REASONS FOR JUDGMENT
1 This is an application under ss 439A(6) and 447A of the Corporations Act 2001 (Cth) (the Act) for an extension of time for the convening period for up to 60 days from 30 August 2013 to 29 October 2013. The application is supported by an affidavit of Mr Philip Patrick Carter, who is one of the joint and several voluntary administrators appointed to the companies. The companies in question are CMA Corporation Limited (CMA) and eight other companies which are described in the schedule to the originating process.
2 The principal company referred to in the schedule is CMA Recycling Pty Limited (CMA Recycling), which appears to be the principal operating subsidiary of CMA in Australia. CMA is the parent company of an integrated Australian based recycling group with operations in Australia and internationally in New Zealand, Singapore, Malaysia and until recently, Papua New Guinea and the United States of America. The organisational structure of the group, which is described as the CMA Group, is depicted in a flowchart to which I was taken this morning.
3 Each of the CMA Group companies including the companies incorporated overseas are wholly owned subsidiaries of CMA. CMA is listed on the ASX but its shares were suspended on 1 August 2013, shortly before the appointment of administrators.
4 The major activities of the CMA Group of companies comprised the trading, processing and recycling of ferrous and non-ferrous metal products. The primary operations of the CMA Group are within Australia, but the Group also undertakes activities from sites in New Zealand, Singapore and Malaysia. The Papua New Guinea subsidiary is now in liquidation and the United States business was sold in about July 2013, shortly before the appointment of the administrators.
5 The CMA Group operates from 12 sites around Australia and six sites internationally. The Group's activities are undertaken from some properties owned by CMA Group companies but also from a number of sites which are leased by the relevant CMA Group companies.
6 The main trading entity is, as I have said, CMA Recycling, which operates from leased premises located at Ringwood, Victoria. Those premises are the regional head office of the Group's Australian operations and all operational reporting from the CMA Group is centralised at Ringwood. The CMA Group employs approximately 120 people in Australia. It also employs approximately 114 people through its foreign subsidiaries.
7 CMA Recycling is the key asset holding entity within the CMA Group. It holds the majority of the leases over the companies operating sites although it appears from the evidence to which I was taken this morning, that a number of the leases are held by another subsidiary, CMA Recycling Australia Pty Limited.
8 The CMA Group's operations are funded by financing arrangements between the CMA Group companies and a number of major financiers, including GE Commercial Pty Ltd and GE Commercial Australia Pty Ltd (together GE), Stemcor Trade Finance Australia and Stemcor Australia Pty Limited (Stemcor), Bank of New Zealand (BNZ), Scholz AG, which is a German-based company and a number of its subsidiaries (described together as Scholz) and, finally, the Commonwealth Bank of Australia (CBA).
9 The financing facilities with those entities are, for the most part, secured but Scholz's financing is not secured and Scholz is therefore an unsecured creditor. The CMA Group companies are also financed through inter-company loans. The details of the financing arrangements are set out in paragraphs 27 to 34 of Mr Carter's affidavit. In addition to those financing arrangements, Stemcor and Scholz have provided letters of comfort, which are referred to in paragraph 35 of Mr Carter's affidavit.
10 The administrators were appointed on 2 August 2013. The first meeting of creditors of the CMA Group companies were held concurrently in Sydney and in various locations in Melbourne, Brisbane, Launceston, Darwin, Adelaide and Port Hedland.
11 The creditors of CMA resolved to appoint a committee of creditors which included Scholz, Scholz Recycling AG, Stemcor Australia Pty Limited and Stemcor Trade Finance Limited, GE Corporation Australia Pty Limited as well as an employee of CMA. CMA Recycling also resolved to appoint a committee of creditors comprising the same persons who were appointed to the committee of creditors of CMA, together with three other persons or entities, namely Bill Russo Nominees Pty Ltd, David Georgiou and Judith Georgiou.
12 The effect of s 439A(5) of the Act is that the administrators are obliged to convene the second meeting of creditors by 30 August 2013. The effect of s 439A(2) is that the second meeting of creditors must therefore be held on or before 6 September 2013.
13 Since the appointment of administrators on 2 August 2013, the administrators have undertaken a large number of tasks which are listed in paragraph 47 of Mr Carter's affidavit. The steps include engaging in a dialogue with the 120 employees employed by the CMA Group companies in Australia and the 22 landlords of properties leased by the relevant companies.
14 Those parties are spread throughout Australia in the various locations at which the CMA Group companies conducted operations. The administrators have continued to pay the wages of the employees and they have continued to pay the rent to the landlords. They have also commenced a marketing and sales campaign for the sale of the Group companies business. This process has resulted in advanced negotiations being undertaken in relation to the potential sale of some of the companies' businesses.
15 There are a number of financial issues which the administrators are required to further investigate. Those issues are listed in paragraph 54 of the affidavit and I need not describe them in detail.
16 The administrators have commenced a sale process. They are engaged in advance negotiations in relation to the potential sale of the businesses at Port Hedland, Western Australia; Berrimah, Northern Territory; Bayswater, Eagle Farm and the "Eco Cycle" mercury recycling business conducted by CMA Recycling. The solicitors engaged by the administrators have prepared draft sales contracts but it is not expected that the contracts will be exchanged or completed during the convening period.
17 A number of the CMA group companies are engaged in major pieces of litigation which are described in paragraphs 66 and 67 of the affidavit. I do not need to describe those matters in any detail. Importantly the reasons why Mr Carter believes that an extension of the convening period is necessary are set out in paragraph 69 of his affidavit. Mr Carter believes that an extension of the convening period for 60 days, to 29 October, is necessary. The reasons which he gives may be summarised as follows:
(a) further time to investigate the financial position of the companies and understand the complex funding arrangements in place;
(b) further time to investigate the inter-company loans and the asset and security position of each company;
(c) further time to assess the optimal strategies for the benefit of creditors as a whole;
(d) further time to maximise the sale of the CMA group's businesses as a going concern;
(e) further time to work with directors and third parties to determine whether a deed of company arrangement can be put forward; and
(f) further time to assess whether the companies were trading whilst insolvent.
18 At the first meeting of creditors on 14 August 2013 the administrators advised the creditors of the CMA group companies that they intended to make an application to the Court to extend the convening period for the second meeting. The administrators asked whether there were any objections but no objections were received in relation to that proposal.
19 The meeting of the committees of creditors of each of CMA and CMA Recycling was held on 22 August 2013. Mr Carter attended the meeting and asked whether the creditors had any objection to the application. Each member of the committee of creditors of those companies confirmed that they did not have an objection to the application. I was taken to the minutes of the meeting of the committees of creditors of both of those companies which bears out that fact.
20 The administrators and their staff have analysed the cash flow requirements of the CMA group companies. They believe that it is in the interests of the creditors and members of the companies for the extension to be granted. Mr Carter does not believe that any of the creditors or members would be unfairly prejudiced by granting the extension which is sought. The administrators have paid and will continue to pay employees and landlords of the various sites occupied by the relevant members of the CMA group of companies.
21 The principles which are to be applied in exercising the power to extend the convening period are well established. The seminal statement of principle is found in Re Diamond Press Australia Pty Limited [2001] NSWSC 313 at [10]. Barrett J said in that case that the function of the Court is to strike an appropriate balance between the expectation that the administration would be a relatively speedy and summary matter, and that the requirement of undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return to creditors.
22 In Re Riviera Group Pty Limited (2009) 72 ACSR 352, Austin J set out 10 reasons which would ordinarily justify the grant of an extension. Those reasons are listed in some detail at [13] of the decision.
23 His Honour also said at [14] that the authorities which were exhaustively listed by him show that where a substantial issue in any of the 10 categories is established, the Court tends to grant an extension, and the extension tends to be for the time sought by the administrator provided that the evidentiary case has been properly prepared, and there is no evidence of material prejudice to those affected by the moratorium. His Honour also observed that the Court should be satisfied that the administrator's estimate of time has a reasonable basis.
24 The authorities to which I have referred have been cited and followed in a large number of other decisions. It is unnecessary to refer to them. It seems to me that the evidence of Mr Carter establishes that a substantial issue arises in relation to almost all of the categories referred to at [13] of Austin J's judgment in Re Riviera Group.
25 I am also satisfied that there is a sufficient evidentiary basis in Mr Carter's affidavit for the extension of time to be granted and that there is no evidence of material prejudice to creditors arising from the moratorium. It seems to me that Mr Carter's estimate of 60 days has a reasonable basis. It is well within the period of time which has been allowed in applications of this type.
26 I have, of course, taken into account the fact that the extension of time has been notified to creditors at the first creditors' meeting and that no objections have been received. Indeed, there is evidence of support from creditors including Scholz which is a very substantial unsecured creditor.
27 I should also point out that Mr Carter has observed at paragraph 79 of his affidavit that he believes that, if the convening period is not extended, the administrators will not have the necessary comprehensive information about the true affairs of the CMA group companies to be able to give a meaningful account to the creditors. He is concerned that without an extension the interests of the CMA group companies and their creditors may not be best served.
28 It follows in my view that I ought to grant the extension which is sought. I will therefore make orders in accordance with the draft short minutes of order handed to me by Mr Mackay of counsel which I will sign and date and place with the court papers.
I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.