Re Windimurra Vanadium Ltd & Midwest Vanadium Pty Ltd; [No 4]
[2009] WASC 373
•9 DECEMBER 2009
RE WINDIMURRA VANADIUM LTD & MIDWEST VANADIUM PTY LTD; EX PARTE WEAVER [No 4] [2009] WASC 373
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2009] WASC 373 | |
| 09/12/2009 | |||
| Case No: | COR:47/2009 | 27 NOVEMBER 2009 | |
| Coram: | BEECH J | 27/11/09 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Application granted | ||
| B | |||
| PDF Version |
| Parties: | DARREN GORDON WEAVER As Administrator of WINDIMURRA VANADIUM LTD ACN 009 131 533 and MIDWEST VANADIUM PTY LTD ACN 113 874 712 (Receivers and Managers Appointed) (Administrators Appointed) ANDREW JOHN SAKER As Administrator of WINDIMURRA VANADIUM LTD ACN 009 131 533 and MIDWEST VANADIUM PTY LTD ACN 113 874 712 (Receivers and Managers Appointed) (Administrators Appointed) MARTIN JONES As Administrator of WINDIMURRA VANADIUM LTD ACN 009 131 533 and MIDWEST VANADIUM PTY LTD ACN 113 874 712 (Receivers and Managers Appointed) (Administrators Appointed) |
Catchwords: | Corporations Administration Meeting of creditors Convening period Application for extension Turns on own facts |
Legislation: | Corporations Act 2001 (Cth) s 439A(4), s 439A(6), s 447A |
Case References: | Re Windimurra Vanadium Ltd & Midwest Vanadium Pty Ltd; Ex parte Weaver [2009] WASC 182 Re Windimurra Vanadium Ltd & Midwest Vanadium Pty Ltd; Ex parte Weaver [2009] WASC 302 Re Windimurra Vanadium Ltd & Midwest Vanadium Pty Ltd; Ex parte Weaver [2009] WASC 71 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
DARREN GORDON WEAVER As Administrator of WINDIMURRA VANADIUM LTD ACN 009 131 533 and MIDWEST VANADIUM PTY LTD ACN 113 874 712 (Receivers and Managers Appointed) (Administrators Appointed)
First-named plaintiff
ANDREW JOHN SAKER As Administrator of WINDIMURRA VANADIUM LTD ACN 009 131 533 and MIDWEST VANADIUM PTY LTD ACN 113 874 712 (Receivers and Managers Appointed) (Administrators Appointed)
Second-named plaintiff
MARTIN JONES As Administrator of WINDIMURRA VANADIUM LTD ACN 009 131 533 and MIDWEST VANADIUM PTY LTD ACN 113 874 712 (Receivers and Managers Appointed) (Administrators Appointed)
Third-named plaintiff
Catchwords:
Corporations - Administration - Meeting of creditors - Convening period - Application for extension - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 439A(4), s 439A(6), s 447A
Result:
Application granted
Category: B
Representation:
Counsel:
First-named plaintiff : Mr M D Howard SC & Mr G J Archer
Second-named plaintiff : Mr M D Howard SC & Mr G J Archer
Third-named plaintiff : Mr M D Howard SC & Mr G J Archer
Solicitors:
First-named plaintiff : Hardy Bowen
Second-named plaintiff : Hardy Bowen
Third-named plaintiff : Hardy Bowen
Case(s) referred to in judgment(s):
Re Windimurra Vanadium Ltd & Midwest Vanadium Pty Ltd; Ex parte Weaver [2009] WASC 182
Re Windimurra Vanadium Ltd & Midwest Vanadium Pty Ltd; Ex parte Weaver [2009] WASC 302
(Page 3)
Re Windimurra Vanadium Ltd & Midwest Vanadium Pty Ltd; Ex parte Weaver [2009] WASC 71
(Page 4)
- BEECH J:
(These reasons are an edited version of the reasons delivered extemporaneously on 27 November 2009.)
Introduction
1 The plaintiffs are the joint and several administrators of Windimurra Vanadium Ltd (Windimurra) and Midwest Vanadium Pty Ltd (Midwest). On 13 March 2009 I ordered an extension of the convening period for the second meeting of creditors to 30 June 2009: Re Windimurra Vanadium Ltd & Midwest Vanadium Pty Ltd; Ex parte Weaver [2009] WASC 71 (the first decision). On 25 June 2009 I granted a further extension of the convening period to 30 September 2009: Re Windimurra Vanadium Ltd & Midwest Vanadium Pty Ltd; Ex parte Weaver [2009] WASC 182 (the second decision). On 24 September 2009 I granted an extension of the convening period for Midwest to 2 December 2009: Re Windimurra Vanadium Ltd & Midwest Vanadium Pty Ltd; Ex parte Weaver [2009] WASC 302 (the third decision). The plaintiffs apply for a further extension of the convening period for Midwest.
2 The relevant legal principles are set out in my earlier decisions.
Background
3 Some of the background facts emerge from [13] - [19] of the first decision and [7] - [8] of the second decision, which are as follows:
The application is supported by an affidavit of Mr Weaver, who is one of the joint and several administrators of the two companies in question. Windimurra Vanadium Ltd and Midwest Vanadium Pty Ltd both had administrators appointed to them on 17 February 2009. Before that, secured creditors of those companies had appointed Mr Brian McMaster and Mr Martin Madden as receivers and managers.
The core asset of the companies is a vanadium project known as the Windimurra Vanadium Project. That project is in its construction phase. Since the appointment of receivers and managers to the company, the construction of the project has stopped.
Following the appointment of the plaintiffs as administrators of the companies they convened the first meeting of creditors on 3 March 2009. The time limits prescribed by s 439A would require notice convening the second meeting of creditors to be provided by no later than 19 March 2009.
(Page 5)
- In his affidavit Mr Weaver says that taking into account the nature of the assets of the companies, the existence of receivers and managers to those companies and other complexities arising from the circumstances of the administration, an extension of the convening period for the second meeting is necessary. In essence, he says that an extension of that time period is necessary in order to allow a proper asset sale process to be conducted or, alternatively, a deed of company arrangement to be formulated.
Mr Weaver deposes to his belief that it is necessary to allow the receivers to conduct a sale process of the companies' assets before a useful opinion can be given to the creditors as to what course of action is in their best interests. He expresses the opinion that in the current economic environment it would be very difficult for reliance to be placed on valuations as the sole basis for the decisions required by creditors as to the future of the companies.
Mr Weaver has been informed by the receivers that although a formal expression of interest process has not yet commenced, there have already been a number of parties who have expressed an interest in the sale of the assets of the companies. Further, the receivers have informed Mr Weaver that indicative offers are expected to be submitted by the end of May 2009.
Mr Weaver expresses his belief, based on his experience in the sale of assets in the mining sector, that a proper sale process could not be effected before the end of March 2009. He goes on in par 21 to express the view in that he 'would not be surprised if the sale process being conducted by the receivers could not be concluded before August 2009' [13] - [19].
…
The sale process of the Windimurra Vanadium project is being conducted by the receivers. The receivers have informed Mr Weaver of the following matters relating to the progress of the sale process:
(a) the formal expression of interest process commenced on 7 May 2009;
(b) numerous interested parties were contacted and provided with an information memorandum;
(c) 12 parties submitted indicative proposals, eight by 2 June 2009 (in accordance with the proposed timetable) and four by 8 June 2009;
(d) preferred bidders are in the course of being notified;
(e) site visits, management presentations, due diligence and discussions with various stakeholders are scheduled to take place between 15 June 2009 and 24 July 2009;
(Page 6)
- (f) final bids are not expected to be received before 31 July 2009, with satisfaction of conditions precedent and completion unlikely to occur before September 2009; and
(g) it is possible that Foreign Investment Review Board approval may be required, depending on the identity of the successful bidder.
In light of these matters, Mr Weaver expresses his belief that a sale of the company's assets or the formulation of a deed of company arrangement cannot successfully and properly be undertaken by 30 June 2009, and that an extension of the convening period is essential to allow the receivers the necessary time to complete the sale process or, alternatively, a recapitalisation or the formulation of a deed of company arrangement leading to the maximisation of returns to stakeholders [7] - [8].
4 In the third decision I summarised the then progress of the expression of interest (EOI) process and the grounds on which I was satisfied that it was appropriate to extend the time for the convening period for the second meeting of creditors of Midwest. Paragraphs [6] - [8] of the third decision are as follows:
It is apparent from the first affidavit that the EOI process has been actively pursued. There has been substantial progress made. Negotiations have been on foot for some time and remain on foot. Due diligence is being conducted. It is anticipated that one or more concrete offers will be received imminently. If these negotiations bear fruit it is anticipated that the deal will be documented in October 2009 with completion in November 2009.
On the basis of both of Mr Weaver's affidavits, I am satisfied that there has been sufficient progress and that there is sufficient substance in the negotiation process to support the grant of the extension of time that is sought. I am also satisfied in the circumstances that any proposal for recapitalisation or sale of the shares or assets, and the formulation of any deed of company arrangement, cannot be completed by 30 September 2009.
Mr Weaver's evidence is that preliminary investigations suggest that there are not likely to be significant recoveries if the company goes into liquidation. Mr Weaver says, in effect, and I accept, that it is in the interests of creditors and stakeholders to extend the time to allow the EOI process. This is because if that bears fruit it will lead to the best prospects of the returns to creditors and stakeholders, which would be completed over the next two months or so.
5 There was evidence before me at the hearing in September 2009 that it was in the best interests of creditors to extend the time for convening the second meeting of creditors to allow the EOI process to come to a conclusion, because if it bore fruit it would lead to the best prospects of
(Page 7)
- return to creditors. At that time it was expected that the process would be completed over the following two months.
Further application to extend
6 The present application to extend the convening period for the second meeting of creditors is supported by two affidavits dated 26 November 2009 sworn by Mr Darren Weaver. The further affidavit sworn 26 November 2009 is the subject of an application for a confidentiality order, and I am satisfied that such an order should be made because of the commercially confidential contents of that affidavit.
7 I deal first with the non-confidential affidavit which is described as the affidavit of Mr Weaver sworn 26 November 2009. Attachment DGW-1 to this affidavit is an announcement made by the receivers and managers of Windimurra and Midwest to the Australian Stock Exchange on 25 November 2009 in the following terms:
Recapitalisation of Midwest Vanadium Pty Ltd (Receivers and Managers Appointed) (Administrators Appointed)
The Receivers and Managers of Windimurra Vanadium Limited (Receivers and Managers Appointed) (Administrators Appointed) ('WVL') and Midwest Vanadium Pty Ltd (Receivers and Managers Appointed) (Administrators Appointed) ('WVPL') ('the Receivers') are pleased to announce they have agreed the key commercial terms with a consortium led by Mineral Resources Limited ('MRL Consortium') ('Recap') for a recapitalisation of MVPL.
Under the terms of the Recap, the MRL Consortium will provide sufficient funding in the form of secured debt to enable completion of construction of the Windimurra Vanadium Project and provide working capital for production ramp-up, in exchange for majority equity in MVPL. The recapitalisation will also involve a restructure of the existing secured debt, with the existing lenders agreeing to receive a combination of reduced secured debt and minority equity.
The Receivers hope to be able to announce financial completion of the transaction by February 2010.
8 That announcement does not refer to the position of unsecured creditors.
9 Paragraphs 6 - 8 of Mr Weaver's non-confidential affidavit satisfy me that there would be no undue prejudice to any landlord or owner of any other property over which the receivers have exercised property rights. The application to extend the convening period has the unanimous support
(Page 8)
- of the committee of creditors. This committee includes a representative of the employees of Windimurra. The application also has the support of the secured creditors.
10 I turn to the further confidential affidavit of Mr Weaver. I will not set out its contents in detail but will outline something about its contents to explain the conclusion to which I have come.
11 The affidavit sets out details about the progress of negotiations in the EOI process. A proposal was received from one of the preferred bidders on 25 September 2009. The other preferred bidder withdrew from the process very soon after the matter was last before me on 24 September 2009.
12 Negotiations then occurred between the receivers and the preferred bidder who had put the proposal of 25 September 2009. That culminated in what was described as a final offer from the preferred bidder on 22 October 2009. However, on 25 October 2009 the preferred bidder withdrew that offer. That brought to an end the exclusivity period of the receivers having to deal only with that preferred bidder.
13 The receivers then engaged in negotiation with a consortium led by Mineral Resources Ltd, the owner of the BOOT (build, own, operate and transfer) plant on the Midwest tenements. There followed a number of meetings and site visits. On 13 November 2009 an indicative term sheet was provided to the receivers by the consortium. An offer was put last Friday, 20 November 2009, by the consortium and was accepted by the secured creditors on Tuesday, 24 November 2009.
14 The evidence satisfies me that the negotiations have been conducted without any undue delay. Further, the evidence explains to my satisfaction why the process has not come to the point of fruition by way of completion of a transaction by late November 2009, as had been anticipated in September 2009 when the matter was last before me. The withdrawal of the offer by the only remaining preferred bidder led to the need to engage with a new party, and that process has been progressed in a way that appears to be reasonably expeditious.
The disposition of the application
15 It must be said that to grant a fourth extension of the convening period so as to enable a total extension of almost 11 months is highly unusual. Nevertheless, I am satisfied that in the circumstances it is appropriate to do so, taking into account the history of the matter and the
(Page 9)
- evidence I have referred to. I also take into account that unusual economic circumstances have contributed to the need for substantial additional time. The combination of the global financial crisis, leading to unusual challenges in credit and fundraising, with the volatility of commodity prices and the Australian dollar, has meant that negotiations of the kind required for the key assets involved have been more than usually complex.
16 In his confidential affidavit, Mr Weaver states that an extension of time to 3 March 2010 is required for the consortium offer to be successfully and properly effected. However, to my mind, for present purposes, the question is not how much time is needed in order to complete that transaction. Rather, the length of any extension granted should be determined by reference to the amount of time the plaintiffs as administrators need to prepare the reports, material and recommendations required by s 439A(4) of the Corporations Act 2001 (Cth).
17 I am satisfied that the plaintiffs are not in a position to prepare that material before 2 December 2009. Apart from anything else, the evidence before me suggests that the proposed return to unsecured creditors as an element of the overall transaction with the consortium has not yet been identified. In those circumstances, the receivers and administrators could not sensibly prepare a report and make recommendations to unsecured creditors by 2 December 2009.
18 Because there is no evidence of the return to unsecured creditors from the proposed consortium transaction, it is not yet possible to judge the extent of any benefit to unsecured creditors from that transaction. There is little direct evidence before me as to the extent to which it may be expected that the unsecured creditors would benefit from the consortium transaction proceeding as distinct from a liquidation of Midwest.
19 However, taking into account the whole of the material before me, the view of the administrators is that it is in the interests of unsecured creditors to attempt to allow the consortium transaction to proceed because there are reasonably good prospects that it will involve some return to unsecured creditors, and that that is likely to exceed the position for unsecured creditors upon a liquidation. I am satisfied that there is a sound basis for that view.
20 I take into account the evidence of Mr Weaver in an earlier affidavit sworn 23 September 2009 that upon a liquidation it is not likely that there
(Page 10)
- will be any returns to unsecured creditors, or any significant recoveries at all. I also take into account that there is no known creditor who opposes the application for an extension.
21 I stated earlier in my reasons that the question of an extension of time for convening the second meeting of creditors should be determined by reference to the time required by the administrators to comply with s 439A(4) of the Corporations Act 2001 (Cth), not by reference to the time needed to complete the consortium offer. On that basis, the administrators seek an amended extension, to 5 February 2010, by which time they anticipate being able to comply with the requirements of s 439A. In the circumstances, I am prepared to grant an extension for that period.
Conclusion
22 For those reasons and in those circumstances I would grant the plaintiffs an extension of the convening period for the second meeting of creditors to 5 February 2010.
2
3
1