Federal Court of Australia

Woodhouse (Administrator), in the matter of Panoramic Resources Limited [2024] FCA 22

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 439A(6) and s 447A(1) of the Corporations Act 2001 (Cth), the period within which the first plaintiffs (Administrators) must convene the second meeting of creditors of each of the second to fifth plaintiffs (Companies) under s 439A of the Corporations Act be extended to midnight AWST on 23 July 2024.

2.    Pursuant to s 447A(1) of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to each of the Companies so that, notwithstanding s 439A(2) of the Corporations Act, the second meetings may be held together or separately at any time during the period up to, or within five business days after the end of, the convening period as extended in order 1 above, provided that the Administrators give notice of the meeting in accordance with r 75-225(1) and r 75-15 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR).

3.    Within two business days of the proposed orders being made, the Administrators are to give notice of the orders to the creditors of each of the Companies (including persons claiming to be creditors) by means of a circular:

(a)    to be published on the website maintained by the Administrators in respect of the administration of the Companies; and

(b)    to be sent by email or by post to all known creditors.

4.    Pursuant to s 447A(1) of the Corporations Act and s 90-15 of the Insolvency Practice Schedule (Corporations) (being Schedule 2 to the Corporations Act) (IPSC), Part 5.3A of the Corporations Act is to operate in relation to the Companies such that if, pursuant to any provision in any of Part 5.3A of the Corporations Act, the IPSC, or the IPR, the Administrators are required to provide any other notification to creditors during the administration of the Companies, such notice will be validly given to creditors of the Companies by:

(a)    giving such notice electronically by email sent to the email address of any creditor (including persons claiming to be creditors) of the Companies for whom or which the administrators hold an email address;

(b)    sending such notice to the postal address or facsimile number, or otherwise as provided for by the Corporations Act or the IPR, to any creditors not being a creditor referred to in subparagraph 4(a) above; and

(c)    to the extent that the matter relates to a meeting that is the subject of r 75-40(4) of the IPR, causing such notice to be published on the Insolvency Notices website located at: https://insolvencynotices.asic.gov.au.

5.    Liberty be granted to the Administrators on one business days' written notice to the Court in relation to any variation of these orders or any other matter generally arising in the administrations of any or all of the Companies.

6.    Liberty be granted to any person who can demonstrate sufficient interest to discharge or modify these orders on the giving of three business days' written notice to the plaintiffs and the Court.

7.    The Administrators' costs of and incidental to this application be costs 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

BANKS-SMITH J:

Administration of the plaintiff companies

1    The first plaintiffs are the Administrators of each of Panoramic Resources Limited, Savannah Nickel Mines Pty Ltd, PAN Transport Pty Ltd and Pindan Exploration Company Pty Ltd.

2    They were appointed Administrators following resolutions of the directors of the respective companies to that effect on 14 December 2023 (as to Panoramic, Savannah and PAN Transport) and on 15 January 2024 (as to Pindan).

3    Panoramic is a nickel mining and exploration company listed on the Australian Securities Exchange and is the direct or ultimate holding company of each of the other companies. It has two substantial shareholders, JP Morgan Nominees Australia Pty Ltd and IGO Forrestania Limited.

4    Savannah owns and operates the Savannah Nickel Project, producing nickel, copper and cobalt from a mine in the East Kimberly region of Western Australia, and is historically funded by Panoramic. The Savannah Nickel Project is the key asset of the group.

5    PAN Transport and Pindan are currently dormant entities in the group.

6    There are currently significant unsecured intercompany loans as between the companies, which have been used mainly to meet costs associated with the operation of the Savannah Nickel Project and exploration costs to maintain tenement assets of the group.

7    In addition, a company known as Trafigura Pte Ltd, a commodities trading and logistics company domiciled in Singapore, has provided facilities to Savannah totalling $45 million, guaranteed by Panorama and PAN Transport. Those amounts are secured by a general security deed, a mining mortgage and specific security deed. Relevantly, under a 'concentrate sales agreement' Savannah has agreed to deliver all of the concentrate it produces to Trafigura.

8    Against that backdrop, in November 2023 Panoramic initiated a strategic review of the Savannah Nickel Project, due to the impact of decreases in nickel prices. It also sought to undertake a campaign for potential recapitalisation, having regard to cashflow requirements, but the process was unsuccessful in the time available. Following those processes, the Administrators were appointed.

Initial steps by the Administrators and first meetings

9    On 21 December 2023, the Administrators provided Trafigura with an irrevocable consent to enforce its securities over the companies beyond the 13 day 'decision period' provided under s 440B and s 437D(2) of the Corporations Act 2001 (Cth). On 22 December 2023, Trafigura's solicitors, Corrs Chambers Westgarth, lodged a proof of debt with the Administrators in the amount of USD$36,636,212.49 for the purposes of the first creditors' meetings.

10    Concurrent first meetings of the creditors of Panoramic, Savannah and PAN Transport were held on 28 December 2023. At the meetings, no creditor sought to replace the Administrators. The first meeting of the creditors of Pindan is due to be held on 25 January 2024.

Time period for convening second meetings

11    In accordance with the statutory regime, the usual 25 business days' time period for convening the second meeting of the creditors of Panoramic, Savannah and PAN Transport is due to expire on 23 January 2024. As to Pindan, it is due to expire on 20 February 2024.

12    For convenience the Administrators wish to bring into line the timing of the second meeting of creditors for the four companies.

13    They sought an extension of time for the convening of those second meetings with respect to each of the companies to 23 July 2024.

14    In support of their application they adduced affidavit evidence from one of the Administrators, Daniel Woodhouse, who is a registered liquidator and a senior managing director in the corporate finance and restructuring practice of FTI Consulting. Two affidavits of Mr Woodhouse were relied upon.

15    For the following reasons, I consider it appropriate to grant the relief sought.

Principles

16    The Court has power to make orders extending the convening period under s 439A(6) and s 447A of the Corporations Act.

17    When considering an application to extend the convening period, the Court must have regard to the objects of Part 5.3A set out in s 435A and reach an appropriate balance between the expectation that an administration will be undertaken in a relatively speedy and summary manner with the need to ensure that the administration is not concluded without consideration of sensible and constructive options directed towards maximising the returns for creditors and any return for shareholders: Diamond Press Australia Limited [2001] NSWSC 313 at [10] (Barrett J).

18    The administrator's view on such an application is significant and, particularly where the administration is complex, it should carry weight: In the matter of Renex Holdings (Dandenong) 1 Pty Ltd (administrators appointed) [2015] NSWSC 2002 at [9] (Black J).

19    In considering an application for an extension, the court must take into account the detriment to third parties, including the suspension of rights and remedies of secured creditors, lessors, and others: Shaw and Albarran (Joint and Several Administrators of Home Art Building Group Pty Ltd (Administrators Appointed)) v Home Art Building Group Pty Ltd (Administrators Appointed) [2016] WASC 274 (Beech J) at [18].

20    The Court has recognised that interests of creditors can be prejudiced not only by delay but also by the convening of premature meetings, where the administrator has been unable to obtain adequate information for the preparation of the administrators' report in a form enabling creditors to make an informed decision: In the matter of Harrisons Pharmacy Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458 at [13] (Farrell J) and the cases there cited.

21    In In the matter of Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) [2009] NSWSC 585 at [13], Austin J identified the following relevant categories of cases in which an extension had been granted:

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

(b)    where the size and scope of the business in administration is substantial; and

(c)    more generally, where additional time is likely to enhance the return for unsecured creditors.

22    In Mighty River International Limited v Hughes [2018] HCA 38; (2018) 265 CLR 480, Nettle and Gordon JJ (in dissent, but not relevantly in this respect) cited many of the authorities in the area and observed:

[73]    Generally speaking, courts have been disposed to grant substantial extensions in cases where the administration has been complicated by, for example, the size and scope of the business, substantial offshore activities, large numbers of employees with complex entitlements, complex corporate structures and intercompany loans, and complex recovery proceedings, and, more generally, where the additional time is likely to enhance the return to unsecured creditors. Provided the evidentiary case for extension has been properly prepared, there has been no evidence of material prejudice to those affected by the moratorium imposed by the administration, and the administrator's estimate of time has had a reasonable basis, the courts have tended to grant extensions for the periods sought by administrators.

(footnote omitted)

23    The principles have also been collected and applied on many occasions in this Court, including in Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717 at [64] (Middleton J); and Algeri, in the matter of WBHO Australia Pty Ltd (Administrators Appointed) (No 2) [2022] FCA 234 at [16]-[17] (Beach J). I also set out the above principles in Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) (No 2) [2021] FCA 577 at [17]-[22]; and Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) (No 2) [2022] FCA 1563 at [7]-[14].

Work undertaken since appointment

24    In assessing whether an extension of time should be granted, it is relevant to have some regard to the nature and intensity of work that it has been necessary for the Administrators to undertake since their appointment, and during the limited period prescribed by the legislation.

25    The Administrators have conducted a solvency analysis of each of the companies in the time since their appointment.

26    Mr Woodhouse said that based on the Administrators' preliminary investigations, it is his opinion that the declining nickel price was the main factor leading to the administration of the companies.

27    Mr Woodhouse adduced evidence as to the cash at hand, fixed assets, employee numbers and secured and unsecured debts for each of the companies. It is not necessary to incorporate those details into these reasons. It suffices to observe that between them, Panoramic and Savannah have approximately 153 staff in Perth and the East Kimberley. There is significant cash at hand and circulating assets but also numerous secured and unsecured creditors. Whilst the position is less significant with respect to PAN Transport and Pindan, as far as Panoramic and Savannah are concerned, the Administrators believe that the greatest return to creditors is likely to be derived from a sale of the Savannah Nickel Project business and, or alternatively, a recapitalisation of the companies.

28    Consistent with their statutory duties, since their appointment the Administrators have also undertaken the following significant tasks:

(a)    corresponded with the directors about the requirements to submit a report as to affairs;

(b)    secured IT ongoing services for the companies to ensure the records are protected;

(c)    sought to obtain the complete books and records of the companies;

(d)    issued an initial circular to creditors and responded to numerous phone and email communications from them;

(e)    continued to operate the companies on a 'business-as-usual' basis, including all mine and processing activities, up until 8 January 2024;

(f)    undertook steps to transition to a care and maintenance regime;

(g)    communicated with suppliers and statutory bodies;

(h)    undertook steps to effect the shipment of approximately 10,000 tonnes of nickel concentrate;

(i)    issued a circular to creditors, suppliers and employees on 9 January 2024 addressing the suspension of the Savannah Nickel Project's operations;

(j)    met with employees where practicable, or otherwise addressed them over Microsoft Teams, and sought to properly inform them as to the necessity to stand some down and make some redundant;

(k)    made all necessary ASX announcements;

(l)    secured assets and retained an independent valuer to value the assets of the group; and

(m)    corresponded with the shareholders and creditors, and their legal representatives as applicable.

29    Since their appointment the Administrators have also undertaken urgent investigations into the companies and their key assets for the purpose of a possible sale, joint venture, or other recapitalisation. A strategic and financial advisor was appointed (Treadstone Resource Partners Pty Ltd) to assist in this process. Parties were able to express an interest in participating in the sale process. The Administrators have corresponded with interested parties (who are subject to confidentiality agreements) to seek non-binding indicative offers and access to an on-line data room. As at the date of Mr Woodhouse's first affidavit, some 25 expressions of interest had already been received, with the date for non-binding indicative offers open until 31 January 2024. After that date, parties will have the opportunity to conduct due diligence and submit final offers. Mr Woodhouse said that for assets of this nature, there is a significant amount of technical information which must be made available to interested parties, and they must have time to complete their due diligence. So much can readily be accepted.

30    Mr Woodhouse said that due to the complex nature of the business and assets, he would expect the sale process to take in excess of three months to complete.

31    Treadstone has advised the Administrators that the sale process from the time of provision of non-binding indicative offers until completion of any transaction is likely to take until at least September 2024. Mr Woodhouse stated the following:

Based on consultation and advice from … Treadstone, the indicative timeframe for the Sale Process is as follows:

(a)    Stage 1 [non-binding indicative offers] are due on 31 January 2024;

(b)    Stage 2 is due to commence mid to late February 2024, depending on the nature of the proposals received at the end of Stage 1;

(c)    Stage 2 final proposals will be due by late March 2024 to mid April 2024;

(d)    Negotiation of commercial terms of final proposals are to be finalised by the end of April 2024;

(e)    Negotiation of full form documentation is to take place during May 2024;

(f)    Binding documents are to be executed by June 2024; and

(g)    A transaction is to be completed by September 2024.

Reasons for extension

32    Mr Woodhouse stated that the primary reason for the extension is facilitation of a sale process, as summarised above. The Administrators do not anticipate that any sale process for a part or the whole of the assets or business can be completed until after the statutory dates for convening the second meetings of creditors unless those dates are extended.

33    Further, Mr Woodhouse stated that the Administrators will not have sufficient time to complete their investigations into the solvency position of the companies by the statutory dates, so as to enable them to properly report to creditors and provide them with an informed recommendation. It is almost inevitable that the second meetings would need to be further adjourned, with resulting costs, unless this application is granted. Alternatively, the companies would be placed in liquidation, an outcome that the Administrators consider would be significantly worse for creditors than if time is permitted to facilitate a successful sale process.

34    The Administrators considered that the requested six-month extension would allow for sufficient time to be available to them to facilitate such tasks without the need to request a further extension.

Position of stakeholders

Employees

35    As operations have now been suspended, the Administrators are undertaking an orderly wind-down of operations. Employees will be made redundant over this wind-down time and approximately $3.3 million in termination entitlements will crystalise. The Administrators' preliminary view is that there are circulating assets as at the date of appointment that may be available to pay potential priority claims of these employees. However, and regardless, Mr Woodhouse disclosed that a number of employees have written to him opposing any extension of the convening period as sought by this application. As a result, Mr Woodhouse prepared a circular that was made available to employees on 17 January 2024, which set out why, in the view of the Administrators, the application for the six-month extension is not expected to materially impact the time within which employees will be paid their outstanding entitlements. Consistent with the contents of the circular, Mr Woodhouse said in his second affidavit:

(a)    The Administrators are of the view that there should be sufficient circulating assets to pay entitlements in full;

(b)    All employee entitlements falling due during the administration period are being paid in the ordinary pay cycle, when due;

(c)    In relation to pre-appointment entitlements, the Administrators are paying certain of those entitlements (unpaid wages, superannuation, short term incentive plan payments and retention bonuses), in advance, during the course of the administration as set out in the Employee Circular at page 11 of Annexure DHW-2 (notwithstanding that, because they are pre-appointment liabilities, they would not ordinarily be payable by an administrator during the administration period);

(d)    For other (more complex) employee entitlements (such as severance/redundancy payments, pay in lieu of notice), the Administrators intend to progress the payments to employees as soon as possible after they have completed the process of calculation, verification and adjudication of entitlements (by reference to employment contracts, industrial instruments, any enterprise bargaining agreements or awards, the Companies' books and records and any relevant advice as to the quantum or basis for entitlements). That exercise is a process which would need to be undertaken whether the Companies remain in administration or go into liquidation. If the Companies were to go into liquidation at the [expiry of the date provided by the Corporations Act], the calculation exercise would not, in my opinion, be significantly quicker (or different), to that which would arise if the convening period was extended. In any case, … the Administrators intend to progress the payments to employees as soon as possible. If the Administrators are able to make those payments during the administration period, they will do so.

36    Further, the Administrators referred to the potential for employees to obtain re-employment if a sale process completes.

Landlord

37    Mr Woodhouse deposed to the intention of the Administrators to continue paying the rent for the companies' office premises to the landlord as long as the companies continue to occupy them. If the Administrators effect a sale of the companies' business and/or their assets, such transaction may involve an assignment of lease, which would benefit the landlord. If a sale or restructure of the companies does not involve an assignment of lease, or the Administrators proceed to an orderly wind-down of the companies, the companies will vacate the premises as they will no longer be required. Once the companies no longer occupy the premises, the Administrators expect to then provide consent for the purposes of s 440B of the Corporations Act to the landlord to re-take possession of the premises.

38    Accordingly, Mr Woodhouse does not consider the landlord will be in any worse position than if no extension were granted. Further, the landlord has not informed the Administrators of any concern in this regard.

Secured creditors

39    Mr Woodhouse said that at the first meetings of creditors, the Administrators advised the creditors that they intended to make an application to the Court to extend the convening period by at least three months and potentially longer, given the size and complexity of the business. Trafigura's solicitors, Corrs Chambers Westgarth, attended the first concurrent meeting and did not raise any objection to the proposed application.

Unsecured creditors

40    No objections were raised by unsecured creditors at the first creditors meeting to the anticipated extension application. Further, it is the Administrators' opinion that the sale process may result in a superior return to unsecured creditors. This potential is to be balanced against any prejudice suffered as a result of the extension of the convening period.

Trade creditors

41    Mr Woodhouse was also of the view that a sale, if facilitated, will maximise the prospect of commercial relationships continuing and contracts being preserved, with a newly capitalised or new counterparty, a result that would be in the interests of trade creditors.

Notice of this application

42    On 12 January 2024, the Administrators caused a letter to be circulated to the identified creditors of each of Panoramic, Savannah and PAN Transport. The circular advised that the Administrators intended to make this application and advised them of the listing date. It informed them that copies of the filed documents would be available on the relevant portal, and sought the urgent views of employees and creditors in respect of the Application. No circular was issued in respect of Pindan because Panoramic and Savannah are the only known creditors of Pindan.

43    Mr Woodhouse said that apart from the communications from employees (referred to at [35] above), the Administrators have not received any notice of any other opposition to this application from creditors.

Extension appropriate

44    In my view this is an example of a large and complex administration where a substantial extension of the convening period for the second meetings is clearly justified and appropriate, as explained in Mighty River International. The matters raised by the Administrators to which I have referred above are all relevant and cumulatively are persuasive.

45    The Administrators' report and requisite opinion required by r 75-225(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth) must provide appropriate information to creditors about the companies' business, property, affairs and financial circumstances together with notice of the second meetings, and is to be provided no later than five business days before the second meetings. I accept that having regard to the complexity of this group administration, the Administrators will not be in a position in the short term to properly make recommendations to creditors. The position will be enhanced by an extension of the convening period as sought.

46    If no extension is granted the Administrators would be placed in the position that the second meetings would proceed, but the Administrators would inevitably recommend that it be adjourned until the necessary work and investigations can be undertaken. This would require the Administrators in effect to convene two second meetings and prepare reports to creditors, and would result in otherwise avoidable expenditure of creditor funds.

47    The additional time will facilitate an orderly sale process being carried out and completed. I accept that if such a sale process is successful, it is likely to enhance the position for creditors, as compared with an immediate liquidation.

48    The two affidavits provided by Mr Woodhouse provide the evidentiary case for the requested extension. There is no evidence of material prejudice to those affected by the extension, and I accept that the Administrators have endeavoured to give appropriate explanations to the employees. There was disclosure to creditors at the first meetings of the intention to seek the extension, including disclosure that the extension period might be longer than three months. Rather than being prejudicial, the extension would generally seem to be in the interests of the various stakeholders, having regard to the sale process that is being considered by the Administrators, which are directed towards maximising the returns for creditors. The purpose of the extension falls within the principles set out in Riviera Group.

49    The Administrators' current estimate of time (six months) has a reasonable basis, and I accept that it is appropriate to give weight to the Administrators' views as to the appropriate length of any extension.

50    In deciding to grant the application, I am guided by the desirability of reaching an appropriate balance between expediency and the potential for an enhanced return, as discussed in Diamond Press Australia.

51    For those reasons there will be an extension of the period within which the Administrators must convene the second meetings of creditors in respect of each of the companies under s 439A of the Corporations Act to midnight on 23 July 2024. There will also be a so-called Daisytek order to facilitate any prospect of convening the meetings earlier than the latest possible date (see order 2).

Other matters

52    The other ancillary orders sought are standard in nature and appropriate.

53    There will be liberty to apply to the Administrators and interested parties to seek to vary these orders.

54    There will be orders accordingly.

Associate:

Dated:    19 January 2024