Lord, in the matter of WPG Resources Ltd (Administrators Appointed) [2018] FCA 1345

Lord, in the matter of WPG Resources Ltd (Administrators Appointed) [2018] FCA 1345 - FCA 2018 case summary — Zoe

[11]

Basis for the extension 10 Based on their investigations and the conduct of the administrations of the Companies, the Administrators formed the view that it was in the interest of the creditors and the Companies to make the application for an extension of the convening period. Their reasons for forming that view are set out below. 11 First, while the Administrators had commenced their investigations as required by s 438A of the Act, they were not yet finalised. Mr Lord's evidence was that the investigations were complex and included investigations in relation to potential voidable transactions, adjudication of a substantial claim made by a creditor of Challenger Gold, reconciliation of revenue from gold sales between Challenger Gold and Tarcoola Gold and reconciliation of gold assets between those companies. As a result, the Administrators do not believe they are presently in a position to provide a statement to creditors as required by r 75-225(3)(b) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (Insolvency Practice Rules). 12 Secondly, since their appointment the Administrators have been investigating potential options to recapitalise and restructure the Companies through a deed of company arrangement (DOCA). Mr Lord's evidence was that a number of potential DOCA proponents had been identified or may be identified but, at the time of making the application, negotiations were at a preliminary stage and there were a number of complex matters which would need to be resolved before a party was likely to commit to a DOCA proposal in respect of some or all of the Companies. Mr Lord anticipated that DOCA proposals may be put forward by any one or more of: (1) a potential purchaser of a company's assets. In that regard the Receivers have been instructed to run an expression of interest process as part of a strategy to realise the Companies' assets or restructure or recapitalise them, including potentially through a DOCA. The Receivers' preliminary view is that the value of the assets, which are subject to Byrnecut's security, are likely to be maximised if the Companies are realised via a share sale, entailing a DOCA, rather than via a more complex asset sale; (2) the former chairman of WPG Resources who has expressed interest to the Administrators in propounding a DOCA; and (3) the former chief financial officer of WPG Resources who has also expressed interest in propounding a DOCA in respect of some of the Companies. 13 The Receivers have identified a range of complexities associated with the Companies' operations which means that a significant period of time is likely to be required to prepare the Companies and their assets for the expression of interest process which they intend to run. Because of the time it will take for the Companies' assets to be sold or to negotiate a DOCA, the Receivers informed the Administrators that in their view an extension of the convening period of up to six months was required.

[12]

Effect of the extension on creditors 14 Concurrent meetings of the committees of inspection of WPG Resources, Tarcoola Gold and Challenger Gold were held on 22 August 2018 prior to receipt of the Receivers' Letter. At those meetings the Administrators outlined their intention to apply for an extension of the Companies' convening periods and indicated that the Receivers had requested that a six month extension be sought. The Administrators noted that further information had been sought from the Receivers' solicitors as to the reasons for this request. A majority of the members of each of the committees of inspection indicated their support for a six month extension of the convening period with the balance of the members of each committee of inspection indicating their support for a three month extension of the convening period. 15 Mr Lord considered the detriment which might be occasioned to those affected by the statutory moratoria as a result of an extension of the convening periods. He gave evidence that: (1) he did not believe that there would be any material prejudice to any creditor; (2) the Administrators did not expect that any employees who were made redundant during the period of any extension of time of the convening period would suffer any prejudice because it is anticipated that their adjudicated priority entitlements would be paid in full out of circulating assets of the relevant Companies; (3) although the Administrators are yet to call for formal proofs of debt, they do not believe that there would be any specific prejudice to ordinary unsecured creditors as a result of the extension of time. To the contrary, the Administrators consider that it is in the interest of those creditors for an extension of time to be granted so that they are able to explore the possibility of a DOCA proposal which may provide a better return for ordinary unsecured creditors than would be the case in a liquidation of the Companies; and (4) he did not believe that there would be any material prejudice suffered by landlords given that the Receivers are continuing to pay rent. 16 In summary, Mr Lord was of the opinion that the application to extend time was in the interests of the Companies' creditors and was necessary to: (1) provide adequate time for the Administrators to undertake and conclude negotiations with potential DOCA proponents and in that way maximise the value of the Companies' assets available for the benefit of creditors; (2) avoid the value destruction that was expected to be inherent in the immediate liquidation of the Companies which would be the outcome if the application to extend the convening period was refused; and (3) conclude the Administrators' statutory investigations and enable them to make the recommendation to creditors required by r 72-225(3) of the Insolvency Practice Rules.

[13]

statutory framework and legal PRINCIPLES 17 Section 439A(6) of the Act gives the Court the power to extend the convening period on an application made during or after the period relevantly referred to in s 439A(5)(b) of the Act. In Crawford, in the matter of North Queensland Heavy Haulage Services Pty Ltd (Administrators Appointed) [2017] FCA 635 at [18]-[20] I summarised the approach to be taken in considering an application to extend time under s 439A(6) as follows: 18 In exercising the jurisdiction to extend time under s 439A(6) the Court must have regard to the objects of Pt 5.3A of the Act as set out in s 435A. Those objects are to maximise the chances of the company or as much as possible of its business continuing in existence or, if that is not possible, to result in a better return for the companies' creditors and members than would result from an immediate winding-up of the company. 19 The approach taken by the Court in applications of this type is well settled. The power to extend the time for convening the second meeting is one that should not be exercised as of course. Rather, the Court must strike an appropriate balance between the expectation that administration will be a relatively speedy matter and the requirement that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders (see In the matter of Harrisons Pharmacy Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458 (per Farrell J) at [11] and the authorities referred to therein). 20 Other relevant factors, particularly in the circumstances of this case, are: (1) whether the prospects of a better outcome for creditors through a longer period of administration may outweigh the general expectation of a prompt resolution of the administration: see Fincorp Group Holdings Pty Ltd (2007) 62 ACSR 192; [2007] NSWSC 363 at [18]; (2) the fact that while the voluntary administration continues there is an embargo or moratorium on the enforcement of remedies by secured creditors, lessors and others, a factor which may militate against the too ready grant of an extension: see Fincorp at [4]; and (3) whether an extension is necessary to enable the administrators to prepare and provide the report and statements, and to arrive at the opinion required by s 439A(4), in order to inform creditors adequately so that they, in turn, will be in a position to decide whether to terminate the administration, execute a DOCA or place the company in liquidation: see Re Pan Pharmaceuticals Ltd (admins apptd) (ACN 091 032 914) (McGrath and Honey as joint liquidators) (2003) 46 ACSR 77; [2003] FCA 598 at [41]). See also Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 at [18] (per Lindgren J) (Austcorp). In Austcorp Lindgren J also noted at [19] that "[l]engthy extensions had been granted where the administrator's investigations are complex", referring to cases where the court had granted extensions of five, almost six, and ten months.

At a glance

Court

Decision date

Before

Source

Judgment (16 paragraphs)

Legislation Cited (2)

Cases Cited (5)