Re Panoramic Resources Ltd (Subject To Deed Of Company Arrangement) (Receivers And Managers Appointed)
[2024] WASC 512
•15 JANUARY 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE PANORAMIC RESOURCES LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS AND MANAGERS APPOINTED); EX PARTE WOODHOUSE WARWICK AND WHITE as joint and several administrators of PANORAMIC RESOURCES LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS AND MANAGERS APPOINTED) [2024] WASC 512
CORAM: HILL J
HEARD: 19 DECEMBER 2024
DELIVERED : 19 DECEMBER 2024
PUBLISHED : 15 JANUARY 2025
FILE NO/S: COR 163 of 2024
MATTER: IN THE MATTER OF PANORAMIC RESOURCES LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS AND MANAGERS APPOINTED)
EX PARTE
WOODHOUSE WARWICK AND WHITE as joint and several administrators of PANORAMIC RESOURCES LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS AND MANAGERS APPOINTED)
First Plaintiff
PANORAMIC RESOURCES LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS AND MANAGERS APPOINTED)
Second Plaintiff
Catchwords:
Corporations - Application for leave under s 444GA of Corporations Act 2001 (Cth) to transfer shares pursuant to deed of company arrangement - Application for ancillary orders pursuant to s 447A and s 90-15 of sch 2 of Corporations Act 2001 (Cth) - Whether shares have nil residual value - Expert evidence as to value of shares - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 444GA, s 447A, sch 2 s 90-15
Result:
Application granted
Category: B
Representation:
Counsel:
| First Plaintiff | : | W C J Zappia |
| Second Plaintiff | : | W C J Zappia |
Solicitors:
| First Plaintiff | : | Gilbert + Tobin |
| Second Plaintiff | : | Gilbert + Tobin |
Case referred to in decision:
Kipoi Holdings Mauritius Limited v Kirman and Bauer as joint and several administrators of Tiger Resources Limited (subject to deed of company arrangement) [No 4] [2024] WASCA 145
HILL J:
(This judgment was delivered extemporaneously and has been edited from the transcript to include references, headings and to correct matters of grammar and expression.)
By originating process dated 25 October 2024, the plaintiffs seek orders pursuant to s 444GA of the Corporations Act 2001 (Act) for leave to transfer all of the issued shares in Panoramic Resources Ltd (Panoramic) to Zeta Resources Ltd (Zeta). The plaintiffs also seek ancillary orders pursuant to s 447A and s 90-15 of sch 2 of the Act for the execution of documents to give effect to any orders for transfer that are made.
The originating process first came on for directions before me on 30 October 2024. On that date, directions were made for notice of the application to be given to Panoramic's shareholders and creditors and for any party who wished to be heard on the application to file any notice of intention to be heard by 11 December 2024. No one has filed any notice or sought to be heard on the application, although I note that a number of shareholders have corresponded directly with the first plaintiffs (the Administrators), objecting to the transfer of their shares.
Evidence relied upon by plaintiffs
At the hearing before me today, the plaintiffs relied on 10 affidavits being:
(a)three affidavits of Daniel Woodhouse filed 25 October 2024, 29 October 2024 and 13 December 2024;
(b)an affidavit of Nicole Brooke Lewis filed 13 December 2024;
(c)two affidavits of Richard Scott Tucker filed 13 December 2024 and 16 December 2024;
(d)two affidavits of Paul John Dunbar filed 13 December 2024 and 17 December 2024;
(e)an affidavit of Mark Ronald Griffiths filed 17 December 2024; and
(f)an affidavit of Jamie Matthew Ammendolea filed 19 December 2024.
I have also had the significant benefit of a detailed outline of written submissions filed 15 December 2024, which I have relied upon in reaching my decision.
Factual background
The factual background to this application can be summarised as follows.
Panoramic is a nickel mining, processing and exploration company whose securities were listed on the Australian Securities Exchange until 28 August 2024.
Panoramic is the ultimate holding company of three Companies:
(a)Savannah Nickel Mines Pty Ltd (Savannah);
(b)Pan Transport Pty Ltd (PAN); and
(c)Pindan Exploration Company Pty Ltd (Pindan),
(collectively, the Companies).
With Panoramic, these Companies form, what is called in the submissions and in this judgment, the Panoramic Group.
The main asset of the Panoramic Group is the Savannah Nickel Project, which is located in the East Kimberley region of Western Australia.
On 14 December 2023, the first plaintiffs were appointed as joint and several voluntary administrators of Panoramic, Savannah and PAN. Shortly afterwards, on 15 January 2024, they were also appointed as joint and several voluntary administrators of Pindan.
The evidence before me is that the decision to place each of the Companies into voluntary administration was taken because of two primary reasons. First, the decline in nickel price and the consequent impact on the profitability of each company and second, the inability of the Companies to secure new funding to support their ongoing operations.
Initially, following their appointment to the Companies on 14 December 2023, the Administrators operated the Savannah Nickel Project on a 'business as usual' basis. However, on 8 January 2024, the Administrators suspended operations due to a continuing decline in the nickel price. Since mid-February 2024, the Savannah Nickel Project has been on care and maintenance.
On 19 January 2024, the Federal Court made orders to extend the convening period for the second creditors' meetings of the Companies until 23 July 2024.
On 7 March 2024, Trafigura Pty Ltd appointed Thomas Birch and Jeremy Nipps as joint and several receivers and managers of certain property of Panoramic.
A concurrent second creditors' meeting of the Companies was convened and held on 30 July 2024. At the meeting, the chair adjourned the meeting for up to 45 business days to enable the Administrators to have additional time to pursue the sale and recapitalisation process of the Panoramic Group.
The evidence before me is that between 14 December 2023 and 23 October 2024, the Administrators ran a sales process for the sale or recapitalisation of the Panoramic Group. As a result of this process:
(a)the Administrators received five non-binding indicative offers;
(b)three of these parties were short-listed and invited to submit binding offers by 5 April 2024, which time was extended to 26 April 2024; and
(c)two of these parties did not proceed to make binding offers with the only binding deed of company arrangement (DOCA) proposal received from Zeta (Zeta DOCA).
The key terms of the Zeta DOCA are that:
(a)on effectuation of the DOCA, all of the Companies' residual cash will be transferred to a creditor's trust for the benefit of all creditors, apart from Trafigura and the Companies; and
(b)all creditors' claims apart from those of Trafigura and the Companies in respect of their inter-company debt and liabilities will be transferred to the creditors trust, and creditors will receive a dividend.
In their report to creditors ahead of the reconvened second creditors' meeting, the Administrators estimated that if the Zeta DOCA was implemented:
(a)priority employee creditors will receive a hundred cents in the dollar;
(b)unsecured creditors will receive 9.68 cents in the dollar compared to 1.8 cents in the dollar if the company was to go into liquidation; and
(c)Trafigura will not receive any return as it will remain a secured creditor of the Companies up to a cap of $39 million USD.
The concurrent second creditors' meeting of the Companies resumed on 2 October 2024. At this meeting, the creditors resolved to execute a Deed of Company Arrangement in the terms proposed by Zeta.
Zeta DOCA and conditions precedent
Subsequently, on 23 October 2024, the DOCA was executed by the first plaintiffs, Zeta, and each of the Companies. On the same date, Zeta, Panoramic, and Savannah entered into a funding deed. Under the terms of the funding deed, Zeta agreed to fund the expenditure of the Companies during the deed administration, on an agreed budget.
The DOCA includes a number of conditions precedent that are required to be satisfied or waived by no later than 2 January 2025. A number of these conditions precedent have already been satisfied. The only substantive conditions precedent that remain outstanding are:
(a)that the court make an order of pursuant to s 444GA of the Act for leave to transfer all of the issued shares in Panoramic to Zeta. If the orders are made in terms of the originating process, this condition precedent will be satisfied; and
(b)Australian Securities and Investments Commission (ASIC) relief in terms in respect of s 606 of the Act. In this regard, the evidence before me is that ASIC has informed the first plaintiffs that they have made an 'in-principle' decision to grant this relief which will be finalised if and when orders under s 444GA are made.
No opposition to the application
The evidence before me is that Panoramic has 10,363 shareholders. I am satisfied on the evidence before me that the plaintiffs have complied with the orders made by the court on 30 October 2024 before, requiring it to send the relevant documents to shareholders and creditors and to publish the necessary advertisements.
Since this time, the first plaintiffs have received a number of emails from shareholders. A number of these shareholders have expressed the opinion that they are unhappy about the prospect of their shares being transferred for nil value and do not accept that this should occur. In reaching my decision on this matter I have had regard to these sentiments.
I am also satisfied on the evidence before me that the plaintiffs have served the application on ASIC as required under r 2.8(3) of the Supreme Court (Corporations) WA Rules 2004.
As I indicated earlier, no one has filed a notice of intention to be heard or appeared at the hearing before me today to oppose the orders that are sought by the plaintiff.
Section 444GA of the Act
Section 444GA of the Act provides as follows:
(1) The administrator of a deed of company arrangement may transfer shares in the company if the administrator has obtained:
(a) the written consent of the owner of the shares; or
(b) leave of the court.
(2) A person is not entitled to oppose an application for leave under subsection (1) unless the person is:
(a) a member of the company; or
(b) a creditor of the company; or
(c) any other interested person; or
(d) ASIC.
(3) The court may only give leave under subsection (1) if it is satisfied that the transfer would not unfairly prejudice the interests of members of the company.
The Court of Appeal recently considered the approach to be taken by a court on the hearing of an application under s 444GA in Kipoi Holdings Mauritius Limited v Kirman and Bauer as joint and several administrators of Tiger Resources Limited (subject to deed of company arrangement) [No 4].[1]
[1] Kipoi Holdings Mauritius Limited v Kirman and Bauer as joint and several administrators of Tiger Resources Limited (subject to deed of company arrangement) [No 4] [2024] WASCA 145 [287] (Vaughan JA).
As Vaughan JA noted at [287] of that decision, on an application under this section, the key consideration for the court is that set out in s 444GA(3). This requires the court to be satisfied that the proposed transfer would not unfairly prejudice the interests of members of the company. However, as his Honour noted, this is not the only consideration. Once the court is satisfied that the transfer would not unfairly prejudice the interests of members of the company, the court has a residual discretion as to whether or not to grant leave to a deed administrator to transfer the shares in the company.
Where the pre-condition in s 444GA(3) is satisfied, the exercise of discretion under s 444GA(1)(b) is exercised having due regard to the objects of pt 5.3A as set out in s 435A of the Act.
At [288] - [290] of his Honour's reasons, Vaughan JA summarised the propositions that apply to an application for leave to transfer shares under s 444GA in the following terms:
1.The interests that are required to be taken into account are those of the members generally not just the members whose shares it is desired to transfer.
2.The section is directed to the interests of members in their capacity as members rather than as creditors or some other capacity.
3.The requirement that the transfer not unfairly prejudice the interest of members directs the court to consider the impact of compulsory transfer on members where there may be some residual value in the company.
4.The question of unfairness only arises if prejudice is established. If the company has no residual value to the members - such that the shares have no value - and the members are unlikely to receive any distribution in an immediate winding up, it is difficult to see how, ordinarily, the members could suffer any prejudice, let alone prejudice that could be described as unfair. That assumes that winding up is the only practicable alternative to the deed of company arrangement proposal of which the transfer is an aspect.
5.One relevant consideration is whether a full and accurate description of the proposal has been given to members and whether members have been given a full opportunity to appear in opposition to the application.
6.While there is an evidentiary onus on the members to raise any consideration telling against the exercise of the discretion, the ultimate onus of satisfying the court that the discretion should be exercised remains on the deed administrator. This requires the deed administrator to satisfy the court that the transfer would not unfairly prejudice the interests of members of the company.
7.Whether or not 'unfair prejudice' would result from a transfer of the shares is determined having regard to all of the circumstances of the case, taking into account the policy of the legislation. Relevant matters in the court's discretion include whether the shares have any residual value which may be lost to the existing shareholders if leave is granted; whether there is a prospect of the shares obtaining some value within a reasonable time; the steps or measures necessary before the prospect of the shares obtaining some value may be realised; and the attitude of the existing shareholders to providing the means by which the shares may obtain some value or by which company may continue in existence. A relevant consideration for the court is between the position of the shareholders if the proposal does not proceed and their position if leave to transfer the shares is granted.
8.The fact that shares are to be transferred without compensation to the shareholder is not of itself sufficient to establish 'unfair prejudice'. The question as to whether members hold equity of any residual value is determined by considering the position of the members in a winding up - at least where that is the likely or necessary consequence of the transfer of shares not being approved. This makes it necessary to consider a valuation of the assets and liabilities of the company by reference to a liquidation scenario rather than as a going concern.
(citations omitted)
If liquidation is the only realistic alternative to the proposed DOCA and shareholders would not receive any distribution in a liquidation, ordinarily there will not be any prejudice, or at least no prejudice that has the required quality under the Act of being unfair.
Where a court grants leave under s 444GA of the Act, the court may also make ancillary orders under s 447A of the Act to provide the necessary machinery under which the transfer of shares can occur.
Will the transfer of shares unfairly prejudice members of Panoramic?
In support of the application, the plaintiffs relied on an independent expert report prepared by Richard Tucker of KordaMentha. He was retained on 14 October 2024 to provide an opinion on the residual value of the shares in Panoramic in the event of a liquidation. In forming his opinion, Mr Tucker has relied on expert reports from two technical experts:
(a)Valuation and Resource Management Pty Ltd (VRM) in relation to the value of the mining assets, as well as the value of the potential claim against Cherish Metals Pty Ltd (Cherish Metals), and
(b)Gordon Brothers Pty Ltd in relation to the value of the processing plant and mining equipment.
Mr Tucker's opinion is as follows:
(a)The total assets of the Panoramic Group are between $67.74 million and $87.09 million. For the purposes of his report, he adopted a value of $77.44 million.
(b)The total indebtedness of the Panoramic Group is between $99.78 million and $109.48 million. For the purposes of his report, he adopted a value of $104.6 million.
(c)Given these matters, his opinion is that the net asset deficiency in the liquidation would be between negative $12.69 million and $41.74 million. He adopted a net asset deficiency of $27.16 million.
(d)As a consequence of these matters, his opinion was that the residual equity value in the Panoramic Group is zero.
One of the assets that was valued by Mr Tucker as part of his report was the value of a potential claim against Cherish Metals. I note that this part of his report is not relied upon by the plaintiff in support of its application. In this regard, the first plaintiffs engaged Paul Dunbar of VRM to provide an independent technical expert report in respect of the claim against Cherish Metals. Mr Dunbar's opinion is that on the assumption a claim is available against Cherish Metals, the value of this claim is between $4.9 and $8.6 million, with a preferred value of $6.7 million. When this valuation is included, this reduces the net asset deficiency to between $11.64 million and $36.84 million, with an adopted net asset deficiency of $24.26 million.
On the unchallenged expert evidence before me of the independent expert report of Mr Tucker, and the three technical reports to which I have referred and which I accept, I am satisfied and find that there is no residual value in the shares in Panoramic. This is because on any of the valuations, namely low, high, or the adopted valuation, the creditors' claims in Panoramic substantially exceed its assets.
In his report, Mr Tucker considered whether there is a prospect of the shares gaining some value within a 12-month period, which I accept is a reasonable time for the purposes of this section. In his opinion, there is no reasonable prospect that this will occur. This is because the primary thing that needs to occur before there could be any increase in the value of shares is an increase in the nickel price within the next six months. In Mr Tucker's report, he sets out a number of reasons as to why this is unlikely to occur, including the increase in supply of nickel due to investments by China in projects across Asia-Pacific, and the ability of international producers to produce nickel at a lower cost than Australian producers, including Savannah, as well as funding and finance costs specific to the Panoramic Group. I accept Mr Tucker's evidence and find that there is no reasonable prospect that the shares in Panoramic will obtain some value within a reasonable time of today's date.
I also accept that a full and accurate description of the Zeta DOCA has been given to members and creditors, and that members have been given a full opportunity to appear at the hearing before me today to oppose the making of the orders. The alternative to the completion of the Zeta DOCA is that Panoramic will go into liquidation. I accept and find that given the history of the sales process that has been undertaken by the first plaintiffs, this is the only practicable alternative to the Zeta DOCA.
On the basis of the unchallenged evidence to which I have already referred, I am satisfied and find that on a liquidation, shareholders of Panoramic would not receive any return. Given this, while I accept that a number of members consider that the proposed transfer of their shares is unfair, I do not consider and find that the transfer will not unfairly prejudice their interests.
The precondition in s 444GA(3) having been established, I then turn to the question as to whether the court should exercise its discretion to make the orders sought. In exercising my discretion, I take into account the fact that on a liquidation there is likely to be a lower return to creditors, the creditors of Panoramic have voted in favour of the Zeta DOCA, and that the Zeta DOCA presents the best opportunity for the operation. In my view, granting the relief sought by the plaintiffs is consistent with the objects of pt 5.3A of the Act as set out in s 435A of the Act.
For these reasons I am satisfied that the transfer of shares in Panoramic to Zeta would not unfairly prejudice the interests of the members of Panoramic, and that I should exercise my discretion to make the orders sought by the plaintiffs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KS
Associate to the Hon Justice Hill
14 JANUARY 2025
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