FEDERAL COURT OF AUSTRALIA

Pleash, in the matter of Consolidated Tin Mines Limited (Administrators Appointed) [2016] FCA 931

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), and until further order of the Court or 18 November 2016, the publication and disclosure of the contents of the affidavit of Blair Alexander Pleash sworn 8 August 2016, and the contents of the documents which are exhibited to the confidential affidavit, identified as Exhibits BAP22 to BAP27, be prohibited and restricted as follows:

(a)    no person other than the first applicant, or their legal representatives, or their servants, agents or employees, may search the Court file for, inspect, uplift or copy the confidential affidavit and/or the confidential exhibits; and

(b)    no person, other than the first applicant, or their legal representatives, or their servants, agents or employees, may publish or disclose any part of the confidential affidavit and/or the confidential exhibits, unless and/or until that information enters the public domain.

This order is made on the basis that it is necessary to prevent prejudice to the proper administration of justice.

2.    Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (the Act), the convening period for the meetings of the creditors of the second applicant, Consolidated Tin Mines Ltd (Administrators Appointed) (ACN 126 634 606) and the fourth applicant Snow Peak Mining Pty Ltd (Administrators Appointed) (ACN 161 212 504) (the Companies) required to be held pursuant to s 439A of the Act be extended up to and including 17 November 2016.

3.    Pursuant to s 447A(1) of the Act, Part 5.3A of the Act is to have effect in relation to the Companies, such that the meetings of the creditors of the Companies required by s 439A(4) of the Act be convened together or separately, with liberty to apply.

4.    The Administrators cause notice of these Orders, within two business days after the making of these Orders:

(a)    to be provided to the Australian Securities and Investments Commission;

(b)    to be sent to all creditors (including those who claim to be creditors) of the Companies (or either of them) who have provided the first and/or third applicants with:

(i)    an email address - by email; or otherwise

(ii)    a facsimile number - by facsimile; or otherwise

(iii)    a postal address - by post;

(c)    to all creditors of the Companies (or any of them) for whom the plaintiffs do not have a current post, facsimile or email address - by making copies of the documents filed in this proceeding (which are not sealed) together with these orders available on the following sections of the website maintained by the plaintiffs’ firm at:

(i)    for the second applicant - http://www.hallchadwick.com.au/csd

(ii)    for the fourth applicant - http://www.hallchadwick.com.au/spm.

5.    Liberty to apply is granted to the Australian Securities and Investments Commission, any creditor or any person who can demonstrate sufficient interest to make such application to vary or discharge these orders upon three (3) clear business days’ written notice being given to the applicants by their solicitors on the record and to the Court.

6.    The Administrators’ costs of the proceeding be paid pro-rata as a cost in the administration of each of the Companies.

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

REASONS FOR JUDGMENT

EDELMAN J:

1    The Administrators are joint and several voluntary administrators of the second applicant, Consolidated Tin Mines Limited (CTM), and the fourth applicant, Snow Peak Mining Pty Ltd (SPM). The Administrators are required by the Corporations Act 2001 (Cth) to convene a meeting of each of CTM and SPM’s creditors by next week, 17 August 2016. They have brought this urgent application for an extension of time, to 17 November 2016, to convene the meetings of the creditors of both companies.

The power to extend the convening period and the relevant considerations

2    Section 439A(1) of the Corporations Act requires the administrator of a company under administration to convene a meeting of the company’s creditors within the convening period as fixed by s 439A(5) or extended under s 439A(6). Section 439A(5)(b) provides, relevantly for this case, that the convening period is 20 business days beginning on 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). Subsection 6 permits an extension:

The Court may extend the convening period on an application made during or after the period referred to in paragraph (5)(a) or (b) [(the convening period)], as the case requires.

3    There is no express restriction upon the discretion to grant the extension. Prior to 31 December 2007 the convening period could only be extended by an application made during but not after the convening period: see Corporations Amendment (Insolvency) Act 2007 (Cth).

4    However, although there is no express guidance upon the exercise of discretion, as Lindgren J explained in Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 [18(a)], an underlying objective is the need for speed of administration and the need for creditors to be fully informed about the company’s position as early as possible and to have an opportunity to vote on its future as soon as possible: see also Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611, 612 (Young J); Re Geraldton Building Co Pty Ltd (Administrators Appointed); ex parte Trevor [2000] WASC 320 [5] (Owen J). This is a reason why the explanatory memorandum of the Corporate Law Reform Bill 1992 (Cth), at [507], expected that the power to extend the period would be exercised infrequently. This does not mean that there is any predisposition or presumption against an extension based upon speedy administration: Lord; in the matter of Tallwood Nominees Pty Ltd (Administrators Appointed) [2011] FCA 1118 [11] (Jacobson J). Rather, the need for an efficient and summary procedure is a factor to take into account; others being the desire not 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 [10] (Barrett J); Re Pan Pharmaceuticals Ltd [2003] FCA 598; (2003) 46 ACSR 77, 85 [42] (Lindgren J); Re New Horizons Corporation; ex parte De Vries [2004] NSWSC 253 [5] (Austin J).

5    Although the discretion is unconstrained by any express statutory criteria, it should be exercised judicially. This includes a requirement for consistency with other decisions. An important matter also to be considered is the obligation upon an administrator to produce a report and an opinion for creditors setting out the matters in s 439A(4) together with the notice convening the meeting under s 439A(3). If the s 439A(5) convening period is not reasonably sufficient for the preparation of this report and the formation of this opinion then this will be a powerful factor supporting the grant of an extension.

6    In In the matter of Riviera Group Pty Ltd (admins apptd) (recrs & mgrs apptd) [2009] NSWSC 585 [13], Austin J described a number of categories, by way of examples, where Courts had previously granted extensions. These included cases where an extension was needed due to (i) the size and scope of the business; (ii) substantial offshore activities of the business; (iii) a large number of employees with complex entitlements; (iv) complex corporate group structure and intercompany loans; (v) complex transactions entered into by the company (e.g. securities lending or derivatives transactions); (vi) complex prospects of recovery proceedings; (vii) lack of access to corporate financial records; (viii) the time needed to execute an orderly process of disposal of assets; (ix) the time needed for thorough assessment of a proposal for a deed of company arrangement; (x) where the extension will allow sale of the business as a going concern; (xi) more generally, that additional time is likely to enhance the return for unsecured creditors. In addition, as Barrett J said in Lombre Re Australian Discount Retail Pty Ltd [2009] NSWSC 110 [21], further “time for the formulation and digestion of recommendations based on established realities will avoid the possibility of what might be a premature decision in favour of winding up as the only practically available option”.

7    The countervailing factors in the assessment of any of these matters include the inefficiency caused by delay and the consequence that while the voluntary administration continues, secured creditors, lessors and others cannot enforce their remedies: Chamberlain, in the matter of South Wagga Sports and Bowling Club Ltd (Administrator Appointed) [2009] FCA 25 [9] (Jacobson J). Another consideration will be whether the administrators can reasonably prepare and provide their report and statements to accompany the notice to creditors, including setting out their opinions as required by s 439A(4)(b), to provide adequate advice to the creditors as required five days before the meeting: see also Pan Pharmaceuticals 84-85 [41] (Lindgren J); Re ABC Learning Centres Ltd(application by Walker) (No 7) [2009] FCA 454; (2009) 71 ACSR 560, 566 [28] (Emmett J).

8    As for the duration of any extension, the longer the extension that is sought the more difficult it may be to justify. Nevertheless, there will sometimes be circumstances in which a lengthy period is necessary. Where the sale process is relatively complex it is not unusual for an extension of up to three months to be granted: Mentha, in the matter of Hans Continental Smallgoods Pty Ltd (Administrators Appointed) [2008] FCA 1933 [26] (Jacobson J). Circumstance might justify a longer, even significantly longer period. For instance, in ABC Learning Centres Emmett J granted an extension of 10 months in most unusual circumstances which included assets which required a significant period of marketing to achieve maximum value (564 [20]).

The circumstances of CTM and SPM relevant to the extension sought

9    It is convenient to consider the extension in relation to CTM and SPM jointly. As I explain below, the activities and fortunes of CTM and SPM are interlocking.

10    The administration is substantial. CTM is a listed entity although it is currently in trading halt. Its principal place of business is in Cairns. Shortly prior to the administration of CTM (on 18 April 2016) it acquired SPM’s assets under an asset sale agreement. Those assets concerned Mount Garnet base metal operations which transformed CTM from a tin exploration and development company to an operating miner and producer. The sale has not yet completed due to non-payment of stamp duty and non-assignment of environmental bonds. However, CTM has operated various mining tenements and operations for SPM. When the Administrators were appointed on 19 July 2016, CTM was also involved in a matter to be tried in the Land Court in Cairns on 28 July 2016.

11    In the course of the month since their appointment, the Administrators have taken many actions. Some of those actions include the following. They have conducted preliminary investigations into the affairs of each company including reviews of the trading activities; they have reviewed the financial records of each company and issued demands to the directors of CTM to deliver books and records; they have met on a number of occasions with directors, advisers, and creditors; they have inspected three of the mining sites for CTM; they have finalised and implemented a care and maintenance budget for CTM including consideration of the employment needs of its employees; they have reviewed the asset sale agreement between CTM and SPM and issued a notice of redemption of convertible notes to CTM; they have liaised with 56 security interest holders over SPM, and 34 of the 88 security interest holders in CTM; they have held meetings with directors and advisers about a restructure of SPM and a Deed of Company Arrangement; they have liaised with the Department of Environment and Heritage Protection about the environmental and compliance obligations at the mining sites (these obligations are significant – for instance, the tailing dam at the Mount Garnet site is very close to the local town’s water supply); they have arranged and held a first meeting of creditors for each company; and they have established a committee of creditors for each company.

12    Separate first meetings of the creditors of each company were held on 29 July 2016.

13    The Administrators say that they will be unable to prepare and provide their report and reach the opinions required by s 439A(4) of the Corporations Act within the convening period because (i) their investigations are still continuing; (ii) valuations (which have been sought) are not likely to be obtained until after the end of the convening period; (iii) the timing of completion of any attempts to undertake a potential capital raising is uncertain; and (iv) a Deed of Company Arrangement is likely to be proposed and that requires identification of the available capital.

14    The purpose of the extension of the convening period is for the Administrators to address all of these matters. The Administrators say, and I accept, that without an extension, and with insufficient information, the only likely outcome is for a winding up of both companies. The Administrators submit that an extension of three months will not unduly prejudice stakeholders or creditors because other than the care and maintenance program, the companies have ceased trading. However, employee creditors could be delayed in accessing entitlements to the Fair Entitlements Guarantee Scheme.

15    The extension should be granted. In the circumstances of these two companies, the extension is reasonably necessary for the Administrators to provide a report and express the opinions required by s 439A(4). It is in the interest of creditors for the options above to be reasonably examined and for them to have the opportunity to vote on the basis of accurate and useful information about the affairs of each of CTM and SPM with meaningful recommendations from the Administrators. The creditors of CTM total $46,050,891 with the main creditors being SPM and Snow Peak Global Company Limited. The creditors of SPM total $21,286,497 with the main creditor being Snow Peak International Investments. I will also make orders granting liberty to apply to all affected persons.

16    As for notifications, the creditors of each of CTM and SPM were both told at the meetings of creditors that this application would be made. ASIC has also been notified. Neither ASIC nor any of the creditors has entered an appearance. And an affidavit from the Administrators’ solicitors has deposed to the absence of any request by any creditor for access to any documents in these proceedings or any intention to appear or object to the orders sought.

17    On the evidence before the Court there is no real commercial risk posed by the extension to any third party, creditors or potential creditors.

18    Members have not been notified. There is no obligation to notify members, although in some cases this will be a significant omission. In this case, the omission does not cause me to exercise my discretion to refuse the application. The two members of SPM (including CTM) are both on notice of this application anyway. And an obligation to notify all members of CTM as a listed company, in the circumstances of this case, would be onerous and unnecessary. The orders which will be made will also be drafted to ensure that the liberty to apply is likely to come to the attention of any substantial member, although it is likely that such a member would have been aware of this application through the website of the Administrators and the creditors’ meetings. If there is an objection, particularly one based on a concern that has not been brought to my attention, then any interested party can apply to relist the matter to seek amended orders and it will be relisted at short notice.

Conclusion

19    The convening period expires on 17 August 2016. The Administrators rely upon s 439A(6) for an extension of the convening period to 17 November 2016. For the reasons above, the extension of three months is reasonably necessary for the Administrators to discharge their duties under s 439A(4). The orders should be made. The orders will also permit that meeting to be held earlier if that is reasonably possible.

20    Pursuant to s 447A(1) of the Corporations Act, the Administrators also seek an order providing for flexibility in the convening of the meetings of the creditors of CTM and SPM. They seek orders that (i) the meetings be convened together or separately and (ii) held at any time during or within five business days at the end of the extended convening period. Section 447A(1) of the Corporations Act provides a general power for the Court to make orders as it thinks appropriate about how Part 5.3A is to operate in relation to a particular company. In the circumstances of the interlocking nature of the interests of CTM and SPM it is appropriate that orders be made that the meetings be convened separately or together. It appears that the intention of the proposed order that that the meeting be held “at any time during or within five business days at the end of the extended convening period … notwithstanding the provisions of s 439A(2)” is to preserve the possibility of a meeting being convened earlier than the period of 5 business days before the end of the convening period. There may be some difficulty in making an order contrary to s 439A(2), which is a mandatory provision. But there is force in the comment by Lindgren J in Re Daisytek Australia Pty Ltd [2003] FCA 575; (2003) 45 ACSR 446 [14], that there may be little point in requiring the Administrators to “sit on their hands” to no good end once the meeting is able to be held. I will provide for a liberty to apply with the possibility of such an application being disposed of, on the papers, with only short submissions on this point if it becomes necessary.

21    One of the affidavits provided by the Administrators contained confidential information concerning valuations of company assets and other information relevant to a potential sales process. The Administrators sought an order under s 37AF of the Federal Court of Australia Act 1976 (Cth). I am satisfied that publication of this affidavit is necessary to prevent prejudice to the proper administration of justice and that it should be restricted until further order or until 17 November 2016 unless there is good reason on the information before the Court to restrict publication for a longer sale process. I will hear further from counsel now, but my present view is that if the relevant matters remain confidential on 17 November 2016 then there can be liberty to apply to extend the restriction.

22    An order sought by the Administrators which I do not make is an order providing for liberty for them to apply for another extension. On the evidence before me, and based on counsel’s careful submissions, a three month extension is both reasonable and adequate. But a further extension should be justified by formal application. There may also be questions concerning whether there is power for the Court to extend time on a second occasion. But I have heard no submissions on this point. On one view the breadth of the words of s 439A(6) would permit a second extension. But, on another view, the amendments to that subsection by the Corporations Amendment (Insolvency) Act 2007 (Cth) might have had a more limited effect. Those amendments substituted for the power to make an application within the convening period a power to make an application during or after the convening period. There are also cases which have granted a second extension, including under the general power in s 447A(1).

Associate:    

Dated:    11 August 2016

SCHEDULE OF PARTIES