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[2012] FCA 374
Federal Court of Australia
2012-04-13
Mr J, Robertson J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 On 22 December 2011 I published my reasons for judgment in this matter at first instance (Ample Source International Limited v Bonython Metals Group Pty Limited; In the Matter of Bonython Metals Group Pty Limited (No 6) [2011] FCA 1484). I then indicated what orders I proposed to make but listed the matter for the making of final orders, including costs, on 22 February 2012 (Ample Source International Limited v Bonython Metals Group Pty Limited; In the Matter of Bonython Metals Group Pty Limited (No 7) [2012] FCA 137). 2 On 27 February 2012 I made orders that Bonython Metals Group Pty Ltd (Bonython Metals), now the second respondent to the appeal, be wound up pursuant to s 233 of the Corporations Act 2001 (Cth). 3 At the same time I stayed the winding up order until 5.00 pm on 19 March 2012 on certain conditions. In my short reasons I noted at [36]: The only cogent evidence is that at present the company, the first defendant, is doing very little. I said this in light of Mr Hillam's evidence at that time as put by counsel that the company's day-to-day operations had ceased. Mr Hillam would manage its affairs as the need arose. There were no more employees; they had all resigned. The company would simply operate as a shell. In practical terms the company was "All but shut down". In support of a stay reference was made to Bonython Metals' position under certain agreements, including the agreement with Carpentaria to which I will later refer in greater detail. 4 The relevant conditions of the stay were: 1. any notice of appeal be filed by 9 March 2012; 2. the parties who are the appellants in such appeal take all steps to have any appeal heard as soon as possible; 3. 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; 4. 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); 5. 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; 6. 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; 7. except to give effect to order 3 above, BMG not issue any shares in itself to any person. 5 A notice of appeal was filed on 9 March 2012. (It has since been substantially amended). 6 On 19 March 2012 I heard argument in relation to orders sought by "Notice of Motion" filed on 19 March 2012. Over the opposition of Ample Source International Limited (Ample Source) I continued the stay orders I made on 27 February 2012 which would otherwise have expired. 7 In the course of submissions reference was made by counsel for the appellants to a potential investor in India having a definitive position by 23 March 2012, the following Friday, and an indication of the position of a proposed independent chairman by the same date. Counsel for Mr Hillam also indicated the solvency question of Bonython Metals could be dealt with by way of proper affidavit evidence "overnight" from 19 March 2012. These proposals did not eventuate within the times indicated. 8 At that stage also there was little or no evidence about what steps had been taken by the appellants to have the appeal heard as soon as possible, conformably with the conditions of the stay. Condition 3, set out above, had not been complied with. The notice of appeal had a return date of mid-April 2012. It did not appear that any steps had been taken to prepare Parts A and B of the appeal books. There had been no application for expedition of the appeal. The appellants appeared to contemplate the hearing of the appeal in the August 2012 sittings. I remarked how little appeared to have been done to get the appeal on for the earliest possible hearing. 9 However while my decision was reserved after 19 March 2012, some progress was made in relation to the preparation of the appeal for hearing. The appellants had put on a motion for expedition and had filed an amended notice of appeal. There was also a timetable for the appeal books. That aspect of the matter came before Emmett J on 4 April 2012 and is listed for directions at 9:30 am on Monday, 16 April 2012. The possibility of a Full Court being able to be convened to hear the appeal in early June 2012 was discussed. When the appeal should be listed was said to be related to the outcome of the stay question before me. I shall refer to this issue again shortly. 10 I therefore relisted the stay application for mention before me on 11 April 2012. 11 By an interlocutory application handed up in court on 11 April 2012 and, by consent the subject of evidence and submissions on that day the appellants apply for interlocutory orders as follows: 1. Order that pending the hearing and determination of the appeal or further order and notwithstanding anything contained in the Share Allotment and Shareholders Agreement dated 20 April 2010, or the Constitution of the Second Respondent: (a) The Honourable Andrew John Rogers QC be appointed to the board of directors of the Second Respondent as its chairman; (b) Mr Richard Stuart Langley Hill be appointed as a director of the Second Respondent; (c) The First Appellant, Mr Hillam is to be entitled to continue as a director of the Second Respondent; (d) the First Respondent, Ample Source International Ltd is to be entitled on or before 12 April 2012 to appoint two persons as directors of the Second Respondent (so that if it does so the board will consist of five persons); (e) The quorum for directors' meetings shall consist of the chairman, Mr Hill and at least one other person with any director entitled to attend by telephone if he or she wishes to do so; (f) Not less than three days notice shall be given at any meeting of directors unless all directors consent to shorter notice, and for this purpose notice to the solicitors for Ample Source International Limited by email shall suffice in the case of any directors appointed by Ample Source International Ltd; (g) The board of the Second Respondent shall be entitled to conduct the business of the Second Respondent; (h) The board of the Second Respondent shall be empowered to sell or otherwise deal in any way with any of the assets of the Second Respondent; (i) The board of the Second Respondent shall be empowered to cause the Second Respondent to enter into the deed of indemnity in the form of the document exhibited to the affidavit of Richard Stuart Langley Hill sworn on 10 April 2012 and marked RH1; (j) The board shall be entitled to act by majority vote with the chairman having (if necessary to produce a decision) a second or casting vote; (k) The First and Second Appellant, Mr Hillam and Ms Teeranukul shall be entitled to enter into deeds of indemnity in the form of the documents exhibited to the affidavit of Richard Stuart Langley Hill sworn on 10 April 2012 and marked RH2 and RH3 respectively; (l) The First Appellant, Mr Hillam shall be entitled to lend to the Second Respondent the sums mentioned in the undertakings to the court noted below 2. Note that Mr Hillam by his counsel undertakes to the Court to lend to the Second Respondent the sums of $150,000 within 14 days and thereafter until the hearing and determination of the appeal the sum of $50,000 per month. 12 This interlocutory application is in substitution for the orders sought by "Notice of Motion" filed on 19 March 2012. 13 The proposed orders were contended for as a whole. The appellants' fall back position was that the stay orders I made on 27 February 2012 should continue. The first respondent opposed the proposed orders and any continuation of the stay. 14 On the 11 April 2012 interlocutory application the following affidavits were read on behalf of the moving parties: John Frederick Hillam affirmed 16 March 2012; John Frederick Hillam affirmed 10 April 2012; Richard Langley Stuart Hill (undated but) filed in court on 11 April 2012; and Karl Richard Reinboth sworn 10 April 2012. The first respondent relied on the affidavit sworn by Thomas Frederic Ritchie on 10 April 2012. 15 One of the matters I take into account in determining the stay question is that a Full Court will, on present indications, be seized of the matter by no later than early June 2012. I understand that the appeal is estimated to take two to three days. I was told by counsel on 11 April 2012 that depending on the outcome of the interlocutory application presently before me Emmett J would entertain an application on Monday 16 April 2012 to consider fixing the hearing of the appeal earlier than June. 16 The immediate occasion for the appellants seeking the orders which they do is to be found in the terms of an agreement between Carpentaria Exploration Ltd (Carpentaria) and Bonython Metals dated 15 April 2010 (the Hawsons Iron Project). The focus of attention has been clause 4.2 which relevantly provides that by the date which is no later than two years and thirty days from the Commencement Date (as defined) Bonython Metals may elect to exercise its right to earn a 51% Joint Venture Interest by payment of the sum of $25 million to Carpentaria (and receipt of such sum by Carpentaria as cleared funds into a bank account nominated by Carpentaria to Bonython Metals for that purpose). On and from the date that Bonython Metals elects to exercise that right the Percentage Shares of the parties will be 51% to Bonython Metals and 49% to Carpentaria. If Bonython Metals elects not to exercise its rights then its Percentage Share will remain at 40%. If that occurs and Carpentaria is approached by a third party with a bona fide offer to acquire all of Bonython Metals Percentage Share, then Bonython Metals must assign its Percentage Share to that third party provided that the consideration for the assignment at least equals the total expenditure of Bonython Metals on the Project after the date of the offer including the Execution Payment, the various cash payments to Carpentaria and Cash Calls which have been made under clause 4. 17 Thus, in one eventuality, if Carpentaria has not received from Bonython Metals $25 million in cleared funds no later than 15 May 2012, Bonython could be required to assign its Percentage Share (40%) to a third party for its total expenditure of approximately $13 million. 18 What is proposed on an interlocutory basis is, in the words of Mr Hillam's most recent affidavit, "capitalising the company Bonython Metals Group Pty Ltd pending the sale or other disposition of its mineral tenement in the Hawsons Iron Project". 19 Mr Reinboth in his affidavit says that for some time his company has been endeavouring to find a buyer for the interest of Bonython Metals in the Hawsons Iron Project. He refers to negotiated terms with a German company whose identity was presently unknown to him, which terms were summarised in correspondence between the solicitors for Mr Hillam and the solicitors for Ample Source dated 27 March and 5 April 2012. Mr Reinboth refers also to negotiations with two possible Indian purchasers of the same asset. He says that in 2011 he undertook due diligence of the Hawsons Iron Project in order that he could form a view about the project and which companies in India it may be suitable for in terms of a possible investment. He said his due diligence included numerous discussions with Mr Hillam. I note that whenever these events took place they were not part of the substantive proceedings before me in 2011. 20 Mr Hill says in his affidavit that as a board member he would make it a priority to seek to obtain the sum of $25.6 million required for the purposes of enabling the company to make all payments due to Carpentaria in order to secure an existing interest in the Hawsons Iron project and to take the company to a 51% interest. He says that he had in mind six persons to whom an investment memorandum could be sent "and who would or would represent persons who could afford such an investment and may be interested in the project." Mr Hill also says that in his opinion none of those persons would be prepared to make funds available to the company to enable it to increase its interest unless the company had in place a Board of Directors and there was no further prospect that any winding up order might take effect. 21 This statement in my view tends to show that it is not only the period between now and the hearing of the appeal which militates against the sale of the Hawsons Iron Project interest but it is also the outcome of the appeal itself against the winding up order. 22 Against this I consider the recent correspondence between the solicitors for Mr Hillam and the solicitors for Ample Source. By letter dated 27 March 2012 the solicitors for Mr Hillam referred to discussions with an Indian company which proposed to introduce an investor to acquire the entirety of the interests of Bonython Metals in the Hawsons Iron Project. By email dated 28 March 2012 the solicitors for Ample Source said that they did not consider the attachment to the email of 27 March 2012 to be a credible proposal because it lacked the details including the identity and contact details of the purportedly interested purchaser of the Hawsons interest and proof that the purportedly interested purchaser had the financial capacity to complete the purchase. The solicitors for Ample Source asked to be provided with copies of all correspondence between any or all of Mr Hillam, Bonython Metals, Dron Energy and the purportedly interested purchaser and any other associated persons or parties. By letter dated 5 April 2012 the solicitors for Mr Hillam said that the Indian intermediary had told Mr Hillam that Bonython Metals will shortly receive a written offer from a German-based company which it advises has an annual turnover of some $50 billion. "The agent has advised us that, upon the signed offer being made available, they will also make available to us a company profile and balance sheet. We will forward those documents to you when we receive them." The letter also forwarded draft deeds of indemnity and letters of consent by way of notice of what was intended to be annexed to an affidavit to be read on the interlocutory application. In summary, little if any of the requested information has been provided to Ample Source.
Conclusion 23 On the assumption that I have the power to make these orders pending the appeal, as to which see generally Williams v Minister for the Environment and Heritage (2003) 199 ALR 352 per Lindgren J which referred to Wilson v Church (No 2) (1879) 12 Ch D 454, in my view, the orders proposed go beyond preserving the status quo pending the hearing of the appeal. What is being proposed has the character of the facilitation by interlocutory order of the sale of what appears to be the major asset of Bonython Metals and the continuation of other commercial activity on the part of the company. In my opinion, there is a disproportion between what is proposed and preserving the status quo. 24 Further, I am not persuaded that there is any realistic proposal which would involve the receipt by Carpentaria of $25,000,000 by 15 May 2012. The material before me is too uncertain, particularly as to timing. I refer in this respect particularly to the attachment to the letter dated 27 March 2012 from Mr Hillam's solicitors to the solicitors for Ample Source and the draft commercial terms attached to it. The steps there contemplated were, first, the delivery of a formal written offer, second due diligence commencing on the delivery of the formal written offer and terminating 21 days thereafter at which time the investor would elect whether to withdraw or proceed, and Foreign Investment Review Board approval to be granted within 90 days of the date of acceptance. I also note the 45 day option period in cl 13.4(d) of the 15 April 2010 agreement which adds to the uncertainty to which I have referred. 25 Further, in my view it is unlikely, consistently with Mr Hill's view, that the proposed interlocutory orders would mean that there was no further prospect that any winding up order might take effect. 26 In addition, I regard the evidence as to the funding by Mr Hillam of Bonython Metals as unsatisfactory. I realise that the appellants seek still more time to finalise these arrangements but the available Court time is finite and I must also take into account the position of the first respondent, Ample Source, which has obtained a winding up order (presently stayed) on the ground of oppression and that at least until recently, a most leisurely attitude has been taken on the part of the appellants to expedition of the appeal and indeed to compliance with conditions 2 and 3 of the conditions of the stay I granted. 27 For these reasons I am not persuaded to make the orders sought in the appellants' 11 April 2012 interlocutory application. The order that I make is that the appellants' interlocutory application dated 11 April 2012 be dismissed with costs. The interlocutory application filed on 19 March 2012 should also be dismissed with costs. I have previously reserved the costs of the interlocutory application dated 22 February 2012. The parties are agreed that the appropriate order in respect of that interlocutory application is that the costs be costs in the appeal. 28 The stay orders I made on 27 February 2012 continue on the same conditions until further order. That is of course without prejudice to anything the Full Court may order. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.
Hillam
Ample Source International Ltd