The Arrium proceedings

On 17 August 2021, following a 38 day hearing involving 30 parties, nine law firms, over 35 Counsel, 40 witnesses, hundreds of thousands of documents and thousands of pages of written submissions, the New South Wales Supreme Court (Ball J) handed down its judgment dismissing two related proceedings brought by different lenders (or assignees from lenders) against combinations of the former CFO, former Treasurer, former Acting Treasurer and former Treasury and Finance department employees of the Arrium group, which went into administration in April 2016 (Lender Proceedings).[1]

The Lender Proceedings, and an insolvent trading claim brought by Arrium entities and its liquidators against 10 Arrium directors which conditionally settled on day 34 of the trial, concerned the foreign currency equivalents of approximately AUD 370 million lent to two wholly-owned Arrium subsidiaries under a series of syndicated and bi-lateral facility agreements and also, in one of the proceedings, the equivalent of more than AUD 1.5 billion in debt rollovers by those same entities, between late December 2015 and mid-February 2016 ahead of what became the April 2016 administrations. 

In the first of the Lender Proceedings (Anchorage Proceedings) the plaintiffs’ primary damages claim exceeded AUD 180 million, in the second (BoC Proceedings) the plaintiffs’ primary loss claim exceeded AUD 140 million, while the plaintiffs’ primary loss claim in the insolvent trading proceedings exceeded AUD 325 million.

Baker McKenzie acted for the former CFO in both Lender Proceedings, as well as eight of 10 former Arrium directors who were defendants in the insolvent trading proceedings.

The plaintiffs’ claims in the Anchorage Proceedings included that:

  • drawdown and rollover notices which were signed by the former Treasurer and/or Treasury or Finance employee(s) (but not the former CFO) negligently contained, or made, misleading personal representations to the lenders that there had been no change in Arrium’s financial position, since 31 December 2012 (under one syndicated facility agreement) or, otherwise, 30 June 2015, which had had a material adverse effect on the ability of the borrower to perform their obligations (MAE Representation) and that no Event of Default or Potential Event of Default had occurred and continued unremedied (No Event of Default Representation).
  • the CFO had also breached a duty of care allegedly owed to lenders by directing that all available monies under the various facilities be drawn down or by failing to ensure the MAE Representation and the No Event of Default Representation were accurate.
  • the CFO and Treasurer had both “procured” or were “involved in” misrepresentations made by the Arrium borrowers negligently and in breach of contract because they directed the monies to be drawn down (in the case of the CFO) or procured or failed to prevent that occurring.
  • the Treasurer had also separately made negligent, misleading representations, in the course of a discussion with one lender, concerning the accuracy of representations made in a particular drawdown notice and the progress of the sale of Arrium’s Mining Consumables business.

The (somewhat simpler) plaintiffs’ claims in the BoC Proceedings included that:

  • representations contained in drawdown notices were misleading because a material adverse effect had occurred (on much narrower grounds than alleged in the Anchorage Proceedings) and, also, because the Arrium entities were insolvent at the time those representations were made.
  • the CFO and Treasurer had engaged in that misleading conduct because, in the CFO’s case, he had directed that drawdowns be made and, in the Treasurer’s case, because she had authority, and responsibility, under Arrium’s Treasury Policy, to make decisions on drawdowns and was also responsible for causing the execution and issue of the notices which gave effect to her decisions.

The BoC Plaintiffs’ claim that the Arrium entities were insolvent overlapped with the plaintiffs’ similar contention in the insolvent trading proceedings, with the BoC plaintiffs relying entirely on the evidence of an Arrium liquidator rather than adducing their own independent expert evidence.

The claims for damages in each of the three proceedings also included novel bases for the assessment of damages, with:

  • the plaintiffs in the Lenders’ Proceedings claiming, amongst other things, that their loss ought be determined by comparing the amounts rolled-over (in the case of the Anchorage Proceedings) or advanced (in the case of the BoC Proceedings) less recoveries (on the one hand) to what was claimed would have occurred under a hypothetical counter-factual in which the Arrium group would have entered administration before the drawdowns and rollovers occurred.
  • the plaintiffs in the insolvent trading proceedings claiming that loss ought be assessed by assuming that ~AUD 120 million of ~ AUD 300 million in recoveries referable to the relevant drawdowns (about 80 cents in the dollar) were first applied by lenders against ~ AUD 2 billion in pre-existing debts.

Issues to be considered in Arrium Series

In a series of Client Alerts over the coming month, senior members of the Baker McKenzie team involved in the successful defence of the Arrium proceedings will consider the following issues raised by these proceedings:

  • Solvency – determining solvency where current debts are being paid but large debts are due in the relatively distant future
  • Do you owe your lender a duty of care?
  • When are company employees personally responsible for representations?
  • Material adverse change and effect provisions – interpretation and assessment
  • Lender reliance and loss causation
  • Novel assessments of loss for negligence, misleading conduct and insolvent trading
  • Secondary debt trading – assignments of debts and rights of recovery in Australia

[1]  Anchorage Capital Master Offshore Ltd v Sparkes (No 3); Bank of Communications Co Ltd v Sparkes (No 2) [2021] NSWSC 1025


Mark Chapple is a partner in Baker McKenzie's Sydney office. A leading dispute resolution and insolvency lawyer in Australia for four decades, and Partner of the Year at the 2016 Lawyers Weekly Australian Awards, Mark is regularly retained to successfully resolve a wide range of major complex commercial disputes, while also taking lead roles in many of Australia's most significant corporate insolvencies over that period. Mark is an accredited mediator, an experienced advocate and a respected author and presenter on a wide range of dispute resolution, commercial and business management topics and previously devised and presented Masters programs at the University of Technology, Sydney in Insolvency and Corporate Restructuring and Advanced Insolvency and Corporate Restructuring. Mark has represented many major Australian and international clients in large and complex commercial disputes, including in relation to directors duties, liquidator, receiver, investor and shareholder claims, contested takeovers, privatisations, buy-outs, shareholder oppression, insider trading, auditors' liability and other Corporations Act issues, contract, negligence and misleading and deceptive conduct claims, major infrastructure projects and commercial property, trusts and incorporated and unincorporated joint ventures, breaches of fiduciary duty and confidence, fraud and local and off-shore asset tracing and recovery, high-yield bonds, futures and option contracts and insurance and reinsurance. Mark also has extensive experience in accounting and auditing standards and issues, securities and other class actions and ASIC, APRA, Royal Commission, ICAC, Parliamentary and other Government enquiries, investigations and examinations.


Jayme-Lyn is a senior associate within the Dispute Resolution Group at the Sydney office of Baker McKenzie. Jayme-Lyn's practice focuses on major commercial litigation, where Jayme-Lyn has considerable experience in complex class action and other litigation involving claims for misleading and deceptive conduct, negligence, Corporations Act breaches and concurrent wrong-doing. Jayme-Lyn also has extensive experience in the conduct of, and the managing of teams involved in, key aspects of major litigation, including technical investigations, discovery and document reviews, complex evidence preparation and Court hearings.


Kathleen is a Senior Associate in Dispute Resolution and is based in the firm's Sydney office. Kathleen practises in general commercial litigation across a range of sectors, including healthcare, product liability, employment, property and telecommunications. Kathleen's experience includes acting in claims arising in tort, contract, equity and statute. Kathleen has experience acting in proceedings in various jurisdictions within Australia, particularly in the Federal Court and the NSW Supreme Court. Kathleen has experience and a particular interest in acting in class actions.


Charlotte Hendriks is an Associate in the Baker McKenzie Dispute Resolution team based in Sydney. Charlotte specialises in commercial litigation across a broad range of sectors, including construction, commercial leasing, contractual claims, insolvency, judicial review and company disputes. Charlotte also practises in and has a particular interest in arbitration. Charlotte’s experience includes acting for large domestic and international clients in commercial disputes across various jurisdictions within Australia, particularly in the Federal Court and the NSW Supreme Court. Charlotte also has experience acting for clients in domestic and international arbitrations conducted under the ICC, LCIA, UNCITRAL and ICSID arbitration rules.