Federal Court of Australia

Gothard, in the matter of Carabella Resources Pty Ltd (Receivers and Managers Appointed) (Administrators Appointed) [2020] FCA 1828

ORDERS

THE COURT ORDERS THAT:

1.    This originating process dated 16 December 2020 (originating process) be returnable instanter.

2.    Pursuant s 439A(6) of the Corporations Act 2001 (Cth) (the Act), the convening period, as defined by s 439A(5) of the Act, with respect to each of the Companies, be extended up to and including 22 March 2021.

3.    Pursuant to s 447A(1) of the Act, Part 5.3A of the Act is to operate in relation to the Companies as if the meeting of creditors of the Companies, required by s 439A of that Act, may be convened and held at any time during the period as extended under order 2 above, and the period of five (5) business days thereafter, notwithstanding the provisions of s 439A(2) of the Act.

4.    Liberty to apply for any purpose connected with the administration of the Companies including but not limited to seeking a further extension of the convening period prior to 22 March 2021.

5.    Liberty to apply is granted to any person, including any creditor of the Companies or the Australian Securities and Investments Commission (ASIC), who can demonstrate sufficient interest to vary the orders sought on the giving of reasonable notice to the plaintiffs, and to the Court.

6.    The plaintiffs, within seven (7) business days of making of orders pursuant to the originating process, are to take all reasonable steps to give notice of these orders to the companies' creditors (including the persons claiming to be creditors), by means of a circular:

(a)    to be sent by email transmission to creditors for whom the plaintiffs have a current email address; or

(b)    to be sent by ordinary post to creditors for whom the plaintiffs have only a postal address.

7.    Pursuant to s 447A(1) of the Act, Part 5.3A of the Act is to operate in relation to the Companies such that any notice (including those pursuant to s 75-225(1) and s 75-15(1) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (other than the notices referred to in paragraph 6 above), report and communication that the plaintiffs must or may give or send to creditors of the Companies (notices) will be validly given to creditors of the Companies by:

(a)    causing the notices to be published on the ASIC published notices website at https://insolvencynotices.asic.gov.au/;

(b)    sending the notices by email transmission to creditors for whom the plaintiffs have a current email address; and

(c)    where an email address is not recorded in the books and records of the Companies but a postal address is recorded, sending by post the notices to the postal address of each creditor at such postal address as is recorded in the books and records of the Companies.

8.    The plaintiffs’ costs and expenses of this application be costs and expenses in the administration of the Companies.

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

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    This application was brought by the administrators of three related companies, Carabella Resources Pty Ltd (receivers and managers appointed) (administrators appointed) (Carabella), Wealth Mining Pty Ltd (administrators appointed) (Wealth Mining) and Bluff PCI Management Pty Ltd (administrators appointed) (Bluff). The administrators sought an extension of the convening period for the calling of the second meeting of creditors under s 439A of the Corporations Act 2001 (Cth) (the Act). Ancillary orders were also sought pursuant to s 447A(1) of the Act.

Background

2    The administrators, who are all partners of the firm KPMG, were appointed as the administrators of the companies on 23 November 2020.

3    They convened the first creditors’ meeting on 3 December 2020.

4    Based upon the administrators’ investigations undertaken to date, it appears that the business of the companies relates to the ownership and operation of the Bluff Coal Mine in central Queensland. The operations there, which are conducted by Bluff and Wealth Mining, have largely been funded by Carabella through inter-company loans. Wealth Mining is also the holder of other mining tenements in an unrelated mining area known as Grosvenor West.

5    The Bluff Coal Mine, which is owned by Carabella, would ordinarily produce approximately 1.2 million tonnes per year of PCI coal, used in the production of iron and steel. Presently it appears to the administrators that Carabella has two major contracts for the sale of coal extracted from the mine, although one will terminate on 31 December 2020 and the other in March 2021.

6    Although the reasons are not entirely clear, it appears that the entity which provides the plant, equipment and personnel for mining operations at the mine, MACA Mining Ltd (MACA), has ceased to do so and will demobilise from the site. It might be inferred that it has not been paid for the services which it has provided.

7    On 18 November 2020, MACA appointed receivers to the assets, or some of the assets, of the companies. From the date of their appointment, the receivers took control of the companies’ primary bank accounts. The result is that the administrators have very little in the way of liquid assets from which to fund the administration.

8    Since 2 December 2020, the administrators have been conducting a sale campaign for each of the companies. This has apparently occurred through the provision of a sale memoranda to a large number of parties. Facilities have been prepared to assess the offers which might be received. The administrators have given evidence that 21 non-disclosure agreements have been entered into for the purposes of negotiating possible sales. They also depose that seven parties have submitted indicative offers to continue with due diligence with a view to making a final offer. It appears that those bidders have indicated a preference to complete the transaction by way of an asset sale structure, or pursuant to a deed of company arrangement.

9    The sale process has been conducted with admirable speed and in an expedited manner, and the administrators expect for bids to be provided on 18 December 2020.

10    Presently, the date for convening a second creditors’ meeting will expire on 21 December 2020.

Power to extend the convening period

11    Pursuant to s 439A(1) of the Act, an administrator must convene a second meeting of creditors within the convening period fixed by subs (5) or extended under subs (6). That is, the second creditors’ meeting must usually be held within 5 business days before, or within 5 business days after, the end of the convening period.

12    However, the Court may extend the convening period pursuant to s 439A(6) and, it may do so even after the end of the convening period, although additional requirements must be satisfied.

13    In this case, the application has been made within the convening period.

14    On applications of the present nature, the Court’s discretion is generally guided by two overriding principles:

(a)    First, weight is to be given to the expectation inherent within the statutory scheme that the administration will proceed in a relatively summary way. That, however, needs to be balanced against the need to afford the administrators time to present meaningful choices to the creditors at the second meeting so as to enhance the objectives of s 435A of the Act.

(b)    Second, the statutory objects of an administration are to maximise the chances of the company continuing in existence or, alternatively, if that is not possible, terminating its existence in a way that provides a better return for the company’s creditors and members than would result from an immediate winding up of the company.

15    It has been well recognised that whilst extension of the time for the convening of the second creditors’ meeting is not for the asking, it is also not necessary for the applicant to show any special grounds for the making of the order: Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611, 613; Re Levi (1996) 19 ACSR 521, 522.

16    In Re Riviera Group Pty Ltd (administrators appointed) (receivers and managers appointed) (2009) 72 ACSR 352, Austin J, a judge of unequalled ability and authority in this area, provided a taxonomy at 355 [13] of the various reasons as to why extensions had been and might be given:

•    the size and scope of the business;

•    substantial offshore activities;

•    large number of employees with complex entitlements;

•    complex corporate group structure and intercompany loans;

•    complex transactions entered into by the company (for example securities lending or derivatives transactions);

•    complex prospects of recovery proceedings;

•    lack of access to corporate financial records;

•    the time needed to execute an orderly process of disposal of assets;

•    the time needed for authoritative assessment of a proposal for a deed of company arrangement;

•    where the extension will allow sale of the business as a going concern;

•    more generally, that additional time is likely to enhance the return for unsecured creditors.

(Citations omitted).

17    His Honour observed (at [14]) that where a substantial issue in any of these categories is established (and even more so when the facts fit into more than one category), then an extension will generally be granted and further, that the time sought by the administrator will be given, provided that sufficient evidence has been adduced to the Court that there is no evidence of material prejudice to those affected by the moratorium imposed by the administration, and the Court is satisfied that the administrator’s estimate of time has a reasonable basis.

Application of the present case

18    In his careful affidavit, Mr Gothard, one of the administrators, set out the circumstances of the administration, including the impediments caused by the appointment of receivers by secured creditors. He also set out the manner in which the administration is being conducted and the sale process being pursued by him and the other administrators.

19    He further deposed to the circumstances which render the granting of the extension desirable for the purposes of the administration. In particular, he identified that further time is required:

(a)    for him to receive and evaluate any final offers received for the companies or their assets;

(b)    to liaise with the parties lodging bids for the companies or their assets and to clarify any proposals;

(c)    for the purposes of negotiating with bidders and documenting and entering into any relevant transaction to secure a sale;

(d)    to investigate the availability of any recovery actions and any other claims which may be available. Necessarily, an understanding of those matters is important if the company is to be sold by way of a transfer of shares; and

(e)    to prepare a detailed report to creditors, including an assessment of the bids and to provide a recommendation as to the appropriate way forward.

20    Mr Gothard expressed his professional view, which I accept, that an extension of time will maximise the flexibility for any proposed transaction structure, including for any potential purchaser to make proposals of any deed of company arrangement. He opined, and again I accept, that such flexibility could result in a potential enhanced return to creditors of the company.

21    He also deposed to his belief that no prejudice may be suffered by any creditor of the company as a consequence of the Court granting the extension. There are no landlord creditors or other creditors seeking to enforce proprietary rights in relation to property held by the companies other than the enforcement action taken by MACA, which resulted in the appointment of the receivers. Mr Gothard also deposed that employee entitlements will not be prejudiced by the granting of the extension.

22    In his affidavit, he deposed that he will convene a second meeting earlier than the extended date if he is able to do so.

23    Given the foregoing, I accept that the proposed extension of the convening period will not unduly prejudice any creditors of the companies, and it is in the best interests of the companies’ creditors that the convening periods be extended. An extension of these periods would provide the best opportunity to investigate and maximise returns to creditors in circumstances where it is unlikely that any specific prejudice will be suffered by any of the creditors. The extension of the convening periods accords the administrators the opportunity to secure greater returns for creditors.

24    In the result, it is in the interests of the creditors that the convening period for the second meeting of creditors be extended until 11 March 2021. It is appropriate to make an ancillary order pursuant to s 447A(1) of the Act that the meeting may be held at any time during the extended period notwithstanding the provisions of s 439A of the Act.

Very appropriately, Mr Coveney of Counsel raised with the Court the fact that due to the imminent passing of the convening period, the current application has not been served on any of the creditors. The administrators propose that this be accommodated by an order that they be required to give notice of any extension orders, and that a further order be made that any interested party have liberty to make an application to vary the orders. I note that a similar order to this effect was made in Crawford, in the matter of North Queensland Heavy Haulage Services Pty Ltd (administrators appointed) [2017] FCA 635. It is appropriate to make such an order.

25    It is also noted that a letter was sent to the solicitors for the substantial secured creditor of Carabella, MACA, and their appointed receivers giving notice of this hearing. MACA’s solicitors have responded indicating that they do not oppose the orders which are sought. In those circumstances, I am prepared to make the orders which the administrators seek.

Associate:    

Dated:    17 December 2020