Federal Court of Australia

Reid (Administrator), in the matter of Northern Iron Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2025] FCA 525

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 439A(6) and s 447A of the Corporations Act 2001 (Cth) the period within which the first and second plaintiffs (administrators) must convene the second meeting of creditors under s 439A of the Corporations Act of the third plaintiff (Company) be extended until midnight on 24 November 2025.

2.    Pursuant to s 447A(1) of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to the Company so that, notwithstanding s 439A(2) of the Corporations Act, the second meeting may be held at any time during, or within five business days after the end of, the convening period as extended by order 1 above.

3.    The administrators, within two business days, must take all reasonable steps to cause notice of these orders to be given to the creditors of the Company (including persons who to the knowledge of the administrators claim to be creditors), in the following manner:

(a)    where the administrators have an email address for a creditor, by sending a copy of these orders to the creditor by email;

(b)    where the administrators do not have an email address for a creditor, by sending a copy of these orders to the postal address as is recorded in the books and records of the Company of the creditor; and

(c)    by posting a copy of these orders to the Rogers Reidy creditors' portal on its website.

4.    Pursuant to s 447A(1) of the Corporations Act and s 90-15 of the Insolvency Practice Schedule (Corporations), Part 5.3A of the Corporations Act is to operate in relation to the Company such that notice of the second meeting required by s 439A of the Corporations Act and s 75-15(1) of the Insolvency Practice Rules (Corporations) 2016 (Cth) will be validly given to creditors of the Company (or persons claiming to be creditors) if the notice is, not less than five business days prior to the date of the proposed meeting, provided:

(a)    where the administrators hold an email address for the creditor – by email;

(b)    otherwise – by sending the notice to the postal address or facsimile number, or otherwise as provided for by the Corporations Act or the Insolvency Practice Rules;

(c)    in any event – causing such notice to be published in The Insolvency Notices website located at: https://insolvencynotices.asic.gov.au/.

5.    The administrators' costs of the application are costs in the administration of the Company and are to be paid out of the assets of the Company.

6.    The administrators have liberty to apply for any purpose connected with the administration of the Company, including but not limited to seeking a further extension of the convening period referred to in paragraph 1 above.

7.    Any person who can demonstrate sufficient interest to discharge or vary the orders have liberty to apply on not less than 72 hours' notice to the plaintiffs.

8.    These orders are to be served on the Australian Securities and Investments Commission.

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

REASONS FOR JUDGMENT

BANKS-SMITH J:

1    The first and second plaintiffs, Stuart Reid and Sam Sellahewa respectively of Rodgers Reidy, are the administrators of the third plaintiff, Northern Iron Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed). The administrators were appointed on 12 April 2025 following a resolution of the board.

2    On 14 April 2025 Hayden White and Daniel Woodhouse of FTI Consulting were appointed joint and several receivers of the property of Northern Iron by a secured creditor, Cargill International Trading Pte Ltd.

3    The first meeting of creditors was held on 28 April 2025 and a committee of inspection was appointed.

4    By this application the administrators seek a six-month extension of time for convening the second meeting of creditors. The application was brought before me as duty judge due to its urgency. Absent any extension, the time for convening the second meeting of creditors expires on 22 May 2025.

5    The application is supported by the receivers.

6    Evidence in support of the application was filed by way of an affidavit of Mr Sellahewa and an affidavit of Mr White.

Nature of the company's business

7    Northern Iron is a privately owned Australian mining company operating in the Northern Territory. Its business is centred on the project known as the Warrego Rehabilitation Project, which uses a rehabilitation process to produce high grade magnetite concentrate from a low-grade iron ore stockpile found within historic mine by-product at the Warrego mine site. Northern Iron developed a method of processing the stockpile into a commercially viable and sustainable high-grade product known as Northern Australia Magnetite Concentrate. According to Mr Sellahewa, through this process Northern Iron will rehabilitate 50% of the historic mine by-product within the mine area, 'halving the storage liabilities currently held by the Northern Territory Government and reducing health and environmental risks at the site'.

8    Once processed, the product is transported by rail to the Port of Darwin. Rail services are provided by Aurizon. It is loaded onto bulk carriers and shipped overseas. According to Mr Sellahewa, export of the product 'provides the steel industry with an alternative to traditional iron ore-based steel production methods that significantly reduces carbon emissions'.

9    Mr Sellahewa deposed that:

Operations which involve full scale production and processing is a complex endeavour and involves substantial resources, including staff. At full capacity, the Mine Site needs in the order of 84 staff (including contract staff) to operate.

Due to the nature of the mining operations, environmental and regulatory considerations, and the need for efficient and safe extraction of resources, operations are complex. This complexity stems from the combination of large-scale machinery, extraction complexities, complexity associated with the plant and operating it, potential hazards, and the need to operate in a remote and challenging environment. We observe in this respect that operations are the subject of regulatory oversight pursuant to, for example, the Mineral Titles Act 2010, the Environment Protection Act 2019 and Mineral Royalties Act together with the Work Health and Safety (National Uniform Legislation) Act 2011 as relates to risks and health to workers given the hazardous conditions. In terms of any export, there are also controls on the export of the Product.

10    Northern Iron stood down its operations immediately prior to the appointment of the administrators, and the receivers have continued to maintain the plant in its shutdown state.

11    The receivers have not taken steps to substantively recommence the operations, but they have engaged certain contractors and employees to continue working during the receivership and administration period with a view to realising value from existing processed product. The receivers are continuing to pay them for services performed during that period.

Purpose of extension

12    In summary, the administrators have formed the view that the best outcome for all stakeholders is likely to occur through a deed of company arrangement (DOCA). Maximising the sale proceeds, however a sale is ultimately structured, will provide the best opportunity for the secured creditors to be paid out, with any net surplus funds made available to unsecured creditors. The sale process is in the hands of the receivers, who have informed the administrators that such process allows for interested parties to structure any acquisition proposal in a flexible manner, including by way of a DOCA. Having regard to the size and scale of the company's operations and the number of creditors and other stakeholders involved, the sale process will take some time and the extension is sought in order to facilitate that process. Mr White deposed to the nature and scope of the sale process and I return to that evidence below.

Principles

13    The principles are well known and collected in many cases, including 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). Having regard to the urgency of the application, I will adopt below the summary of the authorities and principles incorporated in my reasons in Tucker (Administrator) v Bolten (Trustee), in the matter of Quintis Leasing Pty Ltd (Administrators Appointed) (No 2) [2024] FCA 46 at [53]-[59].

14    The court has power to make orders extending the convening period under s 439A(6) and s 447A of the Corporations Act 2001 (Cth).

15    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).

16    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).

17    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) v Home Art Building Group Pty Ltd (Administrators Appointed) [2016] WASC 274 (Beech J), where the principles are summarised at [18].

18    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.

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

(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.

20    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 at [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)

Position as to creditors

21    Cargill is Northern Iron's major secured creditor, with its claim arising pursuant to the terms of a facility agreement and offtake agreement entered into on 10 August 2023 to fund the project. The secured debt is in the sum of approximately $32.8 million.

22    Northern Iron has some 62 unsecured creditors, together with a further 11 unsecured creditors with PPSR registrations.

23    It has six employees, who are supported by more than 75 contract staff when the project is in production. Mr Sellahewa deposed to the prospect that if the company goes into liquidation prior to the sale of the assets or a restructure, the employment of the current employees will likely be terminated and their entitlements would crystallise.

24    It is not necessary to set out details of the quantum of unsecured debt. Evidence has been provided in that regard. Some claims require further investigation by the administrators. It is sufficient to note that the total debt, excluding the Cargill debt, is estimated at over $55 million. The amount due to employees by way of unpaid employee leave entitlements (and excluding potential retrenchments) is $30,000.

Work undertaken since appointment

25    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, and, in this case, to also have some regard to the work undertaken by the receivers.

26    Mr Sellahewa has deposed to those steps and it is not necessary to set them all out. It is sufficient to state that the administrators have attended to the usual statutory duties, held meetings with the directors, external advisers and receivers, secured certain books and records, commenced inquiries into the financial position of the company and its insolvency, convened and held the first meeting of creditors and liaised with creditors and a number of stakeholders. They have also commenced the preparation of their report to creditors.

Receivers' sale process

27    Mr White deposed to the status of the receivership.

28    The receivers have been in control of the assets of Northern Iron and have been managing its day-to-day operations since their appointment. This includes continuing the operational stand down and procuring the sale of existing product. They have taken the usual steps of travelling to site; engaging with employees and staff; have retained contractors to continue work as required; and have engaged with creditors, suppliers and major financial institutions.

29    Relevant to this application is the timeline for the sale process for the business and assets. The receivers have issued flyers and investment process letters to over 170 potentially interested parties; prepared an information memorandum and financial forecast and made them available to parties who have signed confidentiality agreements; opened a data room for parties who have signed confidentiality agreements; and placed advertisements in the Australian Financial Review and The West Australian newspapers.

30    Mr White in his affidavit outlined the sale process timeline, which includes indicative non-binding offers by a due date of 12 June 2025, with site and management visits scheduled for short-listed bidders shortly thereafter. At this stage, final offers are due 30 June 2025, and it is anticipated that draft agreements will be finalised and executed by July 2025, with settlement occurring at a mutually agreed time thereafter.

31    However, Mr White's evidence is that these are indicative times, with a likelihood of some time slippage due to the complexity of the business and assets, the need for due diligence, and the expectation of numerous bidders.

32    Mr White also deposed to the desire of the receivers to preserve the ability for prospective bidders to consider and propose a DOCA as part of any sale process. He observes (and it can be accepted) that such a course is commonly considered by prospective bidders for assets or shares of a distressed company. Mr White notes the recognised receivers' duties and obligations under s 420A of the Corporations Act on the exercise of a sale of assets. He states that, based on his experience, leaving the option open for bidders to pursue an acquisition involving a DOCA will facilitate the fulfilment of their duty, and provide the best prospects for achieving the best available outcome for all stakeholders of the company (including employees and unsecured creditors).

33    Mr White deposed that providing sufficient time to allow parties to formulate and propose a DOCA may be the only means by which unsecured creditors receive a return. This is because if an asset sale was the only option (without a DOCA), it is possible that a successful offer for the assets may not exceed the amount owed to Cargill, in which case unsecured creditors would receive no return.

34    On the other hand, Mr White observed, a DOCA provides an opportunity for a proponent to nominate a portion of funds to be specifically distributed to priority and unsecured creditors, and is the only means by which there is a possibility of shareholders retaining an interest in the company. There is also the potential (identified by Mr Sellahewa) for tax carry-forward losses that might be used by the corporate structure to offset tax that would otherwise be payable.

35    The receivers do not consider the usual statutory timetable for convening the second meeting will provide the receivers with sufficient time for a sale process to be undertaken in a manner that allows them to comply with their duties. They therefore support the six-month extension to the convening period sought by the administrators.

Aurizon

36    Aurizon is one of Northern Iron's largest unsecured creditors. One can well understand it has a keen interest in the steps being taken by the receivers and the administrators. It is the only rail provider in the locality. Prior to the administration, it provided the company's rail transport services, transporting the product from the mine site to the Port of Darwin.

37    Aurizon's lawyers, King & Wood Mallesons, sent a letter to the receivers on 16 May 2025, copied to the administrators, in which they indicated that Aurizon did not currently consider it was in a position to support the extension application. A number of issues were raised. The letter was in evidence.

38    The KWM letter expressed Aurizon's 'strong view' that the best sale price could only be achieved if operations were 'immediately resumed' (which would presumably have the effect that Aurizon would resume receiving payment for rail services). The letter also expressed a concern that the position of unsecured creditors over the extension will be diminished because the receivers have not offered to provide funding for the administrators' costs during the extended period. Aurizon contended that an extension 'for a period as long as 9 months' was excessive.

39    The administrators have considered the matters raised by Aurizon and Mr Sellahewa addressed them in his affidavit. In summary, he observed that in circumstances where the receivers are in place, decisions as to when and whether operations will resume will be made by the receivers and not the administrators.

40    As to the continued incurring of costs, the administrators' view is that as they are not in control of the sale process, their costs over the extended period will be comparatively modest. Mr Sellahewa observed that if the receivers were to fund the administrators, such costs would in any event likely be claimed as a cost of the receivership and so form part of the liability secured by Cargill's security.

41    As to the period of the extension commented on by KWM, the administrators may have contemplated at some point that a nine-month period be sought, but I am dealing with an application for a six-month extension. The issues are to be addressed having regard to that proposed timeframe.

Position of other stakeholders

Notice to creditors

42    A circular notifying all known creditors of the application was sent via email on 16 May 2025. The notice was in evidence. I was informed that at the time of the hearing no objections to the application had been received by the administrators.

Committee of inspection

43    The committee of inspection has six members. A meeting of the committee was held on 16 May 2025 and at that meeting a resolution was passed in favour of supporting the administrators' application for the six-month extension. One member of the committee (Aurizon) abstained from voting.

Cargill

44    Separately to the receivers, Cargill supports the extension of time.

ASIC

45    There was evidence before me that established that ASIC was served with a copy of the originating process and supporting affidavits prior to the hearing. It has not sought to be heard.

Consideration

46    As is apparent from the matters set out above, the administrators seek the extension of time on the basis that they consider it in the interests of the creditors as a whole, including the unsecured creditors, to facilitate the receivers' sale process.

47    It is relevant that the receivers support the application. They have disclosed to the Court the details of the sale process and projected timeline. All of the administrators and the receivers are experienced insolvency practitioners and it is appropriate to give considerable weight to their evidence as to the likely time involved in facilitating a sale process that might be of the greatest benefit, not only to the secured creditors, but also (importantly) to the unsecured creditors.

48    Having regard to the evidence, I accept the administrators' submission that it is apparent that the sale process is complex, due to both the nature of the business and assets (which require significant due diligence, given their unique characteristics) and the number of interested parties who may bid. The business operates in a highly regulated environment, and this will add to the complexity and length of the sale process as bidders no doubt will need to grapple with these issues.

49    The length of the extension is not unusual in the context of the administration of a complex business. There are many examples of similar and greater periods being granted: see, for example, Harrisons Pharmacy at [44]-[46], where Farrell J observed a trend towards more lengthy convening periods by reference to a number of cases. More recent examples include Rathner, in the matter of Citius Property Pty Ltd (Administrator Appointed) [2023] FCA 26 (12-month extension granted by O'Bryan J).

50    An alternative for administrators is to seek a shorter extension of the convening period and return to court for further extensions. For example, four extensions of time were granted in the administration of the Clough group of companies, as set out in Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) (No 5) [2023] FCA 728.

51    However, in circumstances such as the present, where it is relatively clear that a proposed course will take a period of time to be implemented, it is more efficient to approach the court for a period that accommodates that proposed course. Such course does not prevent a further application being brought should it be required.

52    Whether a period is appropriate will always depend on the particular facts. In this case, I consider the evidence supports the grant of the six-month extension.

53    I also take into account that the administrators will not be able to properly report to creditors until they can report on the likely outcome of the receivers' sale process.

54    I am not persuaded on the evidence that any stakeholder will be materially prejudiced by the extension. I acknowledge that Aurizon has not consented to the application, but nor has it actively opposed it. I have taken into account the matters it raised by way of the KWM letter but consider those matters are appropriately answered to the extent possible by the administrators, and its concerns do not direct a different outcome. In light of the appointment of the receivers, it is not for the administrators to decide when or how the operations might recommence.

55    To the extent the administrators' costs might continue to accrue over a greater period, it does not follow that such costs will be disproportionately increased and, in any event, that outcome is to be weighed against the fact that, absent an extension, there is a material risk that there will be no return to unsecured creditors. The extension best permits the receivers to achieve a going-concern sale and to give effect to any DOCA. Either of those courses includes the potential for the company, or as much as possible of its business, to continue in existence, an outcome which is consistent with the primary objective of Part 5.3A of the Corporations Act.

56    For these reasons, an order giving effect to the extension as requested will be made. The convening period will be extended to 24 November 2025. There will also be a Daisytek order, now relatively standard in such applications, which will enable the administrators to convene the second meeting of creditors before that date if the circumstances permit.

Ancillary orders

57    The administrators also seek directions addressing the manner in which notice of these orders is to be given to creditors, and preserving liberty to apply to interested parties. Those directions are routine and will be made.

Associate:

Dated:    21 May 2025