FEDERAL COURT OF AUSTRALIA
Campbell-Wilson, in the matter of Forward Mining Limited (Administrators Appointed) [2022] FCA 356
ORDERS
DATE OF ORDER: |
THE COURT ORDERS THAT:
Interim orders
1. The originating process be returnable instanter.
2. Service of the originating process be dispensed with.
Extension of convening period
3. Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act), the date of the convening period within which the first plaintiffs, as the administrators of Forward Mining Limited (Administrators Appointed) ACN 143 413 343 and Middle Cove Enterprises Pty Ltd (Administrators Appointed) ACN 620 204 551 (Companies), must convene the meetings of the creditors of the Companies pursuant to s 439A of the Act (Second Meetings) be extended up to and including 11:59PM on 24 June 2022.
4. Pursuant to s 447A(1) of the Act, and further or alternatively pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations), being Schedule 2 to the Act (IPS), Pt 5.3A of the Act operates in relation to the Companies such that the meeting of the creditors of the Companies pursuant to s 439A of the Act may be held at any time during, or within five business days after the end of, the convening period as extended by the Court in Order 3 above.
5. The first plaintiffs have leave to apply for any further extension of the convening period referred to in Order 3 above.
Service of orders
6. Within seven days from the date of these Orders, the first plaintiffs are to take all reasonable steps to give notice of these orders to all creditors of the Companies as follows:
(a) electronically to the email address of the creditors (including the persons claiming to be creditors) for whom the first plaintiffs have an email address; and
(b) by post to all other creditors for whom or which the first plaintiffs do not have an email address; and
(c) by publishing these orders on the website of Grant Thornton (GT Website).
Service of reports for Second Meetings
7. Pursuant to s 447A(1) of the Act, Pt 5.3A of the Act is to operate such that the requirement on the first plaintiffs to issue the notice under subs 75-225 (1), (2) and (3) and s 75-15 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPRC) be modified such that the notice of the Second Meetings will be validly given to the creditors of the Companies by, not less than five business days prior to the date of the meetings:
(a) sending such notice electronically to the email address of the creditors (including the persons claiming to be creditors) for whom the first plaintiffs have an email address;
(b) sending such notice to the postal address or facsimile number, or otherwise as provided for by the Act or the IPRC, to any creditors not being a creditor referred to in Order 7(a) above;
(c) causing such notice to be published on the ASIC Insolvency Notices website located at: https://insolvencynotices.asic.gov.au/; and
(d) publishing such notice on the GT Website.
Service of other notices, reports and communications
8. Pursuant to s 447A(1) of the Act, Pt 5.3A of the Act is to operate such that any notice (other than the notice referred to in Order 7 above), report and communication that the first plaintiffs must or may give or send to creditors of the Companies be given or sent as follows:
(a) sending such notice, report or communication electronically to the email address of the creditors (including the persons claiming to be creditors) for whom the first plaintiffs have an email address, together with a statement that a copy of any such notice, report or communication may be requested in writing from the first plaintiffs or inspected at the offices of the first plaintiffs;
(b) sending such notice, report or communication to the postal address or facsimile number, or otherwise as provided for by the Act or the IPRC, to any creditors of the Companies, not being a creditor referred to in Order 8(a) above, together with a statement that a copy of any such notice, report or communication may be requested in writing from the first plaintiffs or inspected at the offices of the first plaintiffs;
(c) publishing such notice, report or communication on the GT Website;
(d) providing a creditor of the Companies, upon receipt of a written request, with a copy of any such notice, report or communication; and
(e) permitting a creditor of the Companies, upon receipt of a written request, to inspect a copy of any such notice, report or communication.
Other orders
9. Any person who can demonstrate sufficient interest (including any creditor of the Companies) for the purpose of modifying or discharging any order have liberty to apply on giving the first plaintiffs not less than five business days’ written notice.
10. The first plaintiffs have liberty to apply for any purpose connected with, or arising out of, the administration of the Companies.
11. The first plaintiffs’ costs of and incidental to this application be costs in the administration of the Companies, and be paid out of the assets of the Companies.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
(REVISED FROM TRANSCRIPT)
MARKOVIC J:
1 This is an application made by the first plaintiffs, Philip Campbell-Wilson and Said Jahani in their capacity as voluntary administrators (Administrators) of Forward Mining Limited (Administrators Appointed) and Middle Cove Enterprises Pty Ltd (Administrators Appointed) (together, Companies), for an order extending the convening period for the meetings of creditors of the Companies pursuant to s 439A (6) of the Corporations Act 2001 (Cth) and consequential orders. The Companies, Forward Mining and Middle Cove Enterprises, are respectively the second and third plaintiffs.
2 The application is supported by an affidavit sworn by one of the Administrators, Philip Campbell-Wilson on 5 April 2022.
BACKGROUND
3 A summary of the background to the application and the steps taken by the Administrators since their appointment on 9 March 2022 appears below.
4 Forward Mining was incorporated on 30 April 2010. It is an Australian unlisted public company.
5 Middle Cove was incorporated on 3 July 2017. It is an Australian proprietary company.
6 Forward Mining is the owner of mining lease no. 1996P/M (Mining Lease) granted and administered by Mineral Resources Tasmania (MRT) in a leased area near Hampshire, Tasmania to construct a mine and conduct mining and exploration operations for metallic minerals, atomic substances, construction minerals and industrial minerals and semi/precious stones (referred to as the Rogetta Project).
7 Middle Cove did not trade in its own capacity but acted as the treasury arm for Forward Mining.
8 Based on the Administrators’ investigations to date, it appears that neither Forward Mining nor Middle Cove employ any staff.
9 Mr Campbell-Wilson explains that the Administrators’ investigations into the Companies’ affairs have been hampered by the inadequate books and records those Companies maintained. However, based on the information that is available to the Administrators, it seems that:
(1) the Mining Lease is Forward Mining’s only asset other than some limited cash at bank of approximately $500;
(2) there are two secured creditors:
(a) DLC Group Holdings Family Trust, the appointing secured creditor which holds security over all present and after acquired property of Forward Mining, who is owed approximately $3,245,160.64; and
(b) Mineral Processing Solutions Pty Ltd, which holds security over certain equipment leased to Forward Mining which is located at the mine site;
(3) unsecured creditors have lodged claims totalling $26 million in the administration of Forward Mining. The Administrators are investigating the validity of each of those claims;
(4) the assets of Middle Cove are limited to cash at bank of approximately $340;
(5) there is one secured creditor of Middle Cove, being DLC the appointing secured creditor, which holds security over all of Middle Cove’s present and after acquired property;
(6) unsecured creditors have lodged claims totalling approximately $3.5 million in the administration of Middle Cove. The Administrators are investigating the validity of each of those claims;
(7) Forward Mining does not own any real property in Australia other than the Mining Lease; and
(8) Middle Cove does not own any real property in Australia.
10 The inadequacy of the Companies’ books and records has not only hampered the Administrators’ investigations to date but has led them to conclude that they have insufficient information to prepare a report to creditors.
11 Since their appointment, the Administrators have made a number of inquiries and taken a number of steps, including inquiring of third parties, in relation to the books and records of the Companies, in order to attempt to obtain copies of them. The steps that have been taken are set out in detail in Mr Campbell-Wilson’s affidavit.
12 While the inadequacy of the Companies’ books and records has generally hampered the Administrators’ ongoing investigations, the Administrators have obtained some books and records of Forward Mining, including some financial statements for some limited years. However, it appears that no financial statements have been prepared for Middle Cove.
13 In addition, despite repeated requests, the Administrators have not been provided with a Report on Company Activities and Property from the director and former directors of either of the Companies.
14 The Administrators have also taken steps to obtain technical information in relation to the Rogetta Project. Again, those steps are set out in detail by Mr Campbell-Wilson in his affidavit.
15 As I have already noted, the inadequate books and records have hampered the Administrators in their ongoing investigations and their ability to identify with any certainty various matters about either of the Companies including whether they had any employees. Certain persons currently claim to be employee creditors, in particular of Forward Mining, but the Administrators have identified that there may be issues with those claims.
16 The Administrators have also identified a transaction, which, in their opinion, might require further investigation. That transaction concerns shares which were formerly held by Forward Mining in Blythe River Iron Pty Ltd (BRI), which owns mining exploration licences in Tasmania. The Administrators’ investigations to date have identified that Forward Mining was the sole shareholder of BRI, owning all of its issued share capital until 27 August 2021. However, between 27 August 2021 and 27 January 2022, Forward Mining’s shares in BRI were transferred numerous times. As at the date of the appointment of the Administrators, the shares in BRI were held by Junyu Su, as to 900 shares, and Chengyu Gan, as to 100 shares. Mr Su is a director of Forward Mining who was appointed on 18 February 2022. Messrs Su and Gan are both directors of BRI. Based on the available books and records, the Administrators have not been able to identify any records of Forward Mining which show the receipt of any payment or consideration for the transfer of the shares in BRI.
17 Since the date of the Administrators’ appointment, there have been further transfers of the shares in BRI to a number of third parties. The Administrators have written to the accounting firm responsible for lodging with the Australian Securities and Investments Commission the initial change of shareholder forms seeking, relevantly, supporting records for the transfer of shares in BRI, but no information has, as yet, been forthcoming.
18 Mr Campbell-Wilson states that he believes that there is significant commercial value in having both the exploration licenses and the Mining Lease under one ownership as this may be crucial to obtaining favourable outcomes for creditors from the campaign that has recently been launched for the sale of Forward Mining’s assets, and/or any proposal to enter into a deed of company arrangement (DOCA). Accordingly, Mr Campbell-Wilson considers that it is both necessary and desirable to further investigate the share transfers in BRI in order to properly advise the Companies’ creditors and to provide a recommendation to them at the second meeting. Relevantly, the Administrators are taking steps to further investigate and understand the transactions that resulted in the transfer of the BRI shares but they do not expect that process to be completed prior to the expiry of the convening period.
19 As I have already observed, the Administrators have, since their appointment, taken steps to commence a sale campaign in order to ascertain whether or not there are any restructuring opportunities or other alternative proposals which may be available to Forward Mining, its creditors, and other stakeholders. The indicative timetable provided by Mr Campbell-Wilson in relation to that campaign anticipates that any transaction which might arise from it would complete in June 2022.
20 Another relevant feature of these administrations is that on 13 January 2021, MRT, a division of the Department of State Growth, Tasmanian Government and the regulator responsible for reviewing the compliance of the mine site and the Rogetta Project in accordance with the Mining Lease and the Mineral Resources Development Act 1995, issued a breach notice to Forward Mining. Forward Mining had failed to comply with various requests for information made of it by MRT and the Environment Protection Authority, Tasmania (EPA).
21 Mr Campbell-Wilson is of the opinion that the continued cooperation of the EPA and MRT will be crucial in the ability to obtain favourable outcomes for creditors from the sale campaign, or any DOCA proposal. Accordingly, the Administrators are taking steps to liaise with those regulatory agencies and to consider the implications of the breach notice served on Forward Mining. Again, they do not expect that process to be complete prior to the expiry of the convening period.
22 In Mr Campbell-Wilson’s opinion, an extension of the convening period is required for a number of reasons including that the lack of books and records for the Companies is hampering the Administrators’ ability to prepare a report to creditors for the purposes of the second creditors’ meeting, the ability to maximise the value of the Companies’ assets available for the creditors and to make a meaningful recommendation under r 75-225(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth), to those creditors.
LEGAL PRINCIPLES
23 The principles relevant to an application of the nature currently made by the Administrators to extend the convening period under s 439A(6) are settled.
24 In Crawford, in the matter of North Queensland Heavy Haulage Services Pty Ltd (Administrators Appointed) [2017] FCA 635 at [18] to [20] I summarised them as follows:
18 In exercising the jurisdiction to extend time under s 439A(6) the Court must have regard to the objects of Pt 5.3A of the Act as set out in s 435A. Those objects are to maximise the chances of the company or as much as possible of its business continuing in existence or, if that is not possible, to result in a better return for the companies’ creditors and members than would result from an immediate winding-up of the company.
19 The approach taken by the Court in applications of this type is well settled. The power to extend the time for convening the second meeting is one that should not be exercised as of course. Rather, the Court must strike an appropriate balance between the expectation that administration will be a relatively speedy matter 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 (see In the matter of Harrisons Pharmacy Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458 (Harrisons Pharmacy) (per Farrell J) at [11] and the authorities referred to therein).
20 Other relevant factors, particularly in the circumstances of this case, are:
(1) whether 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: see Fincorp Group Holdings Pty Ltd (2007) 62 ACSR 192; [2007] NSWSC 363 (Fincorp) at [18];
(2) 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, a factor which may militate against the too ready grant of an extension: see Fincorp at [4]; and
(3) whether an extension is necessary to enable the administrators to prepare and provide the report and statements, and to arrive at the opinion required by s 439A(4), in order to inform creditors adequately so that they, in turn, will be in a position to decide whether to terminate the administration, execute a DOCA or place the company in liquidation: see Re Pan Pharmaceuticals Ltd (admins apptd) (ACN 091 032 914) (McGrath and Honey as joint liquidators) (2003) 46 ACSR 77; [2003] FCA 598 at [41]).
See too Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 at [18] where Lindgren J set out the considerations to be taken into account on an application for extension of the convening period.
25 In Re Riviera Group Pty Ltd [2009] NSWSC 585; ACSR 352 at [13] Austin J observed that reasons given for extensions included where additional time is likely to enhance the return for unsecured creditors. In addition, the court’s power to extend a convening period has been exercised where to do so would allow a sale of a business as a going concern to be achieved: see In the matter of Harrisons Pharmacy Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458.
CONSIDERATION
26 In my opinion, the orders sought by the Administrators for an extension of the convening period should be made. I have reached that conclusion for the following reasons.
27 First, the extension sought will allow time for the Administrators to carry out further investigations and for a DOCA proposal to be made.
28 Secondly, and importantly, it will give the Administrators time to meaningfully report to creditors on the affairs of the Companies prior to the second meeting of creditors. At the moment, the Administrators are not in a position to do that.
29 Thirdly, as submitted by the Administrators:
(1) the application for the extension of the convening period was made before its expiration and it is the first such application;
(2) the extension sought is for a period of approximately 10 weeks, a period of time which is reasonable having regard to the complex affairs of the Companies, the need to conduct further investigations into their affairs, particularly given the inadequacy of the books and records and the failure by the Companies’ directors to have reported to the Administrators as required, the need for further time to allow a possible sale or recapitalisation of the Companies’ assets to be achieved and the need for the Administrators to continue to carry out their investigations;
(3) creditors will not be materially prejudiced by the extension;
(4) there is no winding up application on foot in respect of either of the Companies; and
(5) the orders proposed by the Administrators make provision for any person who can demonstrate sufficient interest to apply to the Court for their modification.
30 Finally, I make one further observation in relation to the Companies’ employees, if any. The Administrators have, based on the information available to them, formed the view that the Companies had no employees. Despite this, claims have been made by persons contending that they are employees. Given that the Administrators have not had complete access to the books and records of the Companies, it is in the interests of the Companies and their creditors that they be given additional time to ascertain the position vis a vis those persons claiming to be employees. This is a further reason for the convening period to be extended.
31 The Administrators also seek ancillary orders providing for the electronic provision of reports and other documents to the Companies’ creditors. Orders of the nature sought by the Administrators have been made in a number of cases and it is clear that courts have become increasingly willing to make them both in order to save costs and time and to conserve the limited available assets for the benefit of creditors: see In the matter of BBY Limited [2015] NSWSC 974 at [7].
32 The orders sought in that regard by the Administrators should be made. Mr Campbell-Wilson explains that those orders will allow the Administrators to email notices and other communications to creditors, where an email address is known, and for those same communications to be placed on the website of the Administrators’ firm. In circumstances where the email address of a creditor is not known, then relevant notices will be sent by prepaid post to their last known postal address. The ability to proceed in this way will save time and cost for the Administrators.
CONCLUSION
33 I will make the orders sought by the Administrators in their originating process filed on 6 April 2022.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Markovic. |
Associate:
