to the meeting to the effect that the date for the adjourned meeting would be announced via the ASX. Accordingly, at the time of the purported adjournment of the Section 249F Meeting, members were left uninformed about when the meeting would resume, when such a decision on the date for any such resumption would be made, and when or how such a decision would be announced.

22. [163]

    Mr Patton indicated in cross-examination that he himself did not know whose decision it would be as to when the meeting would occur. He stated that he “was in unfamiliar territory” because he was “given a consent to chair a meeting where [his] powers as a director are suspended”, and the consent was “for this day for this meeting”, and he “didn’t know whether [he] had power to do something that went into a different time period”.

23. [164]

    Mr Patton did not adjourn the Section 249F Meeting “to a later time at the same meeting”. Nor did he adjourn it “to an adjourned meeting”, since there was no time or date nominated for the members to come together to resume the Section 249F Meeting. Instead, he merely indicated the meeting was “adjourned” and that the details for resumption of the meeting would be provided “in due course”.

24. [165]

    Having regard to those matters, I have concluded that Mr Patton’s purported adjournment of the Section 249F Meeting sine die was beyond the power conferred by rule 7.6(f)(1) of the Constitution and was, in substance, a termination of the meeting: Onefone at [24]. It was therefore invalid and of no effect.

Issue 2: Was power to adjourn exercised in good faith and for a proper purpose?

1. [166]

   Further or alternatively, WAM contended that Mr Patton’s purported adjournment of the Section 249F Meeting was not in good faith for a proper purpose.

2. [167]

   The relevant principles were not in dispute. In McKerlie v Drillsearch Energy Ltd (2009) 74 NSWLR 673; [2009] NSWSC 488, Barrett J held that a chair’s power to adjourn a meeting must be exercised in good faith for a proper purpose. His Honour observed (at [29]) that the power is constrained by the notion of a fraud on the power as explained by Bryson J in Lancedale Holdings Pty Ltd v Health Group Australia Pty Ltd [1999] NSWSC 609 at [71]:

3. [168]

   In Drillsearch at [32], Barrett J referred to the decision of the English Court of Appeal in Byng v London Life Association Ltd [1990] Ch 170, which concerned the residual common law power of a chairman to adjourn a meeting. The Court held that the chairman may act unilaterally if circumstances are such that the wish of the meeting itself cannot be ascertained. However, Sir Nicholas Browne-Wilkinson V-C observed (at 188) that the power of the chairman to act unilaterally is “tightly circumscribed by reference to the objects for which it exists”, namely, “to facilitate the presence of those entitled to debate and vote on a resolution at a meeting where such debate and voting is possible”. His Lordship said (at 189) that it is not correct that a chairman’s decision can only be impugned for lack of good faith: “In my judgment the chairman’s decision must also be taken reasonably with a view to facilitating the purpose for which the power exists.”

4. [169]

   In Drillsearch at [38], Barrett J observed that “it is foreign to the chairman’s function to exercise the power of adjournment to further some personal preference of the chairman or some policy of a body of which the chairman is a member”; and therefore, it is “foreign to the chairman’s function, when the chairman is a director, to exercise the chairman’s powers to implement some policy or decision of the board of directors”. His Honour continued as follows (at [39], emphasis added):

5. [170]

   In the present case, WAM had, pursuant to s 203D(2) of the Act, given two months’ notice of its intention to move a resolution for the removal of the Incumbent Directors. Section 203D(1)(a) provides that the director of a public company may be removed from office by resolution despite anything in the company’s constitution. Further, WAM had, pursuant to s 249F of the Act, exercised its right, as a member holding more than 5% of the votes that may be cast at general meeting, to call and arrange to hold a general meeting, in order to consider resolutions for the removal of the Incumbent Directors.

6. [171]

   The Section 249F Meeting was a forum, created by ordinary corporate processes, for the purposes of enabling the members of Keybridge, if minded to do so, to exercise the right to remove the Incumbent Directors by resolution. Accordingly, it would be an abuse of power for Mr Patton to remove the opportunity to exercise that right “except for some good and proper reason calculated to promote the due exercise of the right in more suitable or constructive circumstances at a later time” (Drillsearch at [39], quoted above). In Central Exchange Ltd v Rivkin Financial Services Ltd [2004] FCA 1546 at [33], Emmett J observed that: “the circumstances in which it will be proper for the Board to postpone … a meeting called pursuant to s 249F, or to cancel such a meeting, will be limited and such powers must, of necessity, be exercised extremely sparingly so as not to frustrate the right conferred by s 249F”. Those comments have equal application to the exercise of a power to adjourn a meeting (particularly where a purported adjournment is sine die).

7. [172]

   The written submissions of the Director Defendants focused principally on the fact that Keybridge had entered into voluntary administration on the previous day. They submitted that, in adjourning the Section 249F Meeting, Mr Patton “was entitled to act as he did in the interests of all shareholders, none of whom suffer any identifiable prejudice by reason of them having the benefit of time to consider the ramifications of the administration pending the resumption of the meeting”. It was submitted that, in those circumstances, it was “a reasonable and proper course of action” for Mr Patton to adjourn the Section 249F Meeting, otherwise “votes could be cast (or, via proxy, had been determined in advance to be cast) in the absence of information concerning the appointment of the voluntary administrator and solvency of the company”.

8. [173]

   In Cadwallader v Bajco Pty Ltd [2001] NSWSC 1193 at [111], Austin J observed that:

9. [174]

   In his conversation with Mr Broadfoot on 7 February 2025, Mr Patton did not identify the prospective appointment of Mr Rathner as voluntary administrator as one of the “material matters” regarding the proposed resolutions, which led Mr Patton to conclude that he should “adjourn the meeting so that shareholders could be properly informed” (see paragraph [98] above).

10. [175]

    There is no record in Mr Patton’s or Ms Reid’s minutes of the Section 249F Meeting of Mr Patton expressing the view that ,in light of Mr Rathner’s appointment, shareholders needed more time to consider the resolutions to remove the Incumbent Directors and to appoint the Proposed Directors. Nor is there any record of any shareholder indicating, at the meeting or prior to the meeting, that they would be assisted by the meeting being adjourned so that they could consider the implications of Mr Rathner’s appointment for the proposed resolutions to change the composition of the Board.

11. [176]

    Mr Patton stated in cross-examination that he did not even consider putting to shareholders the question whether the meeting should be adjourned:

12. [177]

    WAM and its associated entities held a 43.52% voting interest in Keybridge, and Mr Catalano and his associated entities held a 10.36% voting interest in Keybridge. Mr Patton was aware that if WAM and Mr Catalano supported the resolutions to remove and replace directors, those resolutions would necessarily pass at the Section 249F Meeting. Mr Patton was also aware that neither WAM or Mr Catalano had indicated that they required further time to consider their position on the resolutions by reason of the appointment of Mr Rathner as voluntary administrator; and instead, each objected to the adjournment of the Section 249F Meeting (WAM doing so through its representative Mr Hamilton) and supported the meeting continuing, with the resolutions being put to a vote. There was no reason for Mr Patton to consider that an adjournment was necessary in order to promote the due exercise of the right of the majority of shareholders to replace any or all of the Incumbent Directors and to appoint the Proposed Directors.

13. [178]

    According to Mr Patton’s and Ms Reid’s minutes of the Section 249F Meeting, Mr Patton, when referring to the recent appointment of Mr Rathner, expressed the view that each of Mr Rathner and the Proposed Directors might require more time to consider their position.

14. [179]

    Mr Patton’s minutes record that he made the following statements:

15. [180]

    Likewise, Ms Reid’s minutes record that Mr Patton stated as follows:

16. [181]

    However, as Mr Patton knew, Mr Rathner had not requested that the Section 249F Meeting be adjourned or expressed any view that he would be assisted by an adjournment while he was “considering the Administration process”.

17. [182]

    Similarly, Mr Patton was aware that none of the Proposed Directors had indicated that they needed time to consider whether to withdraw their consents to act as a director, now that Keybridge was in administration. Three of the four Proposed Directors were present at the meeting (Mr Hamilton, Mr Ravell and Mr McCathie), and each of them objected to an adjournment and wanted the resolutions for their appointment to be put to a vote at the Section 249F Meeting.

18. [183]

    Mr Patton’s minutes of the Section 249F Meeting include the following commentary regarding the position of the director nominees:

19. [184]

    In cross-examination, Mr Patton maintained that he had a concern for the position of the Proposed Directors, even though none of them had expressed any concern on their own part:

20. [185]

    I do not accept that Mr Patton genuinely held any such concern that a Proposed Director (such as Mr Wilson, who was not present) would need more time to reconsider his position in light of the recent announcement that Keybridge was insolvent and that Mr Rathner had been appointed as voluntary administrator. Mr Patton knew that Mr Wilson and Mr Hamilton had given evidence in the Winding Up Proceeding in support of WAM’s claim that a liquidator should be appointed to Keybridge on the grounds of insolvency. In particular, WAM had contended, in November 2024, that Keybridge was asset rich, but cash poor, and did not have sufficient liquid assets to pay its debts as and when they fell due, being the same view that the directors of Keybridge had reached in early February 2025. As noted above, matters which were material to the finding in the Winding Up Proceeding regarding the solvency of Keybridge were the Yowie loan, the availability of bridging finance from Roadnight, and Keybridge’s ability, as at November 2024, to raise capital on a pro rata basis. In late January 2025, Keybridge had disclosed in the January Court Hearing that the Roadnight bridging facility was no longer available and that Yowie would “shortly require [its] loans to be repaid” (see paragraph [52] above), and an injunction had been granted restraining Keybridge from raising capital by Resolution 7. Those were all matters known to WAM and likely known to the Proposed Directors. Nonetheless, each of those persons provided a written consent to be a director of Keybridge shortly before the Section 249F Meeting (on 6 February 2025 in the case of Mr Ravell, and on 7 February 2025 in the case of Mr Hamilton, Mr McCathie and Mr Wilson).

21. [186]

    Further the discussion at the Board meeting on 5 February 2025 does not suggest that any of the Incumbent Directors (including Mr Patton) thought it would be a surprise to Mr Wilson to learn that the company was insolvent or that it would cause Mr Wilson to reconsider his aim of being appointed as a director:

22. [187]

    At the same Board meeting, Mr Patton stated that “WAM thought they would win in November”, that is, that WAM (and Mr Wilson) considered that the Company would be shown to be insolvent. In cross-examination, Mr Patton indicated that, in February 2025, he did not think it worthwhile discussing with WAM “the terms on which WAM might be willing to provide accommodation to address solvency”, because “WAM has been trying to wind us up as an insolvent company since February last year”. He added that, if he had told WAM (and presumably Mr Wilson) that “we’ve got solvency problems”, the response would be along the following lines; “They’re going to go, of course you’ve got it [a solvency problem], we’ve been saying it since February last year”.

23. [188]

    Those matters are inconsistent with Mr Patton having any genuine belief or concern that, as at 10 February 2025, Mr Wilson might have wanted more time to consider whether to withdraw the consent to act as a director which he had given on 7 February 2025, by reason that in the intervening period the directors of Keybridge had formed the view that the company was or was likely to be insolvent and had appointed a voluntary administrator.

24. [189]

    If Mr Patton had genuinely held such a view, he would likely have asked the Proposed Directors how much time they required to reconsider their position. He did not do so. Instead, without any such enquiry, he adjourned the meeting sine die, and then an announcement was made to the ASX on the following day that the meeting would not occur for another ten weeks.

25. [190]

    If the will of a majority of shareholders was (as Mr Patton knew) that the Incumbent Directors (other than Mr Catalano) be removed and the Proposed Directors be appointed, and that this occur on 10 February 2025, then an adjournment for ten weeks was apt to frustrate the will of majority of shareholders and to interfere with their statutory right to remove directors by resolution on two months’ notice (in circumstances where WAM had given its s 203D(2) notice on 9 December 2024). The effect of the purported ten-week adjournment was that these resolutions would not be put to shareholders for a period of more than four-and-a-half months after that notice was given.

26. [191]

    Similarly, if Mr Patton had genuinely considered that the appointment of Mr Rathner was a matter which might potentially affect the outcome of voting on the resolutions for the removal of the Incumbent Directors and the appointment of the Proposed Directors, there was no good reason why the Section 249F Meeting was adjourned more than two months after the date that the Spill Meeting was to be held (being 18 February 2025). At both meetings, resolutions were to be put to shareholders concerning the composition of the Board, but one was scheduled to proceed one week later, while the other was put off for more than two months.

27. [192]

    Mr Patton also told the Section 249F Meeting that his decision to adjourn was due to “concerns” that shareholders were not properly informed about “a dispute with the trustee in relation to an investment held by the Company which is currently carried at nil value” (see paragraph [130] above). This was a reference to the dispute between Keybridge and Mr Catalano regarding the ownership of ACM. Another of his “concerns” was stated to be that: “On 6 February 2025, WAM voted against their own resolution, and voting recommendation, in support of Mr Catalano”.

28. [193]

    As set out in paragraph [98] above, the only matters which were identified by Mr Patton, when seeking Mr Broadfoot’s advice on 7 February 2025 regarding the adjournment of the Section 249F Meeting on the basis of his “concerns that shareholders were not properly informed regarding some material matters”, were the dispute regarding ACM and WAM’s change in position in respect of Mr Catalano.

29. [194]

    As Mr Patton acknowledged, and as he told the shareholders and Mr Broadfoot, the dispute with Mr Catalano regarding ACM had been ongoing for almost a year prior to the Section 249F Meeting (being referred to in the Monthly NTA Statements issued since March 2024). Keybridge and Mr Patton had not seen any need to make any further disclosure to shareholders about this dispute:

    1. (1)

       prior to, or in the course of, the 2024 AGM on 29 November 2024 (which Mr Patton chaired), where investors voted on the spill resolution; or

    2. (2)

       in the Explanatory Statement issued on 3 January 2025 in relation to the Spill Meeting (including in relation to the resolution to re-elect Mr Catalano); or

    3. (3)

       in the ASX announcement and replacement notice issued by Keybridge on 14 January 2025 in relation to the Section 249F Meeting (including in relation to the resolution to remove Mr Catalano).

30. [195]

    It must be inferred that on each of those occasions, the directors of Keybridge (including Mr Patton) formed the view that disclosure of the dispute with Mr Catalano concerning ACM was not material to the decision of shareholders as to whether to vote for the removal or re-election of Mr Catalano as a director of Keybridge.

31. [196]

    It is telling that the first time that Mr Patton expressed any concern that shareholders needed to know more about the dispute with Mr Catalano regarding ACM was following Mr Catalano’s indication that he would be voting with WAM to remove the other Incumbent Directors and to appoint the Proposed Directors.

32. [197]

    That timing supports an inference that the issue was raised, not out of a genuine concern that shareholders needed to be informed of the ACM dispute, but out of a concern that Mr Catalano had switched his support from the Incumbent Directors to the Proposed Directors. Significantly, when seeking to explain in cross-examination why, in circumstances where he had “chapter 6 concerns … since May last year … in relation to ACM”, he had not approached the Court or the Takeovers Panel about those matters, Mr Patton said:

33. [198]

    Mr Patton and Mr Bolton were likely not planning to take steps to escalate the ACM issue, including making disclosure to shareholders regarding that dispute, for so long as there was a prospect that Mr Catalano might change his vote and support the Incumbent Directors.

34. [199]

    Significantly, Mr Patton was unable, at the meeting, to articulate the reason why the ACM dispute was a matter that was relevant to the resolutions being put to shareholders at the Section 249F Meeting. Mr Hamilton’s note of the meeting records that:

35. [200]

    Further, despite Mr Patton having purported to adjourn the Section 249F Meeting on the basis that shareholders needed to know more about the ACM dispute before voting on resolutions regarding Mr Catalano’s future on the board, Mr Patton and the other directors of Keybridge did not make any disclosure to shareholders about this dispute in the period of more than two weeks between the “adjournment” of the Section 249F Meeting on 10 February 2025 and the holding of the Spill Meeting at which a resolution for the re-election of Mr Catalano as a director was put to shareholders. (The Spill Meeting was held at 4.30pm on 27 February 2025, having been postponed from 18 February 2025 to this date by an announcement made to the ASX on 17 February 2025.)

36. [201]

    As noted above, Keybridge had, unsuccessfully, sought to make an announcement to the ASX in relation to the ACM dispute on the morning of the Section 249F Meeting (significantly, this being a point in time when it was apparent that Mr Catalano would not be changing his vote on the resolutions). Mr Patton was aware, prior to the Section 249F Meeting, that the ASX had indicated that the allegations made by Keybridge regarding Mr Catalano’s conduct in relation to ACM could not be made to the market unless Keybridge could provide “a factual basis” for those allegations (see paragraph [118] above). An available inference is that the reason why no allegations of the type outlined in the draft ASX announcement were subsequently made to shareholders is because the directors could not provide a factual basis for those allegations.

37. [202]

    As set out above, Mr Patton also expressed a “concern” to Mr Broadfoot and at the Section 249F Meeting that WAM had voted against their own stated voting preference and in support of Mr Catalano remaining as a director. Mr Patton told Mr Broadfoot and those present at the Section 249F Meeting that this was one of the “concerns” on which he formed the view that the meeting should be adjourned.

38. [203]

    There is little doubt that Mr Patton was concerned that WAM and Mr Catalano were voting together. Shortly after learning that Mr Catalano was no longer supporting the Incumbent Directors, he and Mr Bolton exchanged messages about whether or not the Section 249F Meeting could be postponed or adjourned. However, the concern being expressed at that time was not the need for further disclosure to be made to the shareholders, but rather the need for further discussions to be had with Mr Catalano in order to see if he would change his mind (see paragraphs [70]-[71] above).

39. [204]

    In his affidavit, Mr Patton deposed, somewhat elliptically, that he had “concerns” about “Potential Chapter 6 issues associated with Mr Catalano and WAM’s coordinated activities”. No such concern was expressed to Mr Broadfoot or to the Section 249F Meeting as a reason to adjourn the meeting.

40. [205]

    Such a concern is articulated in the “Chairman’s Statement” which is added to the end of Mr Patton’s minutes of the Section 249F Meeting (but which does not record anything said by Mr Patton at the meeting). In particular, the “Chairman’s Statement” records the following observations by Mr Patton:

41. [206]

    Mr Patton accepted in cross-examination that he did not mention either rule 7.8(g) or rule 7.8(j) of the Constitution at the Section 249F Meeting.

42. [207]

    Rule 7.8(g) could have no application, as it operates to exclude a member’s vote only in the situation where the notice which called the meeting specified that the member must not vote, or must abstain, or that their vote must be disregarded. Mr Patton agreed that there was no such statement in the notice which called the Section 249F Meeting.

43. [208]

    Rule 7.8(j) provides that: “The chairperson may decide any difficulty or dispute which arises as to the number of votes which may be cast by or on behalf of any member and the decision of the chairperson is final”. No “difficulty or dispute” in relation to the votes which may be cast by any member (including Mr Catalano) or WAM was raised with or referred to Mr Patton as Chairman, either before or at the Section 249F Meeting.

44. [209]

    This was a point conceded by Mr Patton in cross-examination, although the proposition had to be put repeatedly before the concession was forthcoming:

45. [210]

    When Mr Patton was asked in cross-examination whether he honestly believed that it was part of his role as Chairman to adjudicate on questions regarding s 606 of the Act, Mr Patton responded as follows:

46. [211]

    Mr Patton took no steps to raise any concern about these matters with a “higher power”.

47. [212]

    Keybridge had, shortly before the Section 249F Meeting, made two applications to the Takeovers Panel regarding WAM and Mr Ravell “acting in concert”, alleging a contravention of s 606 of the Act and alleging that they had “orchestrated a s 249F meeting to further their agenda” (see paragraph [59] above). However, Keybridge did not make any similar application to the Takeovers Panel in respect of WAM and Mr Catalano.

48. [213]

    Mr Bolton and Mr Patton were aware that the Takeovers Panel had indicated that, while the Capital Raising Restraint Proceeding was before the Court, any Chapter 6 issue should be raised with the Court in that proceeding, rather than with the Panel (see paragraphs [61] and [67] above).

49. [214]

    Keybridge did not raise any such issue with the Court prior to the Section 249F Meeting.

50. [215]

    Mr Patton suggested that the failure to do so was because of limited funds. However, the Capital Raising Restraint Proceeding was in Court on the afternoon of 7 February 2025 and on the morning of 10 February 2025, after it was known that each of WAM and Mr Catalano had voted in favour of the resolutions to remove the Incumbent Directors (other than Mr Catalano) and to appoint the Proposed Directors. On each occasion, WAM’s application to restrain an adjournment of the Section 249F Meeting was before the Court. Keybridge did not, on either occasion, raise any allegation to the effect that s 606 of the Act had been, or may have been, contravened by reason of Mr Catalano “acting in concert with” WAM, and that this issue had to be determined before the meeting could proceed and the resolutions could be put to a vote.

51. [216]

    Further, although Keybridge may have had limited funds, Mr Rathner had, to Mr Patton’s knowledge, been provided with substantial funding by Yowie, having received $118,000 into his trust account prior to giving his consent to act as administrator. Mr Patton acknowledged in cross-examination that he did not discuss or raise with Mr Rathner, prior to the Section 249F Meeting, “approaching the Court, as a higher power, to rule on or resolve this issue”.

52. [217]

    Nor was any step taken to raise any such issue with either the Takeovers Panel or the Court in the period between the purported “adjournment” of the Section 249F Meeting on 10 February 2025 and the holding of the Spill Meeting on 27 February 2025.

53. [218]

    Nor did Mr Patton or the other Director Defendants advance any contention, at the hearing before me, that in the event that the Section 249F Meeting was not validly adjourned and instead continued with Mr Hamilton as Chair, the resolutions to remove the Incumbent Directors (other than Mr Catalano) and to appoint the Proposed Directors were not validly passed, because some or all of the votes cast in favour of those resolutions by WAM or Mr Catalano should have been excluded.

54. [219]

    Having regard to those matters, I am not satisfied that Mr Patton adjourned the Section 249F Meeting because of a genuine concern that there had been a potential contravention of s 606 and that this issue had to be raised with, and determined by, the Court or the Takeovers Panel before the meeting could proceed.

55. [220]

    Senior Counsel for the Director Defendants submitted in oral address that it made “no sense why somebody in Mr Patton’s position would act improperly for the improper purposes in the way that [WAM] contends that he did”. Mr Patton is a non-executive director, and in his affidavit he expressed the view that the fees which he is paid for this role do not adequately compensate him for the amount of work and time commitment involved in the role. Further he gave evidence that once the ACM dispute is resolved, “given all the time and effort I have personally expended on this matter to date, I am happy to stand aside as a non-executive director of the Company”.

56. [221]

    I accept that, in adjourning the Section 249F Meeting, Mr Patton was not acting for his own financial gain. However, it does not follow that, because he was not acting out of financial self-interest, he was acting for a proper purpose. As outlined above, where a meeting of shareholders is duly called so as to allow members to exercise their right to vote on resolutions to change the board, “it will be an abuse of the power of a chairman to remove the opportunity to exercise the right except for some good and proper reason calculated to promote the due exercise of the right in more suitable or constructive circumstances at a later time” (Drillsearch at [39]).

57. [222]

    For the reasons given above, I am not satisfied that Mr Patton adjourned the Section 249F Meeting (and removed the opportunity for Keybridge’s members to vote on the resolutions to change the composition of the Board) for some good and proper reason calculated to promote the due exercise of that right in more suitable circumstances at a later time.

58. [223]

    While Mr Patton may have had no great affection for his role as a director of Keybridge, he held strongly negative views regarding the conduct of WAM’s management in relation to Keybridge. For example:

    1. (1)

       following the issue of WAM’s Section 249F Notice, Keybridge made an announcement to the ASX on 24 December 2024 which was authorised by its Company Secretary (Mr Patton), and stated that: “Keybridge continues to be disappointed in WAM Active’s ongoing conduct to frustrate the operation of the Company for what appear to be uncommercial purposes”; and

    2. (2)

       in his affidavit of 16 January 2025 in the Capital Raising Restraint Proceeding, Mr Patton deposed that he held the view that “WAM has been (and is) misusing its power as a significant shareholder … to cause Keybridge to incur costs and otherwise frustrate Keybridge’s business activities”, and that this “course of conduct has been materially prejudicing Keybridge and its other shareholders”.

59. [224]

    Having regard to the evidence summarised above, it is more likely that Mr Patton purported to exercise the adjournment power under rule 7.6(f) of the Constitution, not in order to promote the due exercise of the right of shareholders to remove and replace directors in more conducive or suitable circumstances at a later time, but because he considered that it would be more conducive to the interests of Keybridge if the members (and, in particular, WAM, Mr Catalano and their respective associates who, together, represented a majority of the members entitled to vote) were not allowed to exercise the right to remove the Incumbent Directors (other than Mr Catalano) and to appoint the Proposed Directors.

60. [225]

    It follows that the power to adjourn was not exercised by Mr Patton for a proper purpose.

61. [226]

    Senior Counsel for the Director Defendants submitted that, if the Court were to take the view that the adjournment of the Section 249F Meeting was “improper” because “it was for too long” or “for some other reason”, then “the appropriate course would be to hold the meeting again”.

62. [227]

    However, if Mr Patton’s purported adjournment of the Section 249F Meeting was not (as I have found) within power, the consequence is that his purported adjournment did not in fact bring about an adjournment or termination of the Section 249F Meeting. In Wishart v Henneberry (1962) 3 FLR 171 at 174, Spicer CJ, Dunphey and Joske JJ said that:

63. [228]

    Accordingly, it is necessary to address the events which occurred at the Section 249F Meeting after the purported (but ineffective) adjournment of that meeting by Mr Patton.

Issue 3: Did the Section 249F Meeting proceed after the purported adjournment and should the Court declare the result of the poll?

1. [229]

   WAM sought declarations that the resolutions to remove the Incumbent Directors (other than Mr Catalano) and the resolutions to appoint the Proposed Directors were passed at the Section 249F Meeting.

2. [230]

   WAM noted, by reference to the passage in Wishart set out in paragraph [227] above, that because the purported adjournment was not valid, the meeting was not adjourned or terminated when Mr Patton left the chair. In Wishart at 174, the Court held that, in such circumstances:

3. [231]

   In National Dwelling Society v Sykes [1894] 3 Ch 159 at 162, Chitty J made the following observations:

4. [232]

   This principle was also referred to by Banks-Smith J in another case to which Keybridge and Mr Patton were parties: Bentley Capital Limited v Keybridge Capital Limited [2019] FCA 1675. In that case, it was “alleged that to the extent Mr Patton was chair of the meeting of [the directors of Keybridge] on 10 July 2019, he left during the course of the meeting (by hanging up from the teleconference), and resolutions were passed after he left”. Banks-Smith J noted that: “A question therefore arises as to how and whether he was replaced for the duration of the meeting”. Her Honour continued as follows (at [58]):

5. [233]

   WAM submitted that, following the purported (but ineffective) adjournment of the Section 249F Meeting:

   1. (1)

      the meeting continued with Mr Hamilton elected as chairperson;

   2. (2)

      Mr Hamilton proceeded to read through each of the resolutions and to call for shareholders to cast their votes on each resolution;

   3. (3)

      Mr Hamilton declared the poll and charged the independent observer in attendance to count the votes; and

   4. (4)

      Mr Hamilton, as chairperson, subsequently announced that all of the resolutions were duly passed (with the exception of the resolution to remove Mr Catalano as a director).

6. [234]

   In their opening written submissions, the Director Defendants and Mr Rathner did not specifically address Issue 3 and, in particular, did not advance a contention that, if the purported adjournment was invalid, there was some reason why the Court should find that the resolutions were not put to shareholders and passed at the Section 249F Meeting.

7. [235]

   In closing address, Senior Counsel for the Director Defendants submitted that the Court should find that Mr Patton was not replaced as chairperson and, therefore, the steps purportedly taken by Mr Hamilton as chairperson, including putting the resolutions to a vote at the meeting, were invalid.

8. [236]

   In this regard, reference was made to the terms of rule 7.5 of the Constitution, which provides as follows:

9. [237]

   As the Director Defendants noted, the default position is set out in rule 7.5(a). However, Mr Patton, who was present at the meeting, was not willing to preside as chairperson following his purported adjournment of the meeting. Although he stayed in the room after leaving the chair, he made clear that he was of the view that the meeting had come to an end. According to Mr Hamilton’s note of the meeting, Mr Bolton and Mr Patton stood over Mr Hamilton when he was seated at the front of the meeting “saying ‘What are you doing?’ ‘You’re embarrassing yourself’ and ‘We have closed the meeting’ on numerous occasions”.

10. [238]

    As regards rules 7.5(b) and (c), there were three directors of Keybridge “present” at the Section 249F Meeting, namely, Mr Bolton and Mr Patton (who were there in person) and Mr Catalano (who was attending by telephone). Plainly, as the evidence above demonstrates, neither Mr Bolton nor Mr Patton was willing to act as chairperson of the Section 249F Meeting after its purported adjournment. However, Senior Counsel for the Director Defendants submitted that “Mr Catalano could have been appointed”, stating as follows:

11. [239]

    These submissions are based on incorrect factual premises. Mr Catalano did not indicate that he wanted to be chairperson of the Section 249F Meeting after Mr Patton’s purported adjournment of that meeting. The relevant portion of the minutes to which reference was made in the submissions above records an exchange between Mr Catalano and Mr Patton, prior to the purported adjournment, concerning the circumstances in which Mr Patton had obtained Mr Rathner’s consent to act as chairperson of the meeting:

12. [240]

    When Mr Patton purported to adjourn the meeting, he closed the telephone line (and therefore, Mr Catalano ceased to be present at the meeting).

13. [241]

    Mr Hamilton did not simply then say: “Well, here I am. I’m counting the votes”. Instead, as recorded in his note of the meeting, he “put [himself] forward to be elected on the floor to continue the unfinished business that was purportedly adjourned by Mr Patton”. He was subsequently elected as chairperson “by way of a shareholder motion on the floor (seconded by Mr Ravell)”. Mr Catalano was then dialled back into the meeting by Mr Ravell on his mobile phone and he remained on the call for the rest of the meeting, without expressing any disagreement either with Mr Hamilton acting as chairperson or with the resolutions being put to a vote by Mr Hamilton.

14. [242]

    Having regard to the evidence set out above, I am satisfied that, following the purported (and ineffective) adjournment of the Section 249F Meeting by Mr Patton, Mr Hamilton was validly elected as chairperson by the shareholders present at the meeting, in circumstances where no other director who was present at the meeting was willing to act as chairperson. Mr Hamilton then, as chairperson, proceeded to conduct the business of the Section 249F Meeting by reading each of the resolutions and putting them to a vote.

15. [243]

    The Director Defendants did not make any submissions challenging the result of that poll. They did not, for example, advance any contention that the votes of any shareholder should have been excluded by the chairperson for any reason (whether because of any contravention of s 606 of the Act or otherwise).

16. [244]

    Accordingly, I reject the Director Defendants’ submissions that the appropriate remedy is “that the meeting be held again”. The Section 249F Meeting did not conclude with Mr Patton’s purported, but ineffective, adjournment of that meeting. Instead, it continued with Mr Hamilton as chairperson and the business of that meeting was conducted by him, with each of the resolutions having been put to shareholders at that meeting.

17. [245]

    For those reasons, it is appropriate that the Court make declarations substantially in the terms sought by the Plaintiffs in prayer 5 of their Originating Process, to the effect that:

    1. (1)

       on 10 February 2025, Keybridge validly held a meeting convened in accordance with s 249F of the Act

    2. (2)

       at the Section 249F Meeting, the members of Keybridge resolved that the Incumbent Directors (other than Mr Catalano) be removed as directors of Keybridge and the Proposed Directors be appointed as directors of Keybridge; and

    3. (3)

       following the Section 249F Meeting on 10 February 2025, the directors of Keybridge were Mr Catalano, Mr Wilson, Mr Hamilton, Mr McCathie and Mr Ravell.

Issues 4 and 5: Was the appointment of the Administrator for a proper purpose?

1. [246]

   Issues 4 and 5 concern the appointment of Mr Rathner as voluntary administrator of Keybridge and are as follows:

   1. (1)

      whether the Board of Keybridge properly and genuinely formed the opinion that Keybridge was insolvent or was likely to become insolvent at some future time (Issue 4); and

   2. (2)

      whether the Board of Keybridge purportedly appointed the voluntary administrator, Mr Rathner, for an improper purpose (Issue 5).

2. [247]

   So far as Issue 4 is concerned, the Plaintiffs accepted that “the material before the board provided a basis for forming the opinion contemplated by s 436A” and “the Court may accept that Mr Dukes and Mr Catalano had that opinion”.

3. [248]

   So far as Issue 5 is concerned, the Plaintiffs did not dispute that each of Mr Dukes and Mr Catalano was acting for a proper purpose in joining in the resolution to appoint an administrator. However, the Plaintiffs contended that each of Mr Bolton and Mr Patton was acting for an improper purpose, and framed the question of the Court as follows:

4. [249]

   Accordingly, the Plaintiffs contended, in substance, that but for the improper purpose of Mr Bolton and Mr Patton, the Board would not have appointed this particular administrator (Mr Rathner) at this particular time (the evening before the Section 249F Meeting). On this basis, the Plaintiffs sought an order that “the purported appointment of Mr Rathner as the administrator of Keybridge on 9 February 2025, is void, invalid and of no effect” (Originating Process, prayer 6).

5. [250]

   Section 436A(1) of the Act provides as follows:

6. [251]

   In Cadwallader at [222], Austin J observed that:

7. [252]

   If the power to appoint a voluntary administrator is exercised for an ulterior or extraneous purpose (that is, some purpose unrelated to the objects of Part 5.3A of the Act as set out in s 435A), then the exercise of the power is invalid: Kazar v Duus (1998) 88 FCR 218 at 233.

8. [253]

   If it is found that the directors are motivated by a purpose of self-interest, such as a desire to retain their control of the company or to defeat the legitimate exercise of shareholders’ powers inimical to their personal interests, their decision is one that is inconsistent with due performance of their duties: In the matter of Condor Blanco Mines Ltd [2016] NSWSC 1196 at [113] (Barrett AJA); referring to Howard Smith Ltd v Ampol Petroleum Ltd [1974] UKPC 4; [1974] AC 821. If such an inconsistent purpose is causative, in the sense that, but for its presence, the power would not have been exercised, the tainted action is vitiated by the impermissible purpose and is rendered voidable as distinct from void: ibid, referring to Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 at 294-5 (Mason, Deane and Dawson JJ); [1987] HCA 11.

9. [254]

   Accordingly, it is necessary, first, to ascertain the actual purpose of the directors who voted in favour of appointing an administrator; secondly, to determine whether that purpose was proper or improper; and thirdly, to consider whether the resolution to appoint a voluntary administrator would have been passed were it not for the improper purpose: Cadwallader at [224]; Re Warwick Keneally as administrator of Australian Blue Mountain International Cultural & Tourist Group Pty Ltd (admin apptd) [2015] NSWSC 937 at [96] (Black J).

10. [255]

    The exercise of the power to appoint an administrator will be invalid, and the purported appointment will be invalid, “if that power is exercised for an ulterior or extraneous purpose and that purpose is substantial in the sense that the decision would not have been made but for the ulterior purpose”: Re Lime Gourmet Pizza Bar (Charlestown) Pty Ltd [2015] NSWSC 244 at [23] (Black J); Australian Blue Mountain International Cultural & Tourist Group at [96]; and VRM Global Holdings Pty Ltd v Savannah AG Research Pty Ltd (admins apptd), in the matter of Savannah AG Research Pty Ltd [2023] FCA 131 at [11]-[12] (Charlesworth J).

11. [256]

    In identifying the actual purpose of the directors who voted in favour of the resolution to appoint an administrator, the Court will have regard to the character and operation of the resolution in relation to the facts and circumstances surrounding it, and not merely to the motives of individual directors (although statements about motives and subjective intentions are relevant): Cadwallader at [224]; Australian Securities and Investments Commission v Planet Platinum Ltd [2016] VSC 120 at [23].

12. [257]

    In respect of the timing of the resolution to appoint Mr Rathner, the Plaintiffs emphasised the following matters: that Mr Bolton only took steps to approach Mr Rathner after he was informed of Mr Catalano’s voting intentions; that the appointment of Mr Rathner was precipitated by the letters of demand and default sent by Yowie (in circumstances where Keybridge had a relevant interest in 78% of Yowie’s shares and where Mr Bolton and Mr Patton were two of the three directors of Yowie); and that Mr Bolton and Mr Patton called the Board meeting to vote on the resolution to appoint an administrator on the evening before the Section 249F Meeting was to be held.

13. [258]

    For the reasons given below, I am not satisfied that those matters establish some improper purpose as regards the timing of the resolution to appoint an administrator or that, but for any such purpose, a resolution to appoint an administrator would not have been passed by the Board on 9 February 2025.

14. [259]

    Prior to learning of Mr Catalano’s voting intentions, Mr Bolton had expressed a concern that Keybridge had “no cash to pay for anything” including “staff” unless the proposed capital raising went ahead, and that there was a “real risk of a voluntary administrator being appointed” if the Court granted an injunction in respect of Resolution 7 (see paragraph [56] above).

15. [260]

    Mr Catalano himself was raising concerns about Keybridge’s solvency in the week before the Section 249F Meeting (see paragraph [78] above). In an email sent to his fellow directors, he stated that he was “concerned as a director to ensure that we manage and avoid any risks of trading whilst insolvent in the interests of [Keybridge’s] shareholders and creditors as appropriate”, and sought information on Keybridge’s financial position. At around the same time, and in advance of any meeting between Mr Bolton and Mr Rathner, Mr Dukes was raising concerns about Keybridge’s solvency (see paragraph [75] above). There is no reason to conclude that those concerns were not genuinely held. Neither Mr Catalano nor Mr Dukes was (or was alleged to be) acting for any ulterior purpose in raising those concerns in the days leading up to the Section 249F Meeting.

16. [261]

    The Plaintiffs emphasised the fact that Yowie sent its letter of default on a Sunday morning, the day before the Section 249F Meeting, and that this precipitated the Board meeting being called for later that day, at which the directors resolved to appoint Mr Rathner. However, there is no basis for finding that Yowie’s actions (or their timing) were orchestrated or influenced by Mr Bolton or Mr Patton.

17. [262]

    For a period of time prior to sending its letter of demand, Yowie had been making requests to Keybridge for payments to be made in respect of its loan, because of Yowie’s own cash flow constraints. For example, on 25 January 2025, Mr Andrew Ranger, who was a director of Yowie, sent a text message to Mr Bolton with the following request: “Are you able to get some interest dollars from [Keybridge] to [Yowie]? Will need to pay for a balance payment on toys for Dragon. 50k USD”. As set out at paragraph [52] above, Mr Patton had deposed in his affidavit of 24 January 2025, prior to becoming aware of Mr Catalano’s voting intentions, that Yowie “would “shortly require [its] loans to be repaid, at least in part, so that it can fund its operations”.

18. [263]

    On 4 February 2025, Mr Ranger sent an email to his fellow directors of Yowie, Mr Bolton and Mr Patton, stating that he was “reaching out as the only director independent to Keybridge to ask for your advice regarding the next steps for [Yowie], in particular how we deal with this Keybridge facility”. Mr Ranger outlined that Yowie was facing “serious capital challenges at the moment that, if not addressed, will cause significant harm to the business”. He proceeded to outline, in significant detail, Yowie’s cash needs, and stated that “unforeseen events have led to overdrafts and delayed payments bringing all of this into urgent attention”. Mr Ranger concluded his email as follows:

19. [264]

    Following this email, the directors of Yowie resolved to establish an independent subcommittee chaired by Mr Ranger with “delegated authority of the Board to make decisions on [Yowie’s] behalf on any matter that involves the Keybridge Reciprocal Loan Facility” (the Yowie Subcommittee). Neither Mr Bolton nor Mr Patton was a member of the Yowie Subcommittee.

20. [265]

    On the morning of 5 February 2025, the Yowie Subcommittee met and “agreed that Yowie must request 100% repayment of the loan balance”. The Yowie Subcommittee determined that a “formal demand for full repayment of the principal amount … be sent to [Keybridge]”.

21. [266]

    There was evidence that the conclusions reached by the Yowie Subcommittee were shared with the Yowie board (and therefore with Mr Bolton and Mr Patton). However, that does not provide any basis for concluding that the decision to send a letter of demand was reached by anyone other than the members of the Yowie Subcommittee.

22. [267]

    There was a further meeting of the Yowie Subcommittee on the morning of 9 February 2025. At this meeting, the Yowie Subcommittee “unanimously agreed to send a letter of default to Keybridge Capital for nonpayment of the requested principal and overdue interest”. These minutes were sent to Mr Bolton and Mr Patton shortly after the meeting, with the letter of default following around five minutes later. There was no evidence to indicate that Mr Bolton or Mr Patton were consulted about the Yowie Subcommittee’s decision. Instead, Mr Bolton sent an email to Mr Ranger, minutes after receipt of the letter of default, describing the letter as “unfortunate” (see paragraph [108] above). In particular, Mr Bolton indicated that he was concerned by the letter being sent at that time, telling Mr Ranger that:

23. [268]

    Immediately upon the receipt of the letter of default, Mr Patton took steps to call a meeting of the Board of Keybridge for the afternoon of the same day (at which the Board resolved to appoint Mr Rathner as voluntary administrator).

24. [269]

    Having regard to those matters, I am not satisfied that either Mr Bolton or Mr Patton had any control over the decision of Yowie to send letters of demand and default, or over the timing of those letters, or that the timing of the Board meeting on 9 February 2025 is explained by Mr Bolton and Mr Patton acting for an improper purpose.

25. [270]

    In closing address, the Plaintiffs did not submit that the Court should find that the independent Yowie Subcommittee was not in fact independent, but instead submitted that the Court should find that “Mr Patton and Mr Bolton could have procured an accommodation between the two entities if they wanted to and if it suited their interest.” The email which Mr Bolton sent to Mr Ranger shortly after the letter of default was received provides some support for the proposition that Mr Bolton believed that there might be scope to come to some accommodation with Yowie about the loan. However, I am not satisfied that there is a sufficient basis to conclude, given the evidence of Yowie’s cash needs, that such an accommodation “could have been procured” if Mr Bolton had sought it.

26. [271]

    In any case, it is not apparent that, if Mr Dukes and Mr Catalano had been informed that such an accommodation could be achieved, it would have affected their decision to appoint an administrator.

27. [272]

    Mr Dukes gave unchallenged evidence that he had reached the view that Keybridge “was simply unable to pay the debts that were due to be paid by it” before Yowie’s letter of demand was sent. When asked in cross-examination questions regarding the timing of the Yowie demand, Mr Dukes stated that: “it didn’t really seem all that relevant to me in making that decision about solvency”.

28. [273]

    Mr Catalano made some comments at the Section 249F Meeting which suggest that he had suspicions about the process which led to Yowie issuing the letter of default on 9 February 2025. According to Ms Reid’s note of the meeting, Mr Catalano stated that “the independent committee is Andrew Ranger, who reports directly to Nick Bolton” and pointed out that Mr Bolton and Mr Patton, who knew Mr Catalano’s voting intentions, were “coincidentally directors of Yowie, the entity which has also put the [Keybridge] into administration”. According to Mr Hamilton’s note of the same meeting:

29. [274]

    Those matters indicate that Mr Catalano suspected that (to adopt the words of the Plaintiffs’ submission) “Mr Patton and Mr Bolton could have procured an accommodation between the two entities if they wanted to and if it suited their interest”. Despite apparently holding such a view on 10 February 2025 (and therefore presumably holding such a view at the time of the Board meeting on 9 February 2025), Mr Catalano voted in favour of the resolution to appoint an administrator. I infer from these matters that, as was the case with Mr Dukes, Yowie’s demand for repayment was not critical to Mr Catalano’s decision to join in the resolution at the 9 February Board meeting to appoint an administrator.

30. [275]

    This inference is further supported by the following matters: (a) Mr Catalano raised his concerns about solvency in advance of Yowie’s letter of demand being sent; and (b) the Board minutes record that the Board reached the conclusion that Keybridge was unable to pay its debts as and when they fall due, based not only on the Yowie demand, but based also on Keybridge’s inability to pay various invoices issued by its solicitors, Gadens, totalling some $620,000 (with further invoices of $150,000 to follow for the January Court Hearing), and on its “inability to pay the upcoming wages for February 2025”.

31. [276]

    Even if the Plaintiffs had established that, in organising the Board meeting for the evening of 9 February 2025, Mr Bolton and Mr Patton were acting for the improper purpose of seeking to prevent the Section 249F Meeting going ahead on the following day, I would not have been satisfied that the “but for” test was established. It is plain that Mr Catalano wanted the Section 249F Meeting to proceed on 10 February 2025. However, in circumstances where he had that intention, he thought it appropriate to join in the unanimous resolution of the Board on the evening before that meeting that an administrator be appointed.

32. [277]

    According to the minutes of the 9 February Board meeting, the directors of Keybridge (including Mr Catalano and Mr Dukes) specifically considered the fact that the Section 249F Meeting was scheduled to be held on the following day, but concluded that “the Company’s solvency and the directors’ duties takes precedence over external events, so this was not a consideration by the Board”.

33. [278]

    The Plaintiffs noted that, although various persons were presented to the Board as potential administrators, all of the options other than Mr Rathner were described either as being too expensive or as not being independent (see paragraph [113] above). WAM further noted that there was no evidence that any person other than Mr Rathner was approached to discuss a potential appointment as administrator; that there does not appear to have been a basis for concluding that Mr Rathner would be significantly cheaper than other options, since he had requested an upfront payment of $1m into trust (see paragraph [93] above); and that Keybridge had previously asserted, in the Winding Up Proceeding, that Keybridge had claims against Mr Rathner for misleading conduct.

34. [279]

    Against that background, the Plaintiffs submitted as follows:

35. [280]

    The Plaintiffs did not articulate the terms of any such “arrangement struck between Mr Bolton and Mr Rathner as to a range of matters” in their opening submissions in chief or in reply, and did not otherwise refer in any materials filed or served in advance of the hearing to the existence or terms of any such arrangement. Mr Rathner was not given the opportunity to respond to any such allegation in his affidavit evidence. Nor did the Plaintiffs squarely put the existence or terms of any such arrangement to Mr Rathner in cross-examination. I accept Mr Rathner’s submission that, in those circumstances, he would be denied procedural fairness if the Plaintiffs were allowed to raise the existence of any such arrangement in closing address.

36. [281]

    After counsel for Mr Rathner raised this objection in closing address, the Plaintiffs said, in reply, that they did not “advance an independent case of misconduct against Mr Rathner” and that they did not “put a case based on an agreement” between Mr Rathner and Mr Bolton regarding the conduct of the administration. Instead, the Plaintiffs submitted that their case was “the case that we clearly opened on and ran”, namely, “that Mr Rathner was not independent, was in a position of conflict, that Mr Bolton and Mr Patton knew and must have known of that, and that that permits an inference to be drawn that they were actuated by an improper purpose”. I accept that a case, put in those terms, is consistent with the Plaintiffs’ opening submissions and that this case was put to Mr Rathner, Mr Bolton and Mr Patton in cross-examination. It is this case which I address below.

37. [282]

    The issues raised in respect of Mr Rathner’s independence fall primarily into pre-appointment issues and post-appointment issues.

38. [283]

    The pre-appointment issues all relate in various ways to Mr Rathner’s role as liquidator of PR Finance Group Ltd (PRFG), AMX No 1 Pty Ltd and Australian Money Exchange Pty Ltd (AME) (together, the PR Group Companies). The relevant background is briefly summarised below.

39. [284]

    On 19 May 2014, Mr Rathner was appointed as liquidator to each of the PR Group Companies. In 2019, AME and PRFG commenced proceedings in the Supreme Court of Victoria (the PRFG Proceedings), seeking relief against various directors and officers of those entities, as well as against the underwriters under the Directors & Officers (D&O) insurance policy (the Underwriters). The PRFG Proceedings were funded by Keybridge. On 22 April 2024, Keybridge paid $1.8m into court as security for costs.

40. [285]

    On 7 May 2024, the PRFG Proceedings came on for hearing. On the first day, the Underwriters sought leave to amend their defence to plead an exclusion in respect of any claim instigated by or on behalf of any person holding more than 25% of the issued shares in the insured company. That was significant because Keybridge owned 100% of the issued share capital in PRFG. On 9 May 2024, leave to amend was granted. On 10 May 2024, AME and PRFG sought leave to discontinue the proceedings, leaving a dispute remaining about costs.

41. [286]

    The argument on costs was heard on 9 August 2024 and judgment was delivered on 27 August 2024: Australian Money Exchange Pty Ltd (in liq) v Llewellyn [2024] VSC 511. Delany J expressed the view that “if Mr Rathner and Keybridge had taken the trouble to look at the insurance policy and to obtain advice on the relevant exclusion, they would not have instituted the proceedings” (at [115]). His Honour noted that no party was critical of the failure of previous legal advisers to give such advice to Mr Rathner or Keybridge, and observed that this was appropriate, given that “the plaintiffs’ legal representation chopped and changed and lacked continuity” (at [109]-[112]). There was evidence from Mr Bolton that the plaintiffs’ costs of the proceedings “exceed several million dollars” and Delany J commented that he did not expect the Underwriters’ costs “to be much less”, adding: “Those costs have been incurred unnecessarily” (at [138]). His Honour indicated that he would make orders that the plaintiffs pay the Underwriters’ costs and that such costs be paid from the security paid into court by Keybridge (at [141]).

42. [287]

    In its financial statements for the year ending 30 June 2024 (which were audited by William Buck), Keybridge made the following disclosure regarding a loan provided in respect of the PRFG Proceedings:

43. [288]

    Similarly, in its financial statements for the year ending 30 June 2024 (which were audited by RSM Australia), Yowie made the following disclosure:

44. [289]

    On 21 October 2024, Lowe Lippman issued an invoice to Keybridge in the amount of $179,633.94 in respect of the work performed by Mr Rathner as liquidator of the PR Group Companies (the LL Invoice). The LL Invoice was not paid by Keybridge.

45. [290]

    On 29 October 2024, Mr Bolton sent an email to Mr Rathner in relation to the LL Invoice, stating as follows:

46. [291]

    Mr Rathner appeared as a supporting creditor in the Winding Up Proceeding. On 6 November 2024, he affirmed an affidavit in that proceeding, in which he asserted that Lowe Lippman was a creditor of Keybridge in the amount of the LL Invoice. He referred to an email from Mr Ho of Keybridge dated 6 April 2017, in which Mr Ho stated that Keybridge “will provide secured creditor funding for [the PR Group Companies] (once cash has been used up) on a monthly basis on presentation of supporting WIP statements and third-party invoices/supporting documentation (as applicable)”.

47. [292]

    On 9 November 2024, Mr Patton swore an affidavit in the Winding Up Proceeding. Mr Patton responded as follows to Mr Rathner’s claim that Lowe Lippmann was a creditor of Keybridge:

48. [293]

    On 12 November 2024, Mr Patton swore a further affidavit in the Winding Up Proceeding in relation to Mr Rathner’s affidavit. Mr Patton deposed that Keybridge had “relied on representations made by Mr Rathner that [a particular insurance policy] would respond to the claim [made by the PR Group Companies] and thus it was in [Keybridge’s] interest to fund the litigation to recover against the insurer”. Mr Patton stated that: “I believe that Keybridge has an off-setting claim against the liquidator and Lowe Lippman for misleading and deceptive conduct in respect of representing the prospects of success of the [PRFG Proceedings]”.

49. [294]

    On 6 January 2025, Mr Rathner made the decision to reverse the LL Invoice. He deposed that:

50. [295]

    The Eye Plantain liquidation was unrelated to the liquidation of the PR Group Companies.

51. [296]

    On 4 February 2025, Mr Rathner sent an email to Mr Bolton and Mr Patton requiring that Keybridge provide funding of more than $190,000 to the PR Group Companies to cover the “WIP” in the liquidation of those companies and storage costs.

52. [297]

    On the same day as Mr Rathner made this request for funding, Mr Bolton sent a text message to Mr Rathner to arrange to meet with him.

53. [298]

    On 5 February 2025, Mr Bolton met with Mr Rathner to discuss his potential appointment as voluntary administrator of Keybridge. In his affidavit, Mr Bolton gave the following evidence of the matters discussed at this meeting:

54. [299]

    Mr Rathner gave the following evidence in his affidavit regarding this meeting:

55. [300]

    I will address separately below the propositions put to Mr Rathner and Mr Bolton in cross-examination regarding the matters discussed at this meeting.

56. [301]

    On 9 February 2025, Mr Rathner obtained a written opinion from Mr Daryl Williams KC. One of the issues which Mr Williams addressed was “whether Mr Rathner’s current and prior relationships with Keybridge would make it inappropriate for him to accept the proposed appointment”. On the instructions provided to him, Mr Williams advised that there was “no ethical impediment to Mr Rathner accepting the proposed appointment”. However, Mr Williams concluded his advice with the following statement:

57. [302]

    On 12 February 2025, Mr Rathner completed a Declaration of Independence, Relevant Relationships and Indemnities. Mr Rathner declared that he had assessed his independence and was not aware of any reasons that would prevent him from accepting the appointment as voluntary administrator. In the “Declaration of Relationships”, Mr Rathner referred to his appointment as liquidator of the PR Group Companies, Eye Plantain and Blue Sennar. In response to the question “Do I have any other relationships that I consider are relevant to creditors assessing my independence?”, Mr Ratner referred to his appointment as liquidator of the PR Group Companies and continued as follows:

58. [303]

    The Plaintiffs raised three issues in respect of Mr Rathner’s independence at the time of his appointment as voluntary administrator, which were said to arise from the matters set out above.

59. [304]

    The first concerns the recovery of the remuneration claimed to be owing to Lowe Lippman for Mr Rathner’s services as a liquidator of the PR Group Companies. As noted above, the LL Invoice was previously issued in respect of this remuneration, which was the basis on which Lowe Lippman appeared as a supporting creditor in the Winding Up Proceeding. However, Lowe Lippman subsequently reversed the LL Invoice in early January 2025.

60. [305]

    As a result of the LL Invoice being reversed, Mr Williams advised Mr Rathner that Lowe Lippman was no longer a creditor of Keybridge, such that s 448C(1)(a) of the Act did not present an obstacle to Mr Rathner accepting an appointment as voluntary administrator. Further, Mr Williams advised that the decision to reverse the LL Invoice was a “sound one”, given that the substance of Keybridge’s agreement to provide secured funding for the liquidation was not that Keybridge was promising to meet Mr Rathner’s remuneration and expenses as liquidator of the PR Group Companies, but instead that Keybridge was promising to make secured loans to the PR Group Companies, so as to enable them to meet Mr Rathner’s remuneration and expenses.

61. [306]

    Mr Rathner has on a number of occasions, including as recently as 4 February 2025, required Keybridge to provide funding to the PR Group Companies, specifically for the purposes of meeting his WIP as liquidator. Keybridge has not done so. That appears to be because the directors of Keybridge have adopted the view, as expressed in Mr Bolton’s October 2024 email and Mr Patton’s November 2024 affidavit, that Keybridge withdrew its agreement to provide funding prior to the relevant services being provided in the liquidation of the PR Group Companies and that, further, Keybridge has an offsetting claim (addressed below).

62. [307]

    Mr Rathner is accordingly now seeking to recover the funds to pay for his remuneration and expenses as liquidator of the PR Group Companies by what he acknowledged in cross-examination to be a “self-help” remedy, namely, by relying on a “Direction Authority” from Keybridge to divert to the PR Group Companies funds which would otherwise be payable to Keybridge in another, unrelated, liquidation (namely, Eye Plantain).

63. [308]

    The terms of this Direction Authority are relevantly as follows (emphasis added):

64. [309]

    Mr Rathner can only rely on this authority to direct funds from the Eye Plantain liquidation to the PR Group Companies insofar as such funds are required to meet “fees” which are in fact due to Mr Rathner or “expenses and disbursements” which have in fact been “incurred by him”, as liquidator of the PR Group Companies.

65. [310]

    There has been a dispute between Keybridge and Mr Rathner about whether fees were in fact properly owing to him, or expenses were properly incurred by him, as liquidator of the PR Group Companies. In circumstances where Mr Rathner has been appointed administrator of Keybridge, he is, in respect of any such issue, in a position of conflict. Counsel for Mr Rathner acknowledged in closing address that there were grounds for finding “an apprehension of bias, if not an actual bias” in respect of these matters:

66. [311]

    As Counsel for Mr Rathner noted, the present application is not an application to replace Mr Rathner as administrator, or to appoint a special purpose administrator in respect of one or more matters, but is instead an application to end the administration on the basis that the Board of Keybridge appointed Mr Rathner for an improper purpose. The matters going to Mr Rathner’s independence are raised in aid of that contention, with the Plaintiffs submitting, in substance, that having regard to those matters (which were known to Mr Bolton and Mr Patton), the Court would infer that Mr Rathner’s appointment was for an improper purpose. I return to this submission below, after dealing with the other issues raised in respect of Mr Rathner’s independence.

67. [312]

    The second of those matters concerns the claim for misleading conduct which had been asserted by Keybridge against Mr Rathner in the Winding Up Proceeding. As set out above, Keybridge alleged in that proceeding that Mr Rathner had misrepresented the prospects of success in the PRFG Proceedings. Those proceedings extended over five years, and were dismissed shortly after the hearing commenced, on the basis of an exclusion in the relevant insurance policy. Delany J expressed the view that, if Mr Rathner had sought advice on this issue prior to commencing the PRFG Proceedings, those proceedings would never have been brought.

68. [313]

    In his affidavit in this proceeding, Mr Patton referred to his previous assertion of a claim against Mr Rathner in the Winding Up Proceeding, and deposed as follows:

69. [314]

    As noted above, Delany J had commented in the PRFG Proceedings that no party had criticised the plaintiffs’ lawyers for failing to advise on this issue, and that this was understandable given that “the plaintiffs’ legal representation chopped and changed and lacked continuity” (see paragraph [286] above).

70. [315]

    When Mr Bolton first asserted that Mr Rathner had provided “incorrect” advice in relation to the PRFG Proceedings, Mr Rathner responded as follows in an email to Mr Bolton dated 30 October 2024, which was copied to Mr Patton and to Keybridge’s in-house counsel, Mr Loizou:

71. [316]

    Mr Rathner thereby contended, in response to the claim asserted against him, that criticism should either be directed at the lawyers who had been retained in the PRFG Proceedings or at Keybridge, who had not properly funded the proceedings (leading to the legal representation chopping and changing and lacking continuity).

72. [317]

    It can be inferred that Keybridge’s management and, in particular, Mr Patton did not accept this response given that, after it was received, Mr Patton proceeded to file two affidavits in the Winding Up Proceeding which asserted that Mr Rathner had engaged in misleading conduct.

73. [318]

    In cross-examination, Mr Bolton gave evidence to the effect that, prior to Mr Rathner’s appointment, Mr Bolton had withdrawn the claim for misleading conduct:

74. [319]

    I am not satisfied that any such discussion occurred on 5 February 2025. If Mr Bolton had withdrawn the cross claim, it is likely that he would have indicated this to Mr Patton (who had sworn the affidavit asserting such a claim) when having discussions with him regarding the appointment of Mr Rathner. However, he did not do so. Further, Mr Bolton did not make any record that he had withdrawn the claim.

75. [320]

    The claim had been asserted against Mr Rathner as recently as November 2024. In early February 2025, Mr Rathner was turning his mind to the potential appointment as administrator of Keybridge and, in particular, issues of independence. If Mr Bolton had withdrawn this claim at the time that Mr Rathner had considered those issues and was seeking advice regarding his prior relationships with Keybridge, this would likely have been a significant matter for him. However, Mr Rathner gave evidence that it was not until 19 February 2025, at a meeting with Mr Patton and Mr Bolton (discussed further below), that Mr Rathner was told that the claim for misleading conduct was no longer being asserted against him:

76. [321]

    Having regard to those matters, I find that, as at the time that Mr Rathner was appointed, the claim for misleading conduct in respect of his alleged misrepresentations concerning the prospects of the PRFG Proceedings had been made and not withdrawn. Following Mr Rathner’s appointment as administrator, he was in a position of conflict in respect of this claim, as acknowledged by his Counsel:

77. [322]

    The third matter raised in respect of Mr Rathner’s independence concerns the loan referred to in the financial statements of Yowie and Keybridge, being a loan in the amount of $1.5m made by Yowie to PRFG in respect of the PRFG Proceedings, with Keybridge having indemnified Yowie for any loss in respect of that loan (see paragraphs [287]-[288] above). In cross-examination, Mr Rathner stated that these funds were provided to meet the order to provide security for costs in the PRFG Proceedings. He further stated that he did not believe “the funds were advanced to me personally” and was “not sure whether it was a loan to PRFG or whether it was just payment into court pursuant to the order made”.

78. [323]

    The Plaintiffs indicated, in closing submissions, that they did not assert that Mr Rathner was personally liable in respect of any such loan, adding:

79. [324]

    Mr Bolton gave evidence in cross-examination that the financial statements of each of Yowie and Keybridge were incorrect, and that Yowie did not advance this sum to PRFG. He did not offer any explanation for how this error had come about in the sets of accounts of two public companies, which were audited by different firms, and approved by their directors. Further, there was evidence that the relevant loan appears in Yowie’s general ledger as a “Loan to PRFG” in the amount of $1,500,707.

80. [325]

    Section 1305(1) of the Act provides that a book kept by a body corporate under a requirement of the Act “is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book”. In Australian Karting Association Ltd v Karting (New South Wales) Incorporated [2022] NSWCA 188 at [129], Gleeson JA (with whom Meagher JA and Simpson AJA agreed) said that:

81. [326]

    I do not consider that Mr Bolton’s assertion in cross-examination of an error, unsupported by any documentary evidence, is sufficient to establish, on the balance of probabilities, that the entries in the audited accounts of Yowie and Keybridge concerning the loan to PRFG are incorrect.

82. [327]

    Counsel for Mr Rathner noted that there had been no reference to this loan in the Plaintiffs’ opening written submissions in chief or in reply, and in those circumstances he had been unable to take steps such as, for example, issuing a subpoena to Yowie to produce any documents relating to the loan. I accept that there is some force in this criticism. In any case, I do not consider that whether or not this loan was made to PRFG adds significantly to the other matters concerning the PR Group Companies which have been addressed above, and which do give rise to issues as to Mr Rathner’s independence.

83. [328]

    The Plaintiffs raised several matters regarding Mr Rathner’s post-appointment conduct, which they also relied upon in contending that the Court should infer an improper purpose in respect of his appointment.

84. [329]

    First, Mr Rathner deposed in an affidavit filed on 23 February 2025 in this proceeding that he “propose[d] to realise assets to a sum not exceeding $1 million” to fund the administration, with any sum not used being available to creditors. The Plaintiffs submitted that this reflected a “fundamental misapprehension of the role of the administrator”, and that the Court should infer that this proposed course of conduct reflected discussions which Mr Rathner had with Mr Bolton prior to his appointment. As outlined below, Mr Rathner gave evidence that he did have some discussion with Mr Bolton regarding the prospect of realising assets to pay pre-appointment creditors, but not “in specific detail about each item of asset”.

85. [330]

    Secondly, Mr Rathner agreed in cross-examination that he had not taken any steps in relation to Yowie, other than considering whether to sell the Yowie shares. The Plaintiffs submitted that it followed that he had taken no steps to convene a meeting to replace the directors of Yowie, in order to ensure that it is being dealt with independently, and had made no requests for undertakings that the assets of Yowie will be preserved or that payments will only be made in the ordinary course of business.

86. [331]

    Thirdly, the Plaintiffs submitted that Mr Rathner, rather than taking a position of neutrality in respect of the issues arising in this proceeding (other than those in respect of his own conduct), had assisted the Director Defendants in their defence of the proceedings. In particular, the Plaintiffs referred to the following matters.

    1. (1)

       On 19 February 2025, there was a telephone conference which was attended by Mr Rathner, Mr Patton, Mr Bolton, Mr Loizou, Mr Abraham and Mr Broadfoot. Mr Loizou is Keybridge’s in-house counsel and Mr Abraham is the solicitor for Mr Rathner and Keybridge in this proceeding. Although Mr Broadfoot appeared at the hearing on 5-7 March 2025 for the Director Defendants, he had, on the day of this teleconference, appeared for Keybridge in a directions hearing in this proceeding. At this meeting, there was discussion regarding which of the defendants should respond to which of the issues in this proceeding, and regarding what evidence would need to be prepared in response to those issues. For example, there was reference to the obtaining of an affidavit from “Yowie re calling loan w/out influence Patton/Bolton”. This was not an issue in respect of which Mr Rathner had any interest. (An unredacted version of the note was produced at the hearing after Mr Rathner conceded that he did not have any interest in any of the issues raised other than those concerning his own conduct, and the Director Defendants conceded that they did not have any interest in the issues relating to Mr Rathner’s own conduct, such that there was no common interest privilege in respect of the contents of the note.)

    2. (2)

       In the course of this teleconference, there had been discussion that in respect of the issue “Did Co appt valid” (that is, whether the appointment of Mr Rathner by Keybridge was valid), it would be necessary to obtain “Aff[idavits] from directors at meeting”. On the following day, Mr Abraham sent an email to Mr Catalano’s solicitor, which was copied to Mr Broadfoot. Mr Abraham stated that he acted for Keybridge and Mr Rathner, and “attach[ed] for [Mr Catalano’s] consideration a draft affidavit settled by Andrew Broadfoot KC”. The email continued: “Our client is concerned that, in circumstances where WAM has alleged that the Administrator was appointed for an improper purpose, any failure by directors to file affidavit material could lead his Honour drawing adverse inferences”. Mr Rathner said in cross-examination that this email was not sent on his instructions and was sent without his knowledge. I consider it unlikely that solicitors and counsel would take a step of preparing a draft affidavit, and incurring the costs involved in doing so, without instructions. It is likely that Mr Rathner agreed to this work being undertaken in the teleconference on the previous day (involving Mr Rathner, Mr Abrahams and Mr Broadfoot) where those present had discussed the need to prepare affidavits for the directors who were present at the board meeting, including Mr Catalano.

    3. (3)

       Mr Bolton also gave evidence that he was assisted in settling his affidavit by Mr Broadfoot, at a time when Mr Broadfoot was retained by Keybridge. Mr Rathner gave evidence that this work was also undertaken without his instructions. For the reasons given above, it is likely that such instructions were in fact given.

    4. (4)

       When Mr Rathner and Keybridge filed opening written submissions, they did not adopt a position of neutrality, such as an administrator should normally adopt on this type of application (see In the matter of Condor Blanco Mines Ltd (No. 2) [2016] NSWSC 1304 at [8]-[11] (Barrett AJA)). Instead, the submissions addressed the issues raised by the Plaintiffs concerning whether there was a proper purpose for the appointment of Mr Rathner and for the adjournment of the Section 249F Meeting. Counsel for Mr Rathner said that those written submissions “went no further” than advancing contentions to the effect that “on the issue of construction [the relevant rule of the Constitution] could be construed this way” and “[o]n the issue of improper purpose, there are documents that support the purpose”. In my view, the opening submissions did in fact go further than this. For example, on the issue of construction, Mr Rathner did not simply advance submissions as to how the rule could be construed, but as to how it should be construed, submitting that this “aspect of the Plaintiffs’ case should be dismissed”; and flagging an intention to bring an application under s 1322 of the Act “against the possibility that the Court finds in favour of the plaintiffs on the first issue [regarding construction]”.

87. [332]

    For the reasons given above, I accept the Plaintiffs’ submissions that Mr Rathner was in a position of conflict, having regard to his prior dealings with Keybridge as liquidator of the PR Group Companies; and that Mr Bolton and Mr Patton must have known that was the case at the time of his appointment. Further, I accept the Plaintiffs’ submission that Mr Rathner assisted Mr Bolton and Mr Patton in their defence of the proceedings, at least prior to the point in time when they obtained legal representation.

88. [333]

    However, the critical question for present purposes is whether, having regard to those matters, the Court should infer that Mr Bolton and Mr Patton were actuated by an improper purpose in proposing Mr Rathner for appointment as administrator.

89. [334]

    In opening written submissions in reply, the Plaintiffs submitted that Mr Rather’s “post-appointment conduct permits inferences to be drawn about what he told the [Incumbent] Directors as to how he intended to approach the administration”, which “in turn supports an inference that the appointment was not for a proper purpose”. However, the Plaintiffs did not identify what particular inferences should be drawn regarding the content of any such discussions.

90. [335]

    Similarly, in closing address, Senior Counsel for the Plaintiffs submitted as follows:

91. [336]

    However, there was no identification of the particular matters in respect of which an “understanding” was reached, or what Mr Bolton and Mr Patton, as a result of pre-appointment discussions, “expected an administration by Mr Rathner to involve”.

92. [337]

    In cross-examination, Mr Rathner gave the following evidence of his discussions with Mr Bolton regarding the conduct of the administration:

93. [338]

    The Plaintiffs did not, in the cross-examination of Mr Rathner, put to him any propositions regarding the terms of any “understanding” which he and Mr Bolton allegedly reached regarding the conduct of the administration prior to his appointment, although there were some questions regarding the extent to which there was discussion about the sale of assets:

94. [339]

    The propositions put to Mr Bolton in cross-examination were along similar lines, focussing on the sale of assets. For example:

95. [340]

    In addition, the following propositions were put to, and denied by, Mr Bolton:

96. [341]

    Mr Patton gave evidence that he did not meet Mr Rathner to discuss the administration prior to his appointment, and that he left it to Mr Bolton to deal with Mr Rathner in that period. The only proposition put to Mr Patton in cross-examination regarding any “understanding” or “expectation” in relation to the conduct of the administration was as follows:

97. [342]

    It is difficult to discern, from the propositions put to Mr Rathner, Mr Bolton and Mr Patton in cross-examination set out above, what is alleged to have been the content of any “understanding” between them regarding the conduct of the administration (and in particular, the sale of assets), or what “expectations” Mr Bolton and Mr Patton are alleged to have held about those matters, let alone why it is said that any such (unspecified) “understanding” or “expectations” support “an inference that the appointment [of Mr Rathner] was not for a proper purpose”. The highest that the allegation appears to go is that there was some understanding or expectation that “putting the company into a friendly administration would provide a basis to maximise [Mr Bolton’s and Mr Patton’s] control of the company or its assets”. However, that bare proposition was denied by each of Mr Bolton and Mr Patton (and was not put to Mr Rathner), and there was no articulation (or exploration in cross-examination) of the respects in which the administration would be “friendly” or the way or manner in which a “friendly” administration would allow Mr Bolton and Mr Patton to “maximise” their “control” of Keybridge or its assets.

98. [343]

    I have found that there were issues with respect to Mr Rathner’s independence at the time of his appointment, arising from his previous dealings with Keybridge in respect of the liquidation of the PR Group Companies, and that Mr Rathner did not, following his appointment and during the period when the Director Defendants were self-represented, adopt a position of neutrality in respect of the issues arising in these proceedings which did not concern his own conduct. However, I do not consider that those matters provide a sufficient basis to conclude that Mr Rathner and Mr Bolton came, prior to his appointment, to some (unspecified) “understanding” regarding the sale of assets, with the result that Mr Bolton and Mr Patton held (unspecified) “expectations” about how an administration by Mr Rathner would proceed, such that it may be inferred that they were actuated by an improper purpose in proposing Mr Rathner for appointment and that, but for this improper purpose, Mr Rathner would not have been proposed, and therefore appointed, as administrator.

99. [344]

    For those reasons, it has not been established that the Board of Keybridge appointed Mr Rathner as voluntary administrator on 9 February 2025 for an improper purpose.

Issue 6: Should administration be terminated?

1. [345]

   By reason of the findings I have made above in respect of Issues 1 to5, the position is as follows:

   1. (1)

      on 9 February 2025, the Board validly appointed Mr Rathner as voluntary administrator; and

   2. (2)

      on 10 February 2025, the shareholders of Keybridge passed resolutions at a general meeting called pursuant to s 249F of the Act which removed the Incumbent Directors (other than Mr Catalano) and appointed the Proposed Directors.

2. [346]

   In that context, it is necessary to consider the final issue which arises for determination, namely, whether the Court should make an order pursuant to s 447A of the Act that the administration of Keybridge is to end with immediate effect.

3. [347]

   Section 447A of the Act relevantly provides as follows:

4. [348]

   While s 447A itself confers “plenary powers” on the Court “to do whatever it thinks is just in all the circumstances” (Cawthorn v Keira Constructions Pty Ltd (1994) 33 NSWLR 607 at 341), s 447A(2)(a) expressly provides that the Court has power to end the administration of a company if the Court is satisfied that the company is solvent: Intergen Energy Holdings (Australia) Pty Ltd, Re Intergen Energy Holdings (Australia) Pty Ltd [2017] FCA 445 at [28] (Gleeson J).

5. [349]

   WAM submitted that the refinancing arrangement outlined in the Letter of Comfort is in the best interests of Keybridge, its creditors and its members, and is sufficient to restore Keybridge to solvency and end the administration under Part 5.3A of the Act.

6. [350]

   In the Letter of Comfort, WAM referred to the Section 249F Meeting, and stated that it was giving the undertakings set out in the letter, subject to certain restrictions, “for the purpose of giving comfort to the Proposed Directors that [Keybridge] is not insolvent or likely to become insolvent”.

7. [351]

   The undertakings in this letter were as follows:

8. [352]

   These undertakings were expressed to be subject to the following restrictions:

9. [353]

   The Letter of Comfort was expressed to be governed by the laws of New South Wales and was executed as a deed by WAM.

10. [354]

    The Director Defendants submitted that “it should be for the administrator to determine whether the letter of comfort is of any utility or not”.

11. [355]

    For his part, Mr Rathner stated in opening written submissions that the Letter of Comfort “in fact provides no comfort of solvency”, in particular because the “terms of any advance are not provided”.

12. [356]

    Subsequently, in the course of the hearing, WAM provided a document headed “Keybridge Bridge Funding – Term Sheet”, which was dated 6 March 2025. The Term Sheet was signed by Mr Hamilton as Company Secretary of WAM and was expressed to remain open for acceptance by Keybridge until 5.00pm on the fifth business day following the determination of these proceedings.

13. [357]

    The Term Sheet states that the purpose of the facility is to “provide [Keybridge] with bridge funding pending finalisation of a capital raising”. The term of the facility is the earlier of 30 June 2025 and the close of any capital raising. The conditions precedent include:

    1. (1)

       Mr Bolton and Mr Patton ceasing to be directors of Keybridge and of any entity that is a subsidiary “including, for the avoidance of doubt, Yowie”;

    2. (2)

       the Proposed Directors comprising a majority of the directors of Keybridge; and

    3. (3)

       Keybridge, following the execution of the Term Sheet, issuing an ASX announcement proposing that it intends to undertake a pro-rata rights issue or such other capital raising reasonably acceptable to WAM.

14. [358]

    After Mr Rathner had the opportunity to review this Term Sheet, Counsel for Mr Rathner put his client’s position as follows:

15. [359]

    That is, Mr Rathner has formed the view that, subject to there being material to establish that WAM has the ability to meet creditors’ claims, the facility in the Term Sheet would, if documented, provide a basis for bringing the administration to an end.

16. [360]

    Because this query regarding WAM’s capacity to pay creditor’s claims was raised only in closing address, it was not addressed in evidence.

17. [361]

    One further issue which I raised with the parties concerned the condition precedent regarding the identity of the directors.

18. [362]

    On the findings I have made, Mr Patton, Mr Bolton and Mr Dukes ceased to be directors of Keybridge on 10 February 2025, and each of the Proposed Directors was appointed a director at that time.

19. [363]

    However, there is an unresolved issue as to the status or significance of the resolutions put to the Spill Meeting on 27 February 2025. (Significantly, there is no issue raised on the Originating Process concerning the Spill Meeting.)

20. [364]

    At the Spill Meeting, resolutions were put for the “re-election” of, relevantly, Mr Patton and Mr Catalano, which were announced as having been passed. The reason that the resolutions referred to the “re-election” of Mr Patton and Mr Catalano was that, as a result of the spill resolution having been passed, each of them was to “cease to hold office immediately before the end of the spill meeting”: s 250V(1) and s 250W(9) of the Act.

21. [365]

    The resolution which was put at the Spill Meeting in relation to Mr Patton was in the following terms:

22. [366]

    As set out above, this resolution was put forward on the premise (which I have found to be incorrect) that Mr Patton remained a director of Keybridge at the time of the commencement of the Spill Meeting, and only ceased to hold office “immediately before the end of this general meeting”.

23. [367]

    I was not provided with any submissions regarding the significance of the resolution put to, and passed at, the Spill Meeting for the “re-election” of Mr Patton on the assumption that Mr Patton had previously been removed as a director at the Section 249F Meeting. WAM raised a number of issues regarding the conduct of the Spill Meeting by Mr Bolton (including his unilateral decision as chairperson to exclude votes cast by WAM “subject to WAM having a right or an interested member having a right to get an order of a Court that would cause those proxies to be counted”). However, as I have noted, there was no relief sought in respect of the Spill Meeting and those matters were not fully explored in evidence or submissions.

24. [368]

    The Plaintiffs submitted that that the appropriate course was either for the Court to conclude that the Director Defendants have not established that Mr Patton is a director (and therefore have not established that the conditions precedent of the bridging facility are not satisfied), having regard to the issues raised with respect to the Spill Meeting; or alternatively, “if the Court would otherwise accept the letter of comfort, but has concerns about whether or not Mr Patton is being on the board, the Court should do no more than say that and give WAM an opportunity to address it”. In respect of this latter course, the Plaintiffs submitted that:

25. [369]

    The difficulty with the first proposed course is that a finding that the Director Defendants had not established that the conditions precedent are not satisfied does not finally determine any controversy as to the current membership of the board (if there is one), and therefore does not determine any controversy as to whether the condition precedent in respect of the composition of the Board has been satisfied (or waived). As matters presently stand, it is unclear even whether Mr Patton advances any contention to the effect that, following his removal as a director at the Section 249F Meeting, he was re-elected as a director at the Spill Meeting, or the basis on which such a contention is advanced.

26. [370]

    For those reasons, I consider that the better course is the alternative that has been proposed.

27. [371]

    I am satisfied that, subject to the outstanding issues in respect of the bridging facility being resolved (namely, the issue identified by Mr Rathner regarding WAM’s ability to meet creditors’ claims and any issue regarding satisfaction of the condition precedent regarding the composition of the board), the facility outlined in the Term Sheet would provide a basis to conclude that Keybridge is solvent and therefore a basis to conclude that the administration should be brought to an end.

28. [372]

    In those circumstances, I will stand over the proceedings for a short period. It is in the best interests of creditors and members that Mr Rathner and WAM have an opportunity to communicate regarding the outstanding issues concerning the Term Sheet, given that, if those issues are resolved, the bridging facility proposed in the Term Sheet would provide the means to restore the solvency of the Company.

29. [373]

    If following this process there is an extant issue about WAM’s ability to meet creditors’ claims, or about the satisfaction of the conditions precedent of the facility, any such dispute can determined by the Court. The remaining relief sought in the Originating Process, including the application for orders ending the administration, can also be determined at that time.

30. [374]

    For the reasons given above, I have determined that the purported adjournment of the Section 249F Meeting was invalid and of no effect, and that the meeting continued following the purported adjournment, with the resolutions being put to shareholders, and with shareholders voting in favour of each of the resolutions to remove the Incumbent Directors (other than the resolution to remove Mr Catalano) and to appoint the Proposed Directors. I will make declarations to this effect.

31. [375]

    I have rejected WAM’s contentions that the appointment of Mr Rathner was for an improper purpose. However, I have concluded that, subject to the specific issues identified above, the bridging facility which is outlined in the Term Sheet would provide a basis to conclude that Keybridge is solvent and therefore a basis to conclude that the administration should be brought to an end. I will stand over the proceedings for a short period to enable discussions to occur in relation to those outstanding issues. When the matter is next in Court, I will make orders to deal with the balance of the relief sought or otherwise will make directions in respect of any remaining dispute, including in relation to costs.

32. [376]

    For those reasons, I make the following orders:

    1. (1)

       Declare that:

    2. (2)

       Stand over the proceedings for directions to 1 April 2025 at 9.15am before Nixon J.