MATTER : Windimurra Vanadium Ltd ACN 009 131 533 & Midwest Vanadium Pty Ltd ACN 113 874 712

DARREN GORDON WEAVER As Administrator of WINDIMURRA VANADIUM LTD ACN 009 131 533 and MIDWEST VANADIUM PTY LTD ACN 113 874 712 (Receivers and Managers Appointed) (Administrators Appointed)

ANDREW JOHN SAKER As Administrator of WINDIMURRA VANADIUM LTD ACN 009 131 533 and MIDWEST VANADIUM PTY LTD ACN 113 874 712 (Receivers and Managers Appointed) (Administrators Appointed)

MARTIN JONES As Administrator of WINDIMURRA VANADIUM LTD ACN 009 131 533 and MIDWEST VANADIUM PTY LTD ACN 113 874 712 (Receivers and Managers Appointed) (Administrators Appointed)

Corporations - Administration - Meeting of creditors - Convening period - Application for extension - Turns on own facts

Re Chemeq Ltd; Ex parte McMaster [2007] WASC 154

Re Evans and Tate Ltd; Ex Parte Jones [2007] WASC 235; (2007) 25 ACLC 1580

Strickland and Williamson as Administrators of Port Kennedy Resorts Pty Ltd [2000] WASC 302; (2001) 19 ACLC 328

BEECH J: (These reasons are an edited version of the reasons delivered extemporaneously on 13 March 2009)

1 The plaintiffs are joint and several administrators of two companies: Windimurra Vanadium Ltd and Midwest Vanadium Pty Ltd. They apply for an extension of the convening period for the second meeting of creditors of those companies from 19 March 2009 to 18 September 2009. For the reasons that follow, I am satisfied that the convening period should be extended, but not for the length of time sought by the plaintiffs.

2 The general scheme and object of pt 5.3A of the Corporations Act 2001 (Cth) may be summarised as follows.

3 Part 5.3A is headed 'Administration of a company's affairs with a view to executing a deed of company arrangement'. The object of pt 5.3A is said by s 435A to be to:

...provide for the business, property and affairs of an insolvent company to be administered in a way that:

(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or

(b) if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company.

4 Upon appointment, the administrator has control of the company's business affairs and assets: s 437A. The administrator may carry on or terminate or dispose of the company's property. Only the administrator can deal with the company's property: s 437D.

5 The administrator must convene two meetings. The business of the first meeting is to determine whether to appoint a committee of creditors, and if so, to determine who are to be the members of the committee: s 436E(1). At the second meeting the creditors can resolve that the company execute a deed of company arrangement specified in the resolution, or that the administration should end, or that the company be wound up: s 439C.

6 When convening the meeting, the administrator must send material as required by s 439A(4), including a statement setting out the administrator's opinion as to whether it would be in the creditors' interests for:

(a) the company to execute a deed of company arrangement;

7 Reasons for such opinions must also be given. If a deed of company arrangement is proposed, a statement setting out details for the proposed deed is to be included in the notice of meeting.

8 The second meeting is required to be convened within 20 business days of the day after the administration begins. The meeting must be held within five business days before, or within five business days after, the end of the convening period: s 439A(2). The court has power, under s 439A(6), to extend the convening period. The plaintiffs invite the court to exercise that power in this application.

9 The company's property is protected from creditors during the period of the administration: div 6 of pt 5.3A. During the period of the administration, the rights of persons who have claims against the company at the time of appointment of the administrator are suspended to give the company breathing space to enable the future of the company to be determined.

10 The approach to be taken to an application under s 439A(6) has been discussed in a number of cases, including in decisions of this court. I would adopt and apply the following statements of principle.

11 In Strickland and Williamson as Administrators of Port Kennedy Resorts Pty Ltd [2000] WASC 302; (2001) 19 ACLC 328 Owen J said as follows:

... orders under s 439A(6) are not granted as of course. They should be the exception rather than the rule. The power to extend the convening period is a power that is not exercised frequently because of the need for these types of administrations to proceed speedily. Accordingly, an application for an extension of time needs to be supported by detailed information about the affairs of the company, so far as that is known, and the reasons for the delay in finalising the necessary information. The affidavit material should also explain why a particular period of extension has been sought.

On the other hand, it is also to be noted that the discretion whether or not to extend the time is to be exercised bearing in mind the spirit and object of Div 6 of Pt 5.3A of the Corporations Law; namely, to maximise the chances of the company continuing in existence or, alternatively, terminating its existence in the most appropriate way [3] - [4].

12 In Re Evans and Tate Ltd; Ex Parte Jones [2007] WASC 235; (2007) 25 ACLC 1580 EM Heenan J summarised the relevant principles at [17] - [21] as follows:

It follows, therefore, that the suspension of the rights of the creditors, and for that matter of lessors, or of any party seeking to begin or to proceed with an action or proceeding in a court against the company under administration (s 440D of the Act), should be for no longer than is reasonably necessary for an informed decision to be made about whether or not to approve a deed of company arrangement, or, otherwise, to end the administration or to proceed to a winding up. There may well be cases, such as the present, where the usual period of 28 days contemplated by the Act is insufficient for these purposes. However, it should not, in my view, be open-ended. Even if a position is reached where the administrators cannot make any detailed recommendation to the creditors because of delays or difficulties in obtaining information, or because their initiative must necessarily be deferred to the initiatives of any secured creditors, that is not a reason for allowing the suspension of third party rights to continue indefinitely or beyond a reasonable limit. There must come a time when, even faced with uncertainty, the creditors will need to decide whether or not to end the administration or to put the company into liquidation. It will be their right to decide. It may well be the case that certain creditors are disproportionately affected by the suspension of rights which the continuation of the administration would entail.

Without the advantage of submissions on this issue, it is not possible to make or even to suggest any detailed list of potential creditors within this capacity. However, creditors' claims which are likely to be diluted by the expenses involved in a continuing administration obviously come to mind, as do suppliers to a company within the group who may be prepared to extend credit if given the opportunity of renewing supply to a company under a scheme of arrangement with secured or enhanced prospects of payment, as also do the lessors of land used by companies within the group who may wish to decide whether or not to seek leave to retake possession of the property under s 440C - cf Re Java 452 Pty Ltd (admin appt) [1999] VSC 252; (1999) 32 ACSR 507.

Indeed, the explanatory memorandum to the bill which inserted pt 5.3A into the Corporations Act said of the power to extend time conferred under s 439A, that:

'The court will be given a power to extend these periods ... though it is not expected that this power will be exercised frequently, since it is an important objective of the new provisions for creditors to be fully informed about the company's position as early as possible and have an opportunity to vote on its future as soon as possible.'

Accordingly, the starting point for any application for an extension of these time limits must be that, generally, the court will expect that administrators adhere to the specified time limits: Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611; Re ATG Developments Pty Ltd (1994) 13 ACSR 261; Re Levi (1996) 19 ACSR 521; Re Madden (1996) 131 FLR 430; Re Allbuild Construction Co Pty Ltd (admin appt) [2000] WASC 227; Re Port Kennedy Resorts Pty Ltd (admin appt) [2000] WASC 302; (2001) 19 ACLC 328; Re Geraldton Building Co Pty Ltd (admin appt) [2000] WASC 320.

Nevertheless, the need to extend time in a particular case is recognised by the power of the court to do so and the exercise of that power should be approached with the objects of pt 5.3A of the Act in view. There do not need to be special grounds for the extension being sought and the matter is one for decision on the evidence in the particular case. One factor for consideration is whether or not an extension of time is necessary to enable the administrator to provide the report and recommendations required under s 439(4) of the Act: Re Pan Pharmaceuticals Ltd (admin appt) [2003] FCA 598; (2003) 46 ACSR 77; Re TPE Kintech Pty Ltd [2004] NSWSC 250; (2004) 49 ACSR 106; Re New Horizons Corporation [2004] NSWSC 253. The wishes of creditors will be a relevant, although not a determinative, consideration: Re Geraldton Building Co Pty Ltd (admin appt); Re Austin Australia Pty Ltd (in admin) [2004] NSWSC 9.

13 The application is supported by an affidavit of Mr Weaver, who is one of the joint and several administrators of the two companies in question. Windimurra Vanadium Ltd and Midwest Vanadium Pty Ltd both had administrators appointed to them on 17 February 2009. Before that, secured creditors of those companies had appointed Mr Brian McMaster and Mr Martin Madden as receivers and managers.

14 The core asset of the companies is a vanadium project known as the Windimurra Vanadium Project. That project is in its construction phase. Since the appointment of receivers and managers to the company, the construction of the project has stopped.

15 Following the appointment of the plaintiffs as administrators of the companies they convened the first meeting of creditors on 3 March 2009. The time limits prescribed by s 439A would require notice convening the second meeting of creditors to be provided by no later than 19 March 2009.

16 In his affidavit Mr Weaver says that taking into account the nature of the assets of the companies, the existence of receivers and managers to those companies and other complexities arising from the circumstances of the administration, an extension of the convening period for the second meeting is necessary. In essence, he says that an extension of that time period is necessary in order to allow a proper asset sale process to be conducted or, alternatively, a deed of company arrangement to be formulated.

17 Mr Weaver deposes to his belief that it is necessary to allow the receivers to conduct a sale process of the companies' assets before a useful opinion can be given to the creditors as to what course of action is in their best interests. He expresses the opinion that in the current economic environment it would be very difficult for reliance to be placed on valuations as the sole basis for the decisions required by creditors as to the future of the companies.

18 Mr Weaver has been informed by the receivers that although a formal expression of interest process has not yet commenced, there have already been a number of parties who have expressed an interest in the sale of the assets of the companies. Further, the receivers have informed Mr Weaver that indicative offers are expected to be submitted by the end of May 2009.

19 Mr Weaver expresses his belief, based on his experience in the sale of assets in the mining sector, that a proper sale process could not be effected before the end of March 2009. He goes on in par 21 to express the view in that he 'would not be surprised if the sale process being conducted by the receivers could not be concluded before August 2009'.

20 Paragraphs 26 and 27 of Mr Weaver's affidavit satisfy me that the grant of an extension will not cause any undue prejudice to any creditor of the companies.

21 The committee of creditors of each of the companies has expressed its support for the extension of the convening period to 18 September 2009 sought by the plaintiffs. The secured creditors have also expressed their support.

22 In the circumstances I have outlined, I am satisfied that an extension of the convening period should be granted. However, I am not satisfied that the period of six months sought by the plaintiffs should be granted in this case.

23 In support of the application for a six month extension, counsel for the plaintiffs referred to the decision of Le Miere J in Re Chemeq Ltd; Ex parte McMaster [2007] WASC 154. In that case his Honour was prepared to grant an extension of almost six months. In doing so, his Honour observed that an extension of that length is unusually long and should only be granted in unusual circumstances. I respectfully adopt those observations.

24 The evidence in Re Chemeq descended to a significantly greater level of specificity in explaining the facts and circumstances said to give rise to the need for an extension of six months.

25 In this case, it is the need to await the progressing of the sale process which is the primary foundation of the application for an extension of time. I have already referred to the evidence in relation to that topic.

26 The belief of Mr Weaver that he would 'not be surprised' if the sale process could not be concluded before August of 2009 does not, in my opinion, provide a sufficient foundation to extend the convening period to September 2009. Should events transpire that the sale process is not concluded until August 2009, then a further application for an extension of time can be made. However, the fact that at present there is some prospect that it may take that long is not, in my opinion, sufficient for an extension to be granted through to a period after that time.

27 I propose to grant an extension to the end of June which, on the evidence before me, would enable consideration to be given to the alternatives to be put to creditors following the receipt of indicative offers for the companies which are, on the evidence, expected at about the end of May.

28 For those reasons, I would grant an extension of the convening period for the second meeting of creditors to 30 June 2009.