Woods, in the matter of Paladin Energy Ltd (Administrators Appointed)
[2017] FCA 901
•28 July 2017
FEDERAL COURT OF AUSTRALIA
Woods, in the matter of Paladin Energy Ltd (Administrators Appointed) [2017] FCA 901
File number: WAD 368 of 2017 Judge: BARKER J Date of judgment: 28 July 2017 Catchwords: CORPORATIONS – application to extend statutory convening period for creditors’ meeting pursuant to s 439A of the Corporations Act 2001 (Cth) – where plaintiff appointed administrators of companies Legislation: Corporations Act 2001 (Cth) ss 435A, 439A, 439A(2), 439A(3), 439A(4), 439A(6), 447A, 447A(1), Part 5.3A
Fair Entitlements Guarantee Act 2012 (Cth)
Federal Court of Australia Act 1976 (Cth) s 37AF, s 37AG(1)(a)
Cases cited: Iannuzzi, in the matter of Josa Constructions Pty Ltd (Administrators Appointed) [2017] FCA 822
Re Riviera Group Pty Ltd(Administrators Appointed) (Receivers and Managers Appointed) [2009] NSWSC 585
Re Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636
Date of hearing: 28 July 2017 Registry: Western Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 32 Counsel for the Plaintiffs: Ms A Hosking Solicitor for the Plaintiffs: King & Wood Mallesons ORDERS
WAD 368 of 2017 IN THE MATTER OF PALADIN ENERGY LTD (ADMINISTRATORS APPOINTED) ABN 47 061 681 098
MATTHEW DAVID WOODS, HAYDEN LEIGH WHITE AND GAYLE DICKERSON IN THEIR CAPACITIES AS JOINT AND SEVERAL ADMINISTRATORS OF PALADIN ENERGY LTD (ADMINISTRATORS APPOINTED) ABN 47 061 681 098; PALADIN FINANCE PTY LTD (ADMINISTRATORS APPOINTED) ABN 83 117 234 278; PALADIN ENERGY MINERALS NL (ADMINISTRATORS APPOINTED) ABN 81 073 700 393
Plaintiffs
JUDGE:
BARKER J
DATE OF ORDER:
28 JULY 2017
THE COURT ORDERS THAT:
Extension of convening period
1.An order pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act) that the convening period within which the plaintiffs must convene the second meeting of creditors of the companies under s 439A of the Act (Second Meetings) be extended to 29 September 2017.
2.An order pursuant to s 447A(1) of the Act that Part 5.3A of the Act is to operate such that the Second Meetings may be held, together or separately, at any time during, or wthin five business days after the end of, the convening period as extended by paragraph 1 above, notwithstanding the provisions of s 439A(2) of the Act.
Service and notices
3.An order that the plaintiffs, within seven business days after the making of these orders, are to take all reasonable steps to give notice of these orders to the companies’ creditors (including the persons claiming to be creditors), by means of a circular:
(a)to be sent by email transmission to creditors for whom the plaintiffs have a current email address; or
(b)to be sent by ordinary post to creditors for whom the plaintiffs have only a postal address.
4.An order pursuant to s 447A(1) of the Act that Part 5.3A of the Act is to operate such that the requirement on the plaintiffs to issue notices under s 439A(3) of the Act be modified so that notice of the Second Meetings will be validly given to any creditors by, not less than five business days prior to the date of the proposed Second Meetings:
(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 plaintiffs hold an email address;
(b)sending such notice to the postal address or facsimile number, or otherwise as provided for by the Act or the Corporations Regulations 2001 (Cth), to any creditors not being a creditor referred to in sub-paragraph (a); and
(c)causing such notice to be published in The Insolvency Notices website located at: order pursuant to s 447A(1) of the Act that s 439A(4) of the Act be modified such that the information required under s 439A(4) to accompany the said notices to creditors may be validly given if it is:
(a)available for download from the website that is maintained by the plaintiffs; and
(b)referred to in the notices issued and published in accordance with paragraph 4 above, as being available for downloaded from the website that is maintained by the plaintiffs.
6.An order that the following parties have liberty to apply on giving all other interested parties not less than three business days’ written notice:
(a)any person who can demonstrate sufficient interest (including any creditor of the companies) for the purpose of modifying or discharging any orders made pursuant to paragraphs 1 and 2 above; and
(b)the plaintiffs, for the purpose of seeking any further extension of the convening period.
Confidentiality
7.Pursuant to sections 37AF and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth), and subject to any further order made on the application of a person interested in the proceeding:
(a)the documents on the Court file identified in the table annexed to these orders and marked Annexure A be replaced with redacted copies, with the identified confidential sections redacted and marked “confidential”; and
(b)any unredacted copies of the documents on the Court file identified in Annexure A be suppressed or sealed by the Court, and are not to be published or accessed except pursuant to an order of the Court.
Costs and other orders
8.The plaintiffs’ costs of and incidental to this application be costs in the administration of each of the companies, and be paid out of the assets of those companies.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ANNEXURE A
Documents the subject of confidentiality order Sections of documents subject to confidentiality order Affidavit of Matthew David Woods sworn 25 July 2017 Paragraphs 20, 21, 24, 27, 28, 32, 34, 35, 36, 40(i) and 44
Annexure MDW-8Plaintiffs’ Outline of Submissions filed 26 July 2017 Paragraph 2.4 Second affidavit of Matthew David Woods sworn 27 July 2017 Annexure MDW-13 REASONS FOR JUDGMENT
BARKER J:
On 28 July 2017, I made the above orders. These are the reasons for so doing.
The plaintiffs were appointed as the administrators of Paladin Energy Ltd (Paladin Energy), Paladin Finance Pty Ltd (Paladin Finance) and Paladin Energy Minerals NL (Paladin Minerals) (together the companies) on 3 July 2017.
By originating process dated 24 July 2017, the administrators seek an order pursuant to s 439A(6) of the Corporations Act 2001 (Cth) to extend the statutory convening period for the second creditors’ meeting until 29 September 2017, and associated orders. In the absence of these orders, the convening period will expire on 31 July 2017.
The application is brought to allow time for the administrators to consider and take advice in respect of a valuation which has been undertaken of the largest asset of the companies, being Paladin Finance’s 75% interest in Langer Heinrich Mauritius Holdings Limited (LHMH), and given the possibility that an option may be exercised by a counterparty to acquire that 75% interest. The administrators also require time to investigate options to restructure or recapitalise the companies as alternatives to liquidation, including in the event the option is not exercised, and to investigate the affairs of the companies and form the opinion required under s 439A(4) of the Act.
On 13 July 2017, the administrators concurrently held the first creditors’ meeting for each of the companies, at which a committee of creditors was appointed to represent the creditors of Paladin Energy. The administrators have called a committee meeting on 26 July 2017, where the committee will be given notice of this application and be asked to confirm whether any creditors oppose this application.
The factual background to this application is set out in the affidavit of Mr Matthew David Woods made 25 July 2017. Mr Woods is one of the administrators.
The companies and their subsidiaries hold interests in two uranium mines, the Langer Heinrich Mine (LHM) in Namibia (75% interest) and the Kayelekera Mine in Malawi (85% interest). The remaining 25% interest in LHMH (and therefore the LHM) is owned by CNNC Overseas Uranium Holding Limited (COUH). Paladin Finance and COUH are parties to a shareholders’ agreement. Paladin Finance and COUH have been in dispute, which has led to a without prejudice agreement to undertake the valuation process contemplated by the shareholders’ agreement. This may lead to COUH seeking to exercise a call option under the shareholders’ agreement (COUH option) to acquire Paladin Finance’s 75% interest in LHMH.
The valuation was issued by Bank of Montreal on 20 July 2017 (BMO valuation), triggering a 30 day period for COUH to seek to exercise the COUH option (which may expire on Monday, 22 August 2017). There remains the potential for the parties to be in dispute over the valuation and/or COUH’s ability to exercise the COUH option.
Whether COUH seeks to exercise the COUH option directly impacts upon the companies’ future financial obligations and the future of the administration. If the COUH option is not exercised or the sale to COUH does not complete, the administrators will pursue other alternatives to restructure or recapitalise the companies through a deed of company arrangement (DOCA) and/or by conducting a sale process for the LHM as an operating asset. Mr Woods has deposed at [37] of his affidavit that the administrators have only made a preliminary assessment of these alternatives.
To date, the administrators have commenced their investigations into the companies’ affairs, and undertaken the significant tasks explained in the affidavit of Mr Woods at [40]. The administration is a complex one, involving multiple entities, subsidiaries with foreign registrations and assets, and complex commercial arrangements.
Due to these factors, and the uncertainty posed by the COUH option, the administrators do not believe that they are presently able to provide a statement to creditors under s 439A(4) of the Act. Mr Woods has deposed that the administrators require further time to investigate the companies’ affairs and to report to creditors.
The administrators seek to preserve the status quo with a view to maximising the prospects of the companies continuing in existence or, if that is not possible, to maximise the return to all creditors and, if possible, shareholders.
The companies’ creditors are divided into three main categories:
(1)Secured creditors – Deutsche Bank AG and Nedbank Limited.
(2)Unsecured creditors (including EDF and Paladin Energy’s bondholders) – The administrators have not processed all proofs of debt received to date. However, the administrators’ preliminary investigations indicate that unsecured creditors are owed around US$650M.
(3)Current and former employees – Australian employee liabilities total approximately A$534,000 across the companies.
Mr Woods deposes that in his experience the likely return to creditors in a liquidation of the companies would be significantly lower than if the companies were restructured and recapitalised through a DOCA. So far as concerns any detriment which could be occasioned on those affected by the statutory moratoria, no specific prejudice to any group of creditors has been identified:
(a)Secured creditors: the major secured creditors have first ranking securities and will be repaid in full in the ordinary course.
(b)Unsecured creditors: an extension of the convening period provides an opportunity for the administrators to explore and maximise a return to unsecured creditors.
(c)Employees: employee entitlements and other payments continue to be met. No Australian employees have been terminated during the administration. If the companies are ultimately placed into liquidation, the employees would be entitled to claim under the Fair Entitlements Guarantee Act 2012 (Cth).
Mr Woods also foreshadowed that a meeting between the administrators and the committee would be held on 26 July 2017 (committee meeting) and that at the committee meeting, the administrators intended to:
(a)give notice to the committee of the administrators’ application currently before the Court by providing the members of the committee with a copy of the originating process;
(b)notify the committee of the time and place of the hearing of the application; and
(c)request confirmation from each of the committee members about whether any creditors intend to appear at the hearing or oppose the application.
In a further affidavit made 27 July 2017, Mr Woods stated that, rather than provide committee members with a copy of the originating process at the committee meeting, he caused an email to be circulated to committee members on 25 July 2017, which attached a circular letter dated 25 July 2017 and a form 529 committee meeting notice.
On 25 July 2017, a copy of the form 529 committee meeting notice was also published on the Australian Securities and Investments Commission Insolvency Notices website.
Mr Woods states that the committee meeting was held by the administrators at 2:30pm on 26 July 2017 at the offices of KPMG in Perth and by teleconference, and that he acted as chairperson for the meeting. As to attendance:
(a)Five of the seven committee members attended the committee meeting by telephone (namely, the committee members representing EOF, BNY Mellon, Leader Investment Corporation (LIC), the Ad Hoc committee and Paladin employees, or their proxies).
(b)The remaining committee members representing JP Morgan and Nedbank SA were absent from the committee meeting.
Mr Woods says that during the meeting (amongst other things):
·the circular letter dated 25 July 2017 was tabled for discussion;
·the reasons for and length of the requested extension were explained to the committee members;
·he notified the committee of the time and place of the hearing of this application; and
·he asked the committee members if there were any objections, and any supporting reasons, to the application and stated that he would advise the Court of the views of the committee.
Mr Woods deposes that the committee member representing EDF advised that EDF supports an extension of the convening period, but only to 31 August 2017. Mr Woods points out that date is only 10 days after the last day on which COUH may seek to exercise the COUH option and COUH has advised the administrators that it will likely not make a decision until the last day. Mr Woods says he advised the committee members that the administrators’ position was that 10 days would be insufficient to call for and consider restructure/recapitalisation proposals following receipt of COUH’s decision.
Mr Woods states that the committee member representing LIC advised that LIC supports the administrators’ extension application and noted that any time shorter than the proposed extension to 29 September 2017 would be to the detriment of Paladin Energy’s creditors.
Mr Woods also states that the committee member representing BNY Mellon stated that BNY Mellon had not obtained a view from bondholders in time for the committee meeting regarding the application to extend the convening period.
Mr Woods says that he has received no other comments from the committee members in relation to the application and no committee members indicated that they objected to the application or intended to appear at the hearing on 28 July 2017.
Mr Woods states that the only creditors of Paladin Finance are Paladin Energy and Deutsche Bank (which has now replaced Nedbank as Paladin Finance’s financier). The only creditors of Paladin Minerals are Paladin Energy and Nedbank (which is represented on the committee). As Deutsche Bank is not represented on the committee, Mr Woods caused notice of this application to be provided by email to Deutsche Bank and its solicitors, DLA Piper, on 27 July 2017. At the time of swearing his affidavit, the administrators have not received any objection from Deutsche Bank and Nedbank to the application, or any notice that they intend to appear at the hearing on 28 July 2017.
Immediately following the hearing of this application, Mr Woods proposes to provide a circular to the companies’ creditors giving notice of any orders made in relation to this application.
Mr Woods says that he and his fellow administrators are not aware of any specific or material prejudice which would be suffered by any creditor or group of creditors of the companies as a result of the sought extension. Accordingly, for the reasons set out in Mr Woods’ second affidavit and first affidavit, he considers that it is in the interests of the companies’ creditors to extend the convening period to 29 September 2017.
It is well established that the Court’s power under s 439A(6) should not be exercised as of course. The Court must strike an appropriate balance, having regard to various “overlapping considerations”, as summarised by Lindgren J in Re Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 at [18], referring to the authorities cited therein:
(a)The Court should recognise the objective of speed of administration that was associated with the introduction of Part 5.3A. The Court should also recognise the objectives stated in para 507 of the explanatory memorandum associated with the Bill for that Act, that it was expected that the power to extend the period would be exercised infrequently since it is an important objective of Part 5.3A that creditors be fully informed about the company’s position as early as possible and have an opportunity to vote on its future as soon as possible.
(b)The function of the Court is to strike an appropriate balance between the legislature’s expectation that the administration will be a relatively swift and summary procedure, and the requirement that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders.
(c)The prospects of a better outcome for creditors through a longer period of administration may outweigh the general expectation of a prompt resolution of the administration.
(d)A particular consideration against the too ready grant of an extension is the fact that while the voluntary administration continues, there is an embargo or moratorium on the enforcement of remedies by secured creditors, lessors and others.
(e)The application is to be assessed by reference to whether an extension is necessary to enable the administrators to prepare and provide the report and statements, and in particular, to arrive at the opinion referred to in s 439A(4), in order to inform creditors adequately so that they will be in a position to decide whether to terminate the administration, execute a DOCA or place the company in liquidation.
(f)It is often desirable that any extension be accompanied by an order under s 447A, permitting the meeting to be held at any time during the convening period as extended.
The following reasons have been identified as valid bases for extension under s 439A (see Austin J in Re Riviera Group Pty Ltd(Administrators Appointed) (Receivers and Managers Appointed) [2009] NSWSC 585 at [13] and the authorities cited therein):
(a)the size and scope of the business;
(b)substantial offshore activities;
(c)the time needed to execute an orderly process of disposal of assets;
(d)complex corporate group structure and intercompany loans;
(e)complex transactions entered into by the company;
(f)the time needed for thorough assessment of a proposal for a DOCA;
(g)where the extension will allow sale of the business as a going concern; and
(h)more generally, that additional time is likely to enhance the return for unsecured creditors.
I accept that, by reference to these various considerations, the circumstances of this case call for an order allowing an extension. It is relevant that the objects of s 435A of the Act will be best served by the extension sought (see Farrell J in Iannuzzi, in the matter of Josa Constructions Pty Ltd (Administrators Appointed) [2017] FCA 822 at [35], in which case a substantial extension of three and a half months was approved). In the administrators’ judgment, a two month extension will allow for the possibility of a better return for creditors than would result if the administration were to end before that time.
In particular, I accept the submission of the administrators that the following factors militate towards the grant of the extension:
(a)this application is made before the convening period expires, and it is the first application;
(b)the extension sought is for a period of two months, and in the circumstances, the time sought is reasonable having regard to the likely time necessary for the potential exercise of the COUH option and for the administrators to consider and take advice in respect of BOM valuation and the COUH option;
(c)the extension would permit the administrators time to explore alternatives to the exercise of the COUH option, including undertaking some form of marketing process of the LHM as a going concern or a DOCA;
(d)that time would also allow the administrators to further their investigations into the companies’ affairs to make a recommendation to creditors;
(e)creditors (including employees) will not be materially prejudiced by the extension – the companies’ post-appointment obligations are being met from the funding provided under the Deutsche Bank Facility;
(f)the orders proposed make provision for any person who can demonstrate sufficient interest to apply to the Court for modification of those orders; and
(g)there is no winding-up application on foot in respect of any of the companies.
I also note the circumstances of the creditors as disclosed in the second affidavit of Mr Woods which I consider overall support an extension order.
For these reasons, I made the above orders.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. Associate:
Dated: 4 August 2017
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