For a couple of years it seemed like the whole ordeal would end up being a sunk cost for unsecured creditors, and it could still be, but the disgruntled former partners have sought to capitalise on a legal precedent set last year that allows for the public examination of former directors of failed companies even if they've been liquidated. In February last year the High Court allowed an appeal of a NSW Supreme Court judgment relating to iron ore and steel producer Arrium, which was placed into administration in 2016 and went into liquidation just over three years later. Arrium shareholders, who claimed information published in a 2015 capital raise did not "adequately or fairly" reflect the true state of its business, decided to apply to the Australian Securities and Investments Commission (ASIC) so they could be given the status of 'eligible applicant' in order to apply for a court order and examine former officers. The regulator gave those shareholders the green light, and a majority of High Court judges allowed their appeal. "The decision has far reaching implications for directors and officers of failed companies who may, for example, be examined about their examinable affairs by shareholders even if the liquidator has declined to examine the company directors or officers," HWL Ebsworth's Jonathan Kramersh, Josh Hanegbi and Thaivini Sathiyaseelan wrote in the aftermath. Those implications have now spread to Smiles Inclusive in an initiative led by former JVPs, Drs John Camacho and Arthur Walsh, with the Federal Court of Victoria issuing summonses for former directors and officers Anthony McCormack, Emma Corcoran, Peter Evans, Michelle Aquilina, David Usasz and James Fuller. The first hearing is due to take place on 29 March with examinations expected to start on 5 June. "This groundbreaking legal action follows the landmark Arrium decision in the High Court last year. Smiles shareholders and creditors, courtesy of the new ASIC regime, will finally have the opportunity to learn exactly what went on at Smiles Inclusive behind closed doors that led to the loss of $100 million," Walsh said. "We are eternally grateful to Senator Deborah O'Neill for her support. This ASIC approved public examination of Smiles directors and officers in the Federal Court is only possible due to Senator O'Neill's intervention," he said, adding an intention to serve further summons covering bankers, stockbrokers, professional advisors and more. "We will leave no stone unturned." Camacho said there would be many actors involved with the Smiles IPO who have "been put on notice", and he will also be taking aim at the market operator. "We have put the ASX on notice. The ASX was well aware of serious issues from very early on," he alleged. He said the examination would be wide ranging, addressing matters including the Smiles IPO, failures in continuous disclosure, insolvent trading and more. Get our daily business news
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ASIC approves public examination of former directors of collapsed dental roll-up Smiles Inclusive

Tom Antonio has some unfinished business. He served as a councillor and acting mayor with Whyalla City Council until about four years ago. He stewarded the city through the Arrium steelworks administration and revival and became known for his motto: "Closure is not an option." But just as there is no end to the steelworks, Mr Antonio is back in local politics, yearning for the mayor's job at the council elections this year. He is up against Deputy Mayor Phill Stone who has also nominated for mayor after the retirement of former mayor Clare McLaughlin. Mr Antonio, a successful owner of electrical stores around Spencer Gulf, is proud of a letter of commendation for him that was written by former Arrium administrator Mark Mentha. The letter says: "You stepped into the breach at a tumultuous time ... you understood the relationship of Whyalla with Arrium and stood by a simple creed - 'closure is not an option' - and you never strayed from this message privately or publicly. "You ... kept the issue at the forefront of public policy and media ... we will be forever grateful." Mr Antonio, while on council, moved to complete a new, iconic jetty based on a design to be chosen by residents. As a result, the foreshore's unique, circular structure was built. He moved for brass plaques to be put on every Norfolk Pine in Essington Lewis Avenue to honour the fallen of World War II. And he revitalised the Ada Ryan Gardens and took action to plant Irrorora Flame Trees along Nicholson Avenue. "I want to run for office because I believe in the city," he said. "It should be a much greater city and a more live-able city where we should have a modern leisure centre
"My vision is for a water park to be created at the foreshore, similar to the one at Cowell. "I know what it takes to build a state-of-the-art foreshore without spending hundreds of thousands of dollars on consultants. "It the Cowell two-and-a-half years to provide it. I want to replicate that. We need the water park at the foreshore with more shelter and barbecues." Mr Antonio was active in state politics, having stood for SA-Best for the seat of Giles at the state election earlier this year, but is now keen to lead the city. Once again, he has a simple statement regarding his candidacy: "I want the citizens of Whyalla to live in a live-able city, better for less." Share

'Unfinished business': Tom runs for mayoral role at council poll

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Private equity-backed ScotPac is understood to be closing in on a deal to refinance steel manufacturer and distributor InfraBuild, in what would be a landmark funding package for Liberty Steel’s Australian business. InfraBuild owns the steelmaking and distribution business formerly owner by Arrium and predecessor OneSteel. Louie Douvis
Only months after ratings agencies downgraded InfraBuild, the company’s said to be in rude financial health and stitching up its new funding with ScotPac. The package would see InfraBuild’s $250 million syndicated asset-based lending facility repaid in full, just in time for its October 2022 maturity, and overcome some of the the refinancing risk that had been playing on ratings agencies’ and lenders’ minds. It is not known whether ScotPac’s funding will go further. InfraBuild also has $US325 million in bonds due in October 2024, and it has had numerous rounds of talks with private equity firms and credit funds about refinancing its debt stack in full. Sources said ScotPac’s appearance came as Liberty had hit a purple patch, with earnings better than expected. The company benefitted from strong construction demand in the year to June 30, and prices across its steel products manufacturing business. Advertisement
Fitch analysts had expected InfraBuild to record $200 million EBITDA in the 2022 financial year, according to their downgrade note published in late March, although the company itself said it was likely to hit $300 million last year. The asset-based lending syndicate to be repaid was put together by JPMorgan in 2019. The Wall Street giant retained a large piece of the $250 million facility, while Street Talk caught Nomura buying in at a discount last year and is poised for a handsome return. The asset-backed loan ranked above InfraBuild’s high-yield bonds in its debt stack. InfraBuild is owned by Sanjeev Gupta’s GFG Alliance, houses the steel manufacturing, recycling and distribution operations previously owned by OneSteel/Arrium. Anthony Macdonald co-edits Street Talk, specialising in private equity, investment banking, M&A and equity capital markets. He has 10 years' experience as a business journalist and worked at PwC, auditing and advising financial services companies. Connect with Anthony on Twitter . Email Anthony at a.macdonald@afr.com
Sarah Thompson has co-edited Street Talk since 2009, specialising in private equity, investment banking, M&A and equity capital markets stories. Prior to that, she spent 10 years in London as a markets and M&A reporter at Bloomberg and Dow Jones. Email Sarah at sarah.thompson@afr.com
Kanika Sood is a journalist based in Sydney who writes for the Street Talk column. Email Kanika at kanika.sood@afr.com.au
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ScotPac ready to roll into InfraBuild debt facility

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Steel industry doyen Ray Horsburgh, who was the acting chairman of Sanjeev Gupta’s Infrabuild business in Australia, has died after a fall in Romania. Mr Horsburgh was a highly respected chief executive in the steel industry who later in his career became a company director, and was a former chairman of ASX-listed transport and logistics group Toll Holdings, acquired by Japan Post in 2015. He was also well-known in Australian Football League circles, having been the president of the Essendon Football Club from late 2005 to 2009. Ray Horsburgh was a highly respected steel industry executive who had a wide variety of company directorships. He was acting chairman of Sanjeev Gupta’s Infrabuild business. Mr Horsburgh had been travelling on business in Romania when he fell. He died on Saturday night. Mr Gupta, executive chairman of GFG Alliance, said Mr Horsburgh would be remembered as a trusted adviser and much-loved member of the group’s family. Advertisement
“Ray was a passionate advocate of the Australian steel industry and Australian manufacturing, and a true ambassador for our business in every sense of the word,” Mr Gupta said. “He was a giant of our industry and we are incredibly grateful for his service to the business and the positive contribution he made to the careers of many of our staff.”
He extended his “deepest condolences to Ray’s wife, children and his family and friends”. Mr Horsburgh was appointed to Mr Gupta’s Liberty Steel group global board in early 2020. InfraBuild chief executive Vik Bansal said Mr Horsburgh would be sorely missed. “Personally, I will miss Ray and his guidance, which he was always willing to provide,” “Mr Bansal said. Advertisement
Mr Horsburgh was chief executive for 15 years until 2007 of Smorgon Steel, a large steel industry player that merged with an entity called OneSteel, which was itself spun off from BHP in 2000. OneSteel changed its broader corporate name to Arrium in 2012. Arrium collapsed in 2016 and after 16 months in administration was acquired by Mr Gupta for about $700 million in mid-2017. The former Arrium business included the Whyalla steelworks in South Australia, and steel mills in Sydney and Melbourne and a national distribution business which operate under the Infrabuild banner. Infrabuild is considered the best-performing business in the global GFG stable. Mr Gupta is still trying to finalise a complex refinancing at the broader GFG of about $6 billion of funds that had previously been provided by Greensill Capital, which collapsed in early 2021. Earlier in his career, Mr Horsburgh worked for industrial conglomerate Australian Consolidated Industries, where he was the chief executive of glassmaker ACI Glass. He had widespread experience across many industries as a company director, including stints as a non-executive director of building materials group CSR, packaging company Pact Group, and Traffic Technologies. Advertisement
Mr Horsburgh received an Order of Australia in 2006 for his contribution to the steel industry and services to disadvantaged youth. He was also a non-executive director of the Ponting Foundation, the organisation set up by former Australian Test cricket captain Ricky Ponting to help in the fight against childhood cancer. Essendon Football Club president Paul Brasher said the Essendon Bombers were in mourning, paying tribute to his leadership. “He served as president during his tenure with strong leadership and was a beloved confidant to many. Ray will be sorely missed,” Mr Brasher said. The club extended its “sincere condolences to Pam and the extended Horsburgh family on the passing of Ray”, Mr Brasher said. Simon Evans writes on business specialising in retail, manufacturing, beverages, mining and M&A. He is based in Adelaide. Connect with Simon on Twitter . Email Simon at simon.evans@afr.com
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Steel industry doyen and former Essendon president Ray Horsburgh dies

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Shareholders in collapsed steel maker Arrium will be able to quiz a former director in a public examination after a High Court decision that lawyers say is a significant boost for securities class actions. In a 3-2 ruling on Wednesday, the High Court overturned a decision by the NSW Court of Appeal which said a mandatory examination of former Arrium director Colin Galbraith would be an abuse of process because it had been sought “predominantly for the purpose of pursuing private litigation against third parties”. No abuse of process: Justice Stephen Gageler ruled in favour of a class action over the collapse of Arrium. Andrew Meares
Justice Stephen Gageler, Justice James Edelman and Justice Simon Steward said examining an officer or director was allowed under section 596A of the Corporations Act. “If the appellants’ purpose for the examination were truly foreign to the purpose of section 596A then it would be an abuse of process,” Justice Gageler said. “But the purpose of the appellants was not so foreign.”
He added that “if the purpose of the litigant is consistent with the scope of the legislation then it will not usually matter whether the litigant has some ulterior motive”. Advertisement
Sanjeev Gupta took control of Arrium in 2017. Arrium went into administration in April 2016 owing $2.8 billion to 60 banks and 30 noteholders. KordaMentha partners ran the business as administrators for 16 months before British billionaire Sanjeev Gupta bought it for about $700 million in August 2017. KordaMentha has been running claims aimed at clawing back proceeds, and resisting a move by law firm Banton Group to examine Mr Galbraith to gather evidence for a class action. Mr Galbraith is also a former director of the Commonwealth Bank. Last year, KordaMentha settled a claim against 10 former Arrium directors for trading while insolvent by drawing down on lending facilities. Another two claims by the lender banks are still on foot. The shareholder claim principally relates to a capital raising by Arrium in 2014 and an information memorandum distributed for that purpose. Mr Galbraith was a director of Arrium from 2000 to 2015. Advertisement
The majority justices said the crucial question in section 596A was “whether the litigant’s predominant purpose is inconsistent with the scope and purpose of the statutory process”. Legitimate purpose
“The purpose and concern of section 596A is not confined to the interests of the corporation, its creditors, or its contributories, or to the bringing of criminal or regulatory proceedings in connection with the affairs of the corporation,” they said in a court statement . “Examining an officer of a corporation for the purpose of pursuing a claim against the corporation ... can be a legitimate use of the power conferred by section 596A, irrespective of whether it is in the interests of the corporation or whether the claim relates to all or only some of the corporation’s creditors or contributories.”
Beverley Newbold, the head of class actions at law firm MinterEllison said it would benefit those pursuing claims against directors or officers of insolvent companies. “The information that could be extracted by way of response has not until now typically been available to shareholders or class action promoters when they are deciding whether there is a basis to commence a claim.”
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Caroline Goulden, a partner at Arnold Bloch Leibler, which acted for KordaMedntha in the High Court, said the case showed the power to examine under section 569A was “not the sole preserve of external administrators seeking to pursue claims to enlarge the insolvent estate for creditors, nor of the regulator seeking to expose corporate misbehaviour.”
‘Faster and cheaper’
Ms Goulden said that for class action promoters section 569A “will likely be faster, cheaper and more productive than relying on more challenging pre-action discovery procedures to obtain information sufficient to satisfy litigation funders”. ”This, in turn removes the time advantage that might otherwise be enjoyed by an external administrator to prosecute proceedings to judgment and access usually finite pools of recovery, such as policies of insurance,” she said. Andrew Watson, the head of class actions at Maurice Blackburn, said it was good news. “We welcome the decision as recognising that it is appropriate for shareholders to make use of the Corporations Act processes to hold directors and companies to account – a recognition that has been all too sadly lacking in the federal government’s recent efforts in winding back corporate accountability,” Mr Watson said. Advertisement
In dissent, Chief Justice Susan Kiefel and Justice Patrick Keane said the purpose of the examination was to assist the claim against certain directors and auditors of Arrium. They said the Court of Appeal, which overturned the trial judge, had applied “the settled understanding” around section 596A. “It is a claim having no connection to the winding up of the company. The appellants do not pretend that it will be of benefit to those engaged in that external administration, to the company or to its creditors as a whole.”
Michael Pelly is the legal editor, based in our Sydney newsroom. He has been a senior adviser to federal and state attorneys-general and written two books, one a biography of former High Court Chief Justice Murray Gleeson. Email Michael at michael.pelly@afr.com
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High Court boost for shareholder class actions

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