By application under s 439A(6) of the Corporations Act 2001 (Cth) Messrs Hall and Honner, in their capacity as joint and several administrators of BCD Resources NL (Receivers and Managers Appointed) (Administrators Appointed) ("Company"), apply for an extension of time in which they are required to convene a meeting of the company's creditors under s 439A(5) of the Corporations Act. They also seek an order, in a common form, that would permit them to hold the second meeting of creditors at any time during, or within five business days, after the end of the convening period. The proposed orders provide for service of the notice of the orders on all known secured creditors of the Company and that leave to be granted to specified persons, including those with a sufficient interest, to apply on three days' notice to vary or amend an order extending time. That order is of particular relevance to one creditor, to which I will refer below.
The application is supported by a comprehensive and helpful affidavit of Mr Honner setting out the factual background. Mr Hall and Mr Honner were appointed as administrators of the Company by a secured creditor ("MKS") holding security over the whole, or substantially the whole, of the Company's assets under s 436C of the Corporations Act. I infer that there is a connection between MKS and the Company, although the nature of that connection has not been fully exposed by the evidence, so far as there is at least one common director between MKS and the Company. MKS has also appointed receivers and managers in respect of the Company.
The Company is party to a joint venture agreement with another entity, Malachite Resources Ltd ("Malachite") in respect of a joint venture to mine gold at the Lorena Gold Mine in Queensland, although the Company is not currently operating any mines while it is in administration. It appears that condition(s) precedent to the formation of an incorporated joint venture contemplated by the joint venture agreement with Malachite has or have not been fulfilled, and that the appointment of the administration is also an event of default under the joint venture agreement, although Malachite has not terminated that agreement. Steps are being taken, it appears, to seek to negotiate with Malachite to satisfy conditions precedent to the joint venture agreement and also to deal with the Company's employees, who are presently employed through the receivers.
There is evidence that MKS is owed about $3 million by the Company and it supports the application for an extension of the convening period. Another entity, SE Power Pty Ltd, has purchase money security interests registered under the Personal Property Securities Act 2009 (Cth) over three substantial generators on the mine site and the administrators are currently paying rental in respect of those generators. Mr Honner also leads evidence of the other unsecured creditors, including 20 employees who are priority creditors of the Company.
A first meeting of creditors was held on 22 April 2015, although notice of this extension application was not given at that meeting, because the administrators understood at that time that a deed of company arrangement proposal would likely be available to the Company before the second meeting. Two proposals for deeds of company arrangement have presently been made, and a third is foreshadowed. None of those proposals is in final form.
Mr Honner's affidavit sets out the steps which the administrators have taken since their appointment and the current status of their investigations. Mr Honner also sets out the position, with respect to the position of Malachite, which it appears has progressed significantly, so that a heads of agreement could be reached within the next week or so, although, if agreement is reached, further documentation will be required. Mr Honner also refers to advice which he has received from a consultant, who is advising MKS in its negotiations with Malachite, that the documentation of the proposed arrangement with MKS could take another two or three months. MKS has also foreshadowed a proposal for a deed of company arrangement, to be put by it, although that is subject to several contingencies, including an agreement with SE Power in relation to particular matters, and the completion of a feasibility report, in respect of the Lorena Gold Mine, and the outcome of the negotiations with Malachite.
Mr Honner points to several matters, which seem to me to support an extension of the convening period for some time, although there is a real question as to the time period which should be permitted. In particular, it seems that, on the evidence, and on the position as it now stands, if the convening period were not extended, the administrators would not have a final version of a deed of company arrangement that could be put to creditors at that meeting, leaving creditors potentially with no other option than to liquidate the Company. That position may well change, if an extension of time is granted, and if the negotiations between MKS and Malachite, to which Mr Honner refers, are successful.
Mr Honner expresses the view that a 90-day extension of the convening period is desirable, to allow the administrators to form a view as to the various proposals, on the basis that the proposals will then have advanced further. There is substance in that view, but there are also matters which seem to me to tend toward a shorter extension period. The first is that until very recently, the administrators have been under the understanding, because of the information provided to them, that a deed of company arrangement would be available by the time of the second meeting. There is a risk that parties who have been over-optimistic as to the time required to reach agreement before may be over-optimistic again. Second, the extension period sought is lengthy, particularly if it ultimately emerges that MKS and Malachite are not able to agree the relevant proposal. That risk is exacerbated by the fact that the proposal for a deed of company arrangement from MKS depends upon the cooperation of SE Power, and its attitude is not presently known.
Mr Honner, properly, draws my attention to the position in respect of creditors' attitudes. MKS supports the application as I noted above. Mr Honner has made other enquiries of other members of the committee of creditors, two of whom support the application. A third has indicated, by an officer, although not his principal officer, that it is also likely to support the application.
Mr Honner's affidavit, sensibly, anticipated the possibility that the Court may consider that a shorter period than 90 days was appropriate for an initial extension of the convening period. He refers to the costs of a further application as a matter lending against extending the period for a shorter period. It seems to me that he was correct to draw attention to that issue. However, it seems to me that the costs of such an application may well be less than the administrators had anticipated because it can be listed before me, and it will not be necessary to re-canvass the matters which have been addressed before me. All that will be necessary on the next occasion is to update me as to any developments, whether positive or negative, in respect of the implementation of the proposals to which the administrators refer, such that the Court can then assess whether the proposals continue to have sufficient likelihood of being brought to fruition that a further extension of time is warranted.
I should note that one creditor, SE Power, has not expressed its position in respect of this application. The administrators, by their solicitors, had attempted to contact SE Power's solicitors yesterday, but their attempts to do so had not been successful. They have provided relevant information to an officer of SE Power, but it seems that information had not reached SE Power's solicitors. Mr Ipp submits, and I accept, that SE Power's position is sufficiently protected by its ability to restore the matter before me.
Mr Ipp, in helpful submissions, draws attention to the well-established principles in respect of an application of this kind. The Court's function in determining that application is to reach an appropriate balance between an expectation that an administration will be relatively speedy and the countervailing factor that undue speed should not be allowed to prejudice sensible and constructive actions for maximising return for creditors. Mr Ipp refers to the factors in Re Riviera Group Pty Ltd [2009] NSWSC 585; (2009) 72 ACSR 352 at [13]-[14], which may support such an extension. A number of those factors are not present in this case but factors that are relevant include the time needed for an assessment of a proposal for a deed of company arrangement, which, in turn, depends in this case on that proposal being sufficiently developed, and the fact that an extension may allow the value of the business to be maximised by the proposals for a deed of company arrangement. I am satisfied that, on balance, the grant of an extension of time is preferable to declining such an extension, where creditors would otherwise be left with no real option other than a winding up. The Court can, and should, also give weight to the considered judgment of the administrator in matters of this kind: Re Owen, RiverCity Motorway Pty (Ltd (admins apptd) (recs & mgrs apptd) v Madden (No. 4) [2012] FCA 1491; (2012) 92 ACSR 255 at [26].
For these reasons, I am satisfied that I could extend the convening period, although not for the full period that the administrators had initially sought. I will, in turn, relist the matter before me, prior to the expiry of that period for which the convening period has been extended, so that the administrator may then update the Court as to the then position, and seek a further extension of the convening period at that point, if he is so advised. The orders that I will make will also allow the administrators to proceed to a second meeting of creditors, within the period for which the convening period has already been extended, if events develop such that the anticipated proposals do not come to pass.
In this matter, I make the following orders:
Upon the plaintiffs' undertaking, by their solicitor, to pay the appropriate filing fee in the registry, the plaintiffs have leave to file in Court the originating process, together with the affidavit of William Anthony Honner sworn 6 May 2015.
Order that the time for the hearing of the application be abridged and that the originating process be returnable instanter.
Order pursuant to section 439A(6) of the Act that the convening period within which the plaintiffs must convene a meeting of the creditors of BCD Resources NL (Receivers and Managers Appointed) (Administrators Appointed) ("Company") as fixed by s 439A(5) of the Act, be extended, in the first instance by 45 days up to and including 22 June 2015.
Order pursuant to section 447 of the Act, that the meeting of the Company required under section 439A of the Act may be held at any time during, or within 5 business days after the end of the convening period as extended by order 3 above, notwithstanding the provisions of section 439A(2) of the Act.
The plaintiffs serve notice of these orders on all known secured creditors of the companies.
Leave be granted to the plaintiffs, any director, creditor, contributory of the Company or any other person with a sufficient interest to apply on 3 days' notice to vary or amend the order extending time.
The costs of this application be paid out of the administration of the Company.
Stand over the application to 9.30am on 18 June 2015 before Black J.
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Decision last updated: 24 June 2015