Ample Source International Limited v Bonython Metals Group Pty Limited; In the Matter of Bonython Metals Group Pty Limited

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1784 of 2010

IN THE MATTER OF BONYTHON METALS GROUP PTY LIMITED (ACN 141 257 294) BETWEEN: AMPLE SOURCE INTERNATIONAL LIMITED BVICN 1575638

AND: BONYTHON METALS GROUP PTY LIMITED ACN 141 257 294

JUDGE: ROBERTSON J DATE: 27 FEBRUARY 2012 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 On 22 December 2011 I published reasons for judgment in this matter. The matter is now before me to deal with costs and an application by the second to fifth defendants ("the defendants") for a stay.

Costs 2 At [367] of the reasons for judgment I stated my conclusions including that costs should follow the event and that the plaintiff, Ample Source International Ltd, should have its costs. 3 At [368] of the reasons for judgment, I directed the plaintiff to file by 8 February 2012 short minutes of order giving effect to those reasons, including which of the defendants should pay the costs of the plaintiff in the substantive proceedings. I directed that if the defendants resisted the orders filed by the plaintiff they should file competing short minutes by 15 February 2012. 4 At the same time I directed that the proceedings be listed for the making of final orders at 9.30 am on 22 February 2012. 5 The defendants did not comply with the directions I have referred to in [3] above but, by an email communication dated 17 February 2012, asked that each party pay its own costs. This was inconsistent with [367] of the reasons for judgment published on 22 December 2011. 6 On 22 February 2012, the defendants handed up written submissions purporting to canvass costs on a still wider basis than their communication forwarded on 17 February 2012. 7 In the result, although it was made a week later than the time fixed by the directions made on 22 December 2011, I have considered in respect of costs the submissions on the part of the defendants that "there be no orders as to costs in respect of the fourth defendant" and that the third defendant and the fifth defendant should not be ordered to pay the plaintiff's costs. 8 I have also considered, although made without leave, the defendants' wider submission in relation to costs. 9 In my reasons for judgment I was not, and I am not now, minded to make any costs order that the plaintiff should not have all of its costs or that any of the defendants should have their costs. 10 The submission that there should be some apportionment by issues is also rejected: the issues were not separate from the overall result. 11 The submission in relation to the fourth defendant was put on the basis that: "Ms Teeranukul played little part in the proceedings. No orders are to be made against her. Her involvement in the evidence was limited to the appearance of her name on a few documents. A defendant should only be liable for the costs as against her. In this case, no costs should be awarded." 12 I do not accept this submission. In my opinion, in the present case it is not the point whether Ms Teeranukul played little part in the proceedings or not. She was represented throughout. Further, Mr Hillam and Ms Teeranukul each held 32,000 ordinary shares in Bonython Metals. In my reasons for judgment I said that I regarded those shareholdings as, in combination, the majority shareholding. Her conduct was a basis for my conclusion that the conduct of the affairs of Bonython Metals was oppressive to Ample Source. 13 Nevertheless, compared to Mr Hillam, Ms Teeranukul had a relatively minor role in the conduct I have held to be within s 232(e) of the Corporations Act 2001 (Cth) and in my opinion the appropriate proportions should be 80% of the plaintiff's costs in relation to Mr Hillam and 20% in relation to Ms Teeranukul. 14 I accept that the third defendant and the fifth defendant were in a different position and they should not be ordered to pay the plaintiff's costs. However I see no basis on which a costs order should be made in their favour or in favour of either of them. 15 I order accordingly.

Stay 16 In my reasons for judgment published on 22 December 2011 I found that the conduct of the affairs of Bonython Metals Group Pty Ltd, the first defendant, was oppressive to Ample Source International Ltd, the plaintiff, within the meaning of s 232(e) of the Corporations Act 2001 (Cth). I concluded that the first defendant should be wound up. 17 By interlocutory application dated 22 February 2012 and filed in court on that day, the second to fifth defendants applied for an order "that execution of the judgment be stayed, and orders in the proceedings not be entered, pending appeal." 18 Those defendants relied for the purposes of the interlocutory application on an affidavit sworn by John Frederick Hillam on 22 February 2012. Counsel for those defendants also tendered an exploration joint venture and farm-in agreement between Carpentaria Exploration Limited (Carpentaria) and the first defendant dated 15 April 2010 and a deed of variation between the Blue Rose Joint Venture and the first defendant. 19 The plaintiff relied on an affidavit of Thomas Frederic Ritchie sworn 21 February 2012.

Orders not be entered pending appeal 20 I deal first with the application insofar as it seeks an order that the orders in the proceedings not be entered. 21 This part of the interlocutory application appears to accept that orders would be made but seeks to draw a distinction between the making of the orders and the entry of those orders. 22 Because an appeal is from orders and not from reasons it seems impossible that orders not be made "pending appeal". As to the entry of orders, rule 39.31(1)(c) of the Federal Court Rules 2011 relevantly provides that an order must be entered if an appeal from the order has been instituted. 23 No suggestion was made that there was a basis for dispensing with compliance with that rule under rule 1.34. 24 I therefore reject that part of the interlocutory application that orders in the proceedings not be entered pending appeal.

Execution of the judgment be stayed pending appeal 25 The relevant defendants relied on s 23 of the Federal Court of Australia Act 1976 (Cth) insofar as any appeal would not have been instituted at the time the orders are first proposed to be made. 26 In Deputy Commissioner of Taxation v Ansett Resources & Industries Pty Ltd (ACN 116 913 663) (2010) 79 ACSR 347 Reeves J said: [11] … it is clear, in my view, that I have the power under s 23 of the Federal Court Act 1976 (Cth) to order a stay of the winding-up order pending an appeal to the Full Court. The grant of such a stay is a matter for the discretion of the court in all the circumstances of the case: see HVAC Construction (Qld) Pty Ltd v Energy Equipment Engineering Pty Ltd (2002) 44 ACSR 169 at [47]-[48] (HVAC) per French J. Furthermore, the principles applicable to this stay application are the same as those that apply under the Rules of Court to the stay of any order of the court pending an appeal: see Kalifair Pty Ltd v Digi-Tech (Aust) Ltd (2002) 55 NSWLR 737 at [18] (Kalifair); Masri Apartments Pty Ltd (in liq) v Perpetual Nominees Ltd (2004) 209 ALR 86 at [17] (Masri); and Gronow, McPherson's Law of Company Liquidation (Lawbook Co, subscription service) at [16.190]. [12] Under the Federal Court Rules, the normal principles are these. First, it is not necessary to demonstrate some "special" or "exceptional" reason for the stay: see Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 at 66 and HVAC at [48]. Second, there is an onus on the applicant to make out a reason or appropriate case for the discretion to be exercised in its favour: see HVAC at [48] and Ng v Van Der Velde [2010] FCA 89 at [20] and [21] (Ng). Third, the fact that an appeal will be rendered nugatory if a stay is not granted, is usually regarded as a substantial factor in favour of a stay. This, in turn, requires some assessment to be made to the prospects of success on the appeal: see, variously, Alexander v Cambridge Credit Corp Ltd (receivers appointed) (1985) 2 NSWLR 685 at 695; Kalifair at [18]; Masriat [17]; HVAC at [49(b)] and Ng at [21]. That assessment has been described as: "a preliminary non-speculative assessment of whether the appellant by the grounds of appeal has raised an arguable case … [involving] … a low threshold of arguability": see Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd [2008] FCA 1867 at [40] per Greenwood J and Ng at [36]. Fourth, if the grounds of appeal disclose an arguable case, it is necessary to consider where the balance of convenience lies. See Kalifair at [18] and Masriat [17]. In this respect, some of the factors that have been identified as being relevant to the stay of a winding-up application include: any detriment or risk to creditors or contributories flowing from the stay; the current trading position and solvency of the company; and the legislative policy expressed in the Act against delay in the liquidation process: see HVAC at [49] and, as to the latter, Broadbeach Properties at [15]. 27 I propose to follow these principles for present purposes. In my opinion, contrary to the plaintiff's submission, there may well be, in the present case, a difference between staying a winding up order already made, under s 482 of the Corporations Act, and making contemporaneous orders that a company should be wound up and that order stayed. 28 I note that under the Federal Court Rules, referred to by Reeves J, rule 36.08(1) now provides that an appeal does not operate as a stay of execution or a stay of any proceedings under the judgment subject to the appeal but rule 36.08(2) states: "However, an appellant may apply to the Court for an order to stay the execution of the proceeding until the appeal is heard and determined." 29 The evidence of the relevant defendants in support of the stay application provided no detail as to the effect on the first defendant of an order that the first defendant be wound up. 30 It was however submitted that the principal ground for a stay was the preservation of the subject matter of the proceedings and: the fact that any appeal will be rendered futile if BMG is wound up prior to appeal. It is self-evident that the appeal would be rendered nugatory without a stay. If BMG is wound up, the liquidator will sell the assets on the open market, very likely at a fire sale price. It is likely that the assets will be broken up and sold separately, and a successful appeal could not restore the position. It is highly likely that some assets, like the rights in action against Carpentaria for inclusion of the Redan tenement in the joint venture, and the right of action against Helix for specific performance of the Helix agreement, will be completely lost by delay, as it is likely that the liquidator will lack the resources to fund the actions. 31 Reference was made in particular to the joint venture agreement between Carpentaria and the first defendant and to the agreement between the Blue Rose Joint Venture and the first defendant. 32 The plaintiff submitted that I should not infer that the assets would be sold at a "fire sale price". It also contested the reference to the liquidator lacking the resources to fund any actions. 33 It seems to me that there are, broadly, three options. The first is to dismiss the application for a stay pending appeal. The second option is to grant a stay for a limited period so that any notice of appeal may be filed. The third option is to grant a stay until the appeal is heard and determined. In the case of either the second or third options the stay could be granted on conditions. 34 In my view, in light of the relevant defendants' frequent failures in these proceedings to act in a timely way I should not proceed on the basis that a notice of appeal will be filed until that event occurs. I should also not proceed on the basis that an undertaking to prosecute an appeal expeditiously would suffice to protect the relevant interests so far as the balance of convenience is concerned. 35 I am concerned also at the short notice and lack of formality with which this interlocutory application and the evidence in support of it has been filed. 36 I am also concerned that there has been no real attention in the evidence to the consequences of a stay being granted or not. The only cogent evidence is that at present the company, the first defendant, is doing very little. The Court has not had the benefit of full evidence on the question of a stay. 37 In my view the better course is to stay the operation of the winding up order for a short period on conditions that preserve the status quo. That will best answer the balance of convenience.

Orders 38 I therefore make the following orders:

1. The first defendant be wound up pursuant to s 233 of the Corporations Act 2001 (Cth).
2. David John Leigh and Michael Andrew Owen of PPB Advisory be appointed joint and several liquidators of the first defendant.
3. The first, second and fourth defendants do all things necessary to cause the first defendant to issue to the plaintiff ten fully paid ordinary shares in the first defendant.
4. The cross-claim of the second and fourth defendants filed 25 March 2011 be dismissed.
5. The Notice of Motion of the second to fifth defendants filed 28 September 2011 be dismissed.
6. The plaintiff's Interlocutory Application filed 11 October 2011 be dismissed.
7. The second defendant pay 80% of the plaintiff's costs of the proceeding (including the plaintiff's costs of the cross-claim and of the motions filed 28 September and 11 October 2011, and all reserved costs), as agreed or to be taxed as costs as between party and party.
8. The fourth defendant pay 20% of the plaintiff's costs of the proceeding (including the plaintiff's costs of the cross-claim and of the motions filed 28 September and 11 October 2011, and all reserved costs), as agreed or to be taxed as costs as between party and party.
9. The moneys paid into court by the plaintiff (being the sum of $390,000) pursuant to the Court's orders on 23 May 2011, together with the interest accrued thereon, be paid to the plaintiff forthwith.
10. Orders 1 and 2 above be stayed until 5.00pm on 19 March 2012 on the conditions: (i) any notice of appeal be filed by 9 March 2012; (ii) the parties who are the appellants in such appeal take all steps to have any appeal heard as soon as possible; (iii) the parties who are the appellants in such appeal file an affidavit by 16 March 2012 setting out what steps they have taken and propose to take, and by when, to have such appeal heard as soon as possible; (iv) the directors of Bonython Metals Group Pty Ltd (BMG) ensure that that company continues to maintain its bank accounts exclusively at NAB Double Bay branch and makes all payments from and receives all payments to and conducts its business through NAB Double Bay branch bank account numbers 85-808-2187, 16-613-1625 or 17-847-4000 (BMG Bank Accounts); (v) the defendants in the present proceedings do not: (a) dispose of, deal with or diminish the value of any of the assets of BMG; (b) cause the assets of BMG to be disposed of, dealt with, or diminished in value; or (c) incur any liabilities on behalf of BMG; other than in the ordinary course of business; (vi) the second defendant and the third defendant do not claim any amount against BMG pursuant to the Contractor Agreement between BMG and the third defendant; (vii) except to give effect to order 3 above, BMG not issue any shares in itself to any person. If any of these conditions is not met the plaintiff has leave to apply for the stay order to be discharged.
11. The costs of the second to fifth defendants' interlocutory application dated 22 February 2012 be reserved.
12. The appeal proceedings be listed at 9.30 am on 19 March 2012 for any further interlocutory orders.
13. The parties have liberty to apply on the giving of written notice of 3 business days. THE COURT DECLARES THAT:
14. The plaintiff is entitled to appoint two directors to the board of the first defendant and, while the plaintiff remains a shareholder in the first defendant, to replace that director in accordance with the Constitution of the first defendant. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.