FEDERAL COURT OF AUSTRALIA

Hird, in the matter of Allmine Group Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 748

IN THE MATTER OF ALLMINE GROUP LIMITED (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 128 806 271)

THE COURT ORDERS THAT:

1.    Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act), the convening period within which the plaintiffs must convene the meeting of creditors of Allmine Group Limited (Receivers and Managers Appointed) (Administrators Appointed) ACN 128 806 271 (the Company) as fixed by s 439A(5) be extended up to and including 11 October 2013.

2.    Pursuant to s 447A(1) of the Act, Part 5.3A of the Act is to have effect in relation to the Company such that the meetings of the creditors required by s 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 1 above notwithstanding the provisions of s 439A(2) of the Act.

3.    The plaintiffs are to give notice by 5pm on 19 July 2013 of these orders to the Company's creditors, by means of:

3.1    circular to be emailed to those of the Company's creditors for whom the plaintiffs have email addresses and to be sent by mail to the Australian Securities and Investments Commission and all other creditors for whom the plaintiffs have only mailing addresses;

3.2    publication of these orders on the ASX announcements platform; and

3.3    publication on the website for the plaintiffs’ firm, Moore Stephens at www.moorestephens.com.au.

4.    Any creditor of the Company, or any other interested person, has liberty to apply to vary or discharge these orders upon 48 hours’ notice to the plaintiffs.

5.    The plaintiffs’ costs of this application be costs in the administration.

6.    These orders may be entered forthwith.

7.    Liberty to the plaintiffs to apply on 48 hours notice.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE MATTER OF ALLMINE GROUP LIMITED (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 128 806 271)

REASONS FOR JUDGMENT

1    On 20 June 2013, voluntary administrators were appointed to Allmine Group Limited (receivers and managers appointed) (administrators appointed) (ACN 128 806 271) (Company). On the next day, the secured creditor, Westpac Banking Corporation (Westpac) appointed Messrs Cliff Rocke and Scott Langdon of Korda Mentha as receivers and managers of the Company (Receivers). At the first meeting of creditors of the Company under s 436E of the Corporations Act 2001 (Cth) (Corporations Act) held on 1 July 2013, the creditors passed a resolution that the administrators appointed on 20 June be removed and that the plaintiffs (Mr Hird and Mr Hancock) (together the Administrators) be appointed. Unless extended, the convening period was due to end on 19 July 2013 under s 439A(5) of the Corporations Act. All section references in these reasons are to sections of the Corporations Act unless otherwise indicated.

2    By an application filed on 17 July 2013, the Administrators sought orders under s 439A(6) and s 447A(1) extending the convening period within which a meeting of creditors of the Company must be convened (second meeting) for a period of approximately 3 months to 11 October 2013 and ancillary orders (Orders). I made the Orders on 18 July 2013. These are my reasons for making those orders.

3    Mr Hird swore an affidavit in support of the application dated 16 July 2013 which was filed and (other than [41]) read in the proceedings. A further affidavit of 17 July 2013 sworn by Mr Hird was also read. Written submissions by Counsel for the Administrators were also filed.

Background

4    On 28 February 2011, the Company’s securities were admitted to the official list of the Australian Securities Exchange Limited (ASX) and although its securities were suspended from trading before administrators were appointed, those securities remain listed for quotation. That Company’s head office is in Perth. The Administrators caused notice of their appointment to be published on the ASX public announcements platform on 1 July 2013.

5    The Company is the holding company of a group comprising at least 17 wholly and partially owned subsidiaries incorporated in Australia, Fiji, New Zealand, South Africa, Hong Kong and Liberia. The Company is a mining service company that operates divisions through wholly-owned subsidiaries: engineering, procurement and construction projects around the world and fixed and mobile plant maintenance and associated consumable sales through centres in Perth, Lienster, Karratha and Darwin. In addition, the Company provides on-site labour hire and field service operations and sales of aftermarket earthmoving components across Australia and Fiji.

6    Eight subsidiaries incorporated in Australia have been placed in external administration, with either receivers and managers or liquidators appointed.

7    Mr Hird deposes that the Receivers have full control of the Company’s assets and operations and they are seeking to realise sufficient funds to meet Westpac’s secured debt. The books and records of the Company are held by the Receivers. Based on the minutes of the first meeting of creditors, it appears that Westpac is owed at least $11 million. The Administrators have little or no ability to assess what the real value of the Company’s assets will be after Westpac has been paid or what the potentially viable courses of action might be. They are not in a position to provide the recommendation to creditors required under s 439A(4). The Receivers are not due to provide their report under s 421A until 21 August 2013.

8    The correct financial position of the Company and its subsidiaries (Group) requires investigation. Mr Hird deposes that:

(a)    The Company’s ASX Release dated 28 February 2013 attaching an Appendix 4D for the Half Year 2013 Financial Results indicates that the Company’s revenues had been sharply affected by regression in construction activity as a result of decreased iron ore sector works programs and a key client entering a partial commissioning phase; however the Group expects revenue in the range of $120-$130 million and net profit before tax of between $8-$10 million. As at 30 June 2012, the Company had total assets of (in round numbers) $69 million and total liabilities of $24 million and as at 31 December 2012 the Group had total assets of $109 million and total liabilities of $40 million.

(b)    As set out in the minutes of the first meeting of creditors, the chairman informed the meeting that the consolidated financial position for the Group at 20 June 2013 was assets totalling $13.6 million, including cash at bank ($6.2 million), trade debtors ($6.4 million) and plant and equipment ($1 million); and liabilities of $32.8 million, including secured creditors ($13.6 million), priority creditors ($1.2 million) and ordinary unsecured creditors (approximately $18 million).

(c)    The outgoing administrators provided to Mr Hird a statement of assets and liabilities of the Group as at 25 June 2013. In summary it shows the following book values for the Group: current assets of $24,458,247.81, including trade debtors (approximately $8 million), cash at bank (approximately $6 million) and other current assets (approximately $9.8 million); non-current assets of $85,789,694.52, including related party loans (approximately $37 million), plant and equipment (approximately $4.5 million) and other non-current assets (approximately $44 million); employee priority entitlements totalling approximately $3 million, total assets of approximately $110 million, secured debt owing to Westpac of approximately $11 million and surplus assets (after deduction of total employee entitlements and secured debt) of approximately $96 million.

(d)    A draft independent report as at 30 April 2013 states that the Group has a net asset position of approximately $57 million.

9    Although the statement provided to Mr Hird by the outgoing administrators had shown priority employee entitlements for the Group of $3 million, with approximately $1.2 million relating to the Company, it is not at this point clear that the Company has any employees.

10    There appears to be investors who may be interested in injecting capital into the Company or participating in a restructure of the Group.

11    Counsel for the Administrators indicated that, although there is need to investigate the Company’s affairs, there is some likelihood that there will be a surplus after the Receivers have performed their duties.

Relevant law

12    In written submissions, Counsel for the Administrators relied on the useful summary of the “overlapping considerations” relevant to the exercise of the Court’s discretion whether to extend a convening period identified by Lindgren J in Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 at [18] as follows:

(a)    The Court should recognise the objective of speed of administration that was associated with the introduction of Part 5.3A by the Corporate Law Reform Act 1992 (Cth) as from 23 June 1993. The Court should also recognise the objectives stated in para 507 of the explanatory memorandum associated with the Bill for that Act, that it was expected that the power to extend the period would be exercised infrequently since it is an important objective of Part 5.3A that creditors 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: Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611 (Young J) at 612; Re Geraldton Building Co Pty Ltd (Administrators Appointed); ex parte Trevor [2000] WASC 320 (Owen J) at [5];

(b)    the function of the Court is to strike an appropriate balance between the legislature’s expectation that the administration will be a relatively swift and summary procedure, 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: Re Diamond Press Australia Pty Limited [2001] NSWSC 313 (Barrett J) at [10]; Re Pan Pharmaceuticals Ltd (2003) 46 ACSR 77 (Lindgren J) (Pan Pharmaceuticals) at [42]; Re New Horizons Corporation; ex parte De Vries [2004] NSWSC 253 (Austin J) at [5];

(c)    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: Re Fincorp Group Holdings Pty Ltd (2007) 62 ACSR 192 (Barrett J) (Fincorp) at [18];

(d)    a particular consideration against the too ready grant of an extension is 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: Fincorp 62 ACSR 192 at [4]; Chamberlain, in the matter of South Wagga Sports and Bowling Club Ltd (Administrator Appointed) [2009] FCA 25 (Jacobson J) at [9];

(e)    the application is to be assessed by reference to whether an extension is necessary to enable the administrators to prepare and provide the report and statements, and, in particular, to arrive at the opinion referred to in s 439A(4), in order to inform creditors adequately so that they will be in a position to decide whether to terminate the administration, execute a deed of company arrangement or place the company in liquidation: Pan Pharmaceuticals (2003) 46 ACSR 77 at [41]; ABC Learning Centres Limited, in the matter of ABC Learning Centres Limited; application by Walker (No.7) [2009] FCA 454 (Emmett J) (ABC Learning Centres)at [28];

(f)    it is often desirable that any extension be accompanied by an order under s 447A, permitting the meeting to be held at any time during the convening period as extended: see the order made in Re Daisytek Australia Pty Ltd (2003) 45 ACSR 446 (Daisytek) at [10]–[18].

13    Justice Lindgren at [19] also noted that lengthy extensions have been granted where the administrator’s investigations are complex, see, for example: Re AFG Insurances Ltd [2002] NSWSC 803 (Barrett J) (five months); Re Chemeq Ltd (Administrators Appointed); ex parte McMaster [2007] WASC 154 (Le Miere J) (almost six months); ABC Learning Centres [2009] FCA 454 (Emmett J) (ten months). Extensions in ABC Learning were ultimately in the order of 18 months.

14    These statements of principle are similarly summarised by Austin J in Re Riviera Group Pty Ltd (2009) 72 ACSR 352 at [15]. Justice Austin also usefully summarised examples of the circumstances in which orders extending the convening period have been made at [13].

Consideration

15    Having regard to these statements of principle and the circumstances of the Company and the Group, the following factors support the grant of an extension of the convening period as requested by the Administrators:

(a)    the application for the extension of the convening period was made before the convening period expired and it is the first application. Although the almost 3 extension sought is long, it is not unprecedentedly long. There are circumstances which justify that length of time;

(b)    the Group has operations in many countries and many regions within Australia. Liquidators have been appointed to 5 of the Australian subsidiaries and receivers and managers to a further 3. There are at least 17 wholly and partly owned subsidiaries. There is therefore complexity to the corporate arrangements;

(c)    the appointment of the Receivers to the Company and external administrators to a number of subsidiaries means that it may be some time before the Administrators have access to all relevant books and records. The Receivers are not due to report until 21 August 2013;

(d)    to establish the financial position of the Company and Group, it will be necessary for the Administrators to conduct investigations but there is reason to believe there will be surplus assets when the Receivers have completed their duties;

(d)    as a result of the foregoing factors, the Administrators (through no lack of diligence or fault of their own) will not be in a position to prepare the report to creditors required and their recommendation under s 439A(4) until after 21 August 2013 at the earliest;

(e)    by a letter dated 16 July 2013, the Receivers advised the Administrators that they have no objection to the application. Convertible note holders (owed in the order of $5 million) were advised of the potential for the application to be made and support it. Some other large creditors (including Export Finance and Insurance Corporation, another secured creditor who is owed approximately $2.65 million) were advised of the application but no response was made before the hearing of the application. There is no committee of creditors; and

(f)    creditors (including employees) do not appear to be prejudiced by the extension.

16    Accordingly I am satisfied that to make the Orders will advance the objects of Part 5.3A of the Corporations Act.

17    As there is no committee of creditors and securities issued by the Company are listed for quotation on the ASX, it is desirable that the Administrators give notice of the extension of the convening period. The Administrators offered no objection to giving notice of the Orders on the ASX’s company announcements platform, by email or post to creditors and by posting notification on the Administrators’ website. I made orders to this effect. Any interested person will be able to apply to vary or revoke the Orders, recognising that the application for the Orders was made ex parte.

Associate:

Dated:    1 August 2013