Ford v Advanced Energy Minerals Limited

COLVIN J: 1 Mr Julian Ford proposes to commence proceedings in this Court against five respondents. They include Mr John Fletcher, Mr Tim Fletcher and Mr Michael Adams. On the evidence before me, they each live overseas. Mr John Fletcher lives in the Hong Kong Special Administrative Region of the People's Republic of China and Mr Tim Fletcher and Mr Adams live in the United Kingdom. Mr Ford seeks leave to serve the three proposed respondents in accordance with the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at The Hague on 15 November 1965 (Hague Convention). 2 An applicant for leave to serve an originating application outside of Australia must satisfy the requirements of r 10.43(3) and (4) of the Federal Court Rules 2011 (Cth). 3 Rule 10.43(3) requires the application for leave to be accompanied by an affidavit stating (a) the name of the country where the person to be served is likely to be; (b) the proposed method of service; and (c) in a case where the Hague Convention is relied upon, that the Hague Convention applies. The applicant has filed affidavits of Mr Nicholas Parkinson deposing to these matters. 4 Rule 10.43(4) requires the applicant for leave to satisfy the Court that (a) the Court has jurisdiction; (b) the proceeding is of a kind mentioned in r 10.42; and (c) the party has a prima facie case for all or any of the relief claimed in the proceeding. For reasons which follow, I am satisfied as to each of these matters.

The Court has jurisdiction 5 The proposed originating application seeks to raise civil claims under the Corporations Act 2001 (Cth). It alleges oppressive conduct of the affairs of Advanced Energy Minerals Limited (AEML), an Australian proprietary company, and leave to bring derivative proceedings. The Court has jurisdiction as to claims of that kind under s 1337B of the Corporations Act and s 39B(1A) (c) of the Judiciary Act 1903 (Cth).

The proceeding is of a kind mentioned in r 10.42 6 An affidavit of Mr Ford has been provided which describes the nature of the proceedings. Mr Ford claims to have been the chief executive officer and an executive director of AEML. He also claims to be a shareholder of AEML. He has outlined a history of complaints concerning the conduct of the affairs of AEML including his exclusion from decisions taken by the board of directors, a resolution of the board in his absence to approve a shareholders agreement in respect of a company in which AEML held shares, the activities of the company in seeking to raise capital and two instances of the exercise of share options. 7 The material facts to determine whether the proceedings are of the requisite kind may be revealed by the content of the proposed proceedings or by further evidence: Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 at [52]. 8 The proceedings are of a kind described in a number of the items mentioned in r 10.42. I need only observe that they concern membership of a company that carries on business in Australia (item 8) and seek relief or a remedy under the Corporations Act (item 15).

A prima facie case for all or any of the relief 9 The requirement to establish a prima facie case must be understood in the context in which it arises and inferences from matters relied upon may be more readily drawn than they may otherwise be at trial: Tiger Yacht Management Ltd v Morris [2019] FCAFC 8; (2019) 268 FCR 548 at [46]. The purpose of the requirement is to ensure that it is demonstrated that there is controversy the resolution of which warrants the use of the Court's processes and justifies the involvement of the foreign respondent: Suzlon Energy v Bangad (No 3) [2012] FCA 123 at [35]. Determining whether there is a prima facie case for the purposes of the application should not call for a substantial inquiry. A prima facie case for relief is made out if, on the material before the Court, inferences are open which, if translated into findings of fact, would support the relief claimed: Ho v Akai Pty Limited (in liq) [2006] FCAFC 159; (2006) 247 FCR 205 at [10] (and cases there cited). 10 It is not necessary to demonstrate merit in all of the claims made in the proceeding: Tiger Yacht at [45]. 11 In submissions in support of the present application, the applicant describes the alleged events which have occurred and then simply asserts that he has a prima facie case for orders (a) regulating the future conduct of the affairs of AEML; (b) setting aside the purported exercise of options by the proposed respondents; and (c) requiring the proposed respondents to purchase the shares in AEML held by Mr Ford. 12 In the circumstances, it is not possible to adjudge the merits of the claim to (a). As to (b) and (c), the facts relied upon are set out in the submissions in support of the application. The test as to whether conduct has been contrary to the interests of the members as a whole or oppressive or prejudicial to a member or members is objective. It includes conduct in good faith and for a proper purpose but where a reasonable director weighing the corporate object on the one hand and the disadvantage, disability or burden which the decision would impose on a member or members on the other would not have made the decision: Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459 at 472-473 (Brennan J) as applied in Mackay Sugar Limited v Wilmar Sugar Australia Limited [2016] FCAFC 133 where there is a summary of the relevant principles at [9]-[14]. 13 As has been noted, the conduct complained of includes the entry into a shareholders agreement in respect of a shareholding held by AEML in another company. One of the alleged terms of the shareholding agreement provided for a call option at 70% of book value for the transfer of AEML's shares to the other shareholder in the event that Mr John Fletcher or his company ceased to be the ultimate and major shareholder of AEML. It is alleged that this conduct had a tendency to limit the way in which capital might be raised by AEML and that it did so at a time that AEML needed to raise capital. 14 It is also alleged that options were exercised in breach of corporate governance standards and were approved by meetings of the board that were not validly convened. There is evidence that the options were exercised and approved in circumstances where the issue of the shares could affect the ability of AEML to raise capital at a time that it needed to do so. The relevant options are said to have been held by Mr Tim Fletcher and Mr Adams. 15 On the affidavit evidence of Mr Ford, each of the proposed three respondents to be served out of the jurisdiction are alleged to have been involved in the above dealings as officers of AEML. 16 There are other factual matters relied upon in support of the claim that have been outlined in the affidavit of Mr Ford. 17 Mr Ford claims to hold approximately 10.89% of the shares in AEML and to have been prejudiced by the above dealings which advantaged the personal interests of others. 18 In the above circumstances, I am satisfied that, having regard to the nature of the present application, there is a prima facie case for at least some of the relief sought. Given the nature of the application it is neither necessary nor desirable that more detailed reasons be provided concerning the merits: The Owners - Strata Plan No 87231 v 3A Composites GmbH [2019] FCA 811 at [28].

General Practice Note 19 The Court's Overseas Service and Evidence Practice Note (GPN-OSE) states that the affidavit in support of an application for leave to serve an originating application or other court documents on a person outside Australia should include information obtained from the Attorney General's Department of the Australian Government and that such information may be obtained from the Private International Law section of the Department's website. One of the affidavits of Mr Parkinson in support of the application deposes to having visited the website of the Department and having obtained the relevant information from that website.

Residual discretion 20 The Court has a residual discretion to refuse leave. One matter to be considered in the exercise of that discretion is whether the proceedings might be stayed if commenced: Trina Solar (US), Inc v Jasmin Solar Pty Ltd [2017] FCAFC 6; (2017) 247 FCR 1 at [115]-[118] (Beach J, Dowsett J agreeing). 21 In the present case, Mr Ford commenced proceedings in the Supreme Court of Western Australia seeking the same relief as that which he proposes to claim in the proceedings in this Court. Mr Ford has claimed that those proceedings relate to other proceedings in the Supreme Court and that both matters should be case managed together. However, it appears that a question was raised as to the jurisdiction of a judge of that Court to grant orders to effect service of the proceedings outside of Australia and it is in those circumstances that it is proposed to commence proceedings in this Court seeking the same relief. There is reference in the affidavit materials to the discontinuance of the existing proceedings in the Supreme Court, the commencement of the proposed proceedings in this Court and the possibility of an application to transfer such proceedings to the Supreme Court after service has been effected. Therefore, this is not a case where the applicant seeks to substantively advance both proceedings. 22 In correspondence that is before the Court on the present application it has been suggested that these matters may mean that the proceedings in this Court are an abuse of process. On the affidavit material it appears that Mr Ford proposes to seek such orders as may be appropriate to ensure that the same claims to relief are not being pursued in both this Court and the Supreme Court. 23 A similar circumstance arose before Siopis J in Perdaman Chemicals and Fertilisers v Griffin Coal Mining Company Pty Ltd [2011] FCA 1425. His Honour concluded that in such circumstances any issue of vexation or oppression could be addressed in due course by appropriate orders and was not a reason to decline leave to serve proceedings out of the jurisdiction: at [19]-[22]. In that case, the parties against whom leave was sought to serve out of the jurisdiction were not parties to the existing proceedings in the Supreme Court. Given that the affidavit material indicates that it is proposed to discontinue the existing Supreme Court proceedings the same appears to pertain in the present case. 24 Further, as Siopis J observed, it is a matter that can be addressed by appropriate orders. I agree with the approach of Siopis J in Perdaman.

Orders 25 For the reasons that have been given, orders should be made granting leave to the applicant to serve the proposed proceedings outside Australia. 26 The proposed method of service is by sending the originating process by international registered post to addresses that have been described in the affidavit evidence at places of residence of each of the proposed respondents and I will make orders accordingly. The costs of the present application should be reserved for determination in the proceedings to be commenced by the applicant. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.