Weaver v Noble Resources Ltd [2018] NSWSC 11 | Case summary

The Deed Administrators' and interested parties' submissions

The Deed Administrators rightly accepted that they bear the legal onus of establishing that the Court's discretion to allow the share transfer should be exercised in their favour in this application: Re Nexus Energy Ltd (subject to deed of company arrangement) above at [27]. They relied on Mr Jaski's and Mr Woods' evidence to establish that the equity in PEL has no value. I have referred to Mr Jaski's report and Mr Wood's evidence that PEL has been unable to realise its assets to repay its debt or achieve a solvent restructuring of that debt and as to the likely outcome of a liquidation above. Subject to the matters raised in shareholders' submissions, which I address below, it seems to me that that evidence establishes that the deficiency in PEL's assets against its debt are such that its equity has no value, on a going concern basis, on a "distressed" going concern basis, or in a liquidation and a liquidation is the likely outcome of the failure of this application.
Mr Pike submits (and I also accept, subject to the particular issues addressed below) that the Deed Administrators' evidence establishes that, on either a going concern or distressed basis, the shares in PEL have nil value, where the deficiency in assets against debt of PEL as valued by Mr Jaski is, at least, US $99 million and exceeds US $350 million on a distressed basis. Mr Pike also submits, and I accept, that there appears to be no present prospect of a capital raising or other injection of funds which might enable PEL to continue to trade or avoid liquidation, if this application is not approved and the DOCA cannot be effected. Mr Pike submits (and I also accept, subject to the particular issues addressed below) that the DOCA represents the best outcome for creditors of PEL in the circumstances, where there would be no return to shareholders on a liquidation. It follows, as Mr Pike submits, that there is no economic prejudice or unfair prejudice to shareholders in the transfer of shares contemplated by the DOCA. A position by which existing shareholders retain 2% of the equity in PEL is, albeit marginally, more advantageous to them than a liquidation and there is no evidence to suggest that any other alternative is presently available.
The Deed Administrators tendered a bundle of correspondence from shareholders (Ex P7) and provided a helpful aide memoire (MFI 2) which summarised the essential features of that correspondence. A single shareholder wrote to the administrators indicating his support for the transaction. A significant number of shareholders, not surprisingly, objected to the transaction, and many of those shareholders perceived the transaction as involving a confiscation or appropriation of their assets "without compensation" or expressed disappointment in the management of PEL. Several shareholders advanced criticisms of the independent expert report or the adequacy of marketing activities undertaken by the administrators in respect of PEL's assets.
Mr Kalfon, a shareholder in PEL, was heard in opposition to the application and tendered a bundle of documents relating to the uranium price and the price of shares in companies associated with the uranium industry and, in particular, to increases in that price which occurred when a Canadian producer indicated that it would suspend production from a mining and milling operation by the end of January 2018 by reason of: "the continued state of over-supply in the uranium market and no expectation of change on the immediate horizon". That evidence is not wholly favourable to Mr Kalfon's submissions, so far as that announcement indicated a pessimistic view as to the uranium market. Mr Kalfon also referred to a further increase in the uranium price which occurred when a major producer was understood to have announced that it would cut planned output by 20% over the next three years, although it appears that producer was merely not increasing production and that price increase was not sustained in the longer term. Mr Kalfon also tendered two documents which related to the valuation of PEL's Michelin project in Canada, a matter to which I refer below. Mr Kalfon also briefly cross-examined Mr Jaski as to that matter.
Mr Kalfon submits that Mr Jaski's report, and the CSA report on which it relies, do not establish that PEL's equity has no value by reason of the two matters to which I referred in paragraph 39 above, which, he submits, impacted spot uranium prices after the valuation date of 30 September 2017 adopted for that report. Specifically, Mr Kalfon submitted that Mr Jaski's expert report: "is no longer relevant in that all its conclusions were completed, and the report finished, in June of 2017 just prior to two significant material events that have changed the value of both global spot uranium prices and the valuation of virtually all miners."
Mr Kalfon also accepted in his submissions, consistent with the Deed Administrators' position, that the spot price of uranium had been severely depressed over the last five years, but submitted that the announcements to which I referred above were reflected in a 20% increase in the spot uranium price and a 25% increase in the share price of uranium miners, which he submitted had the result that CSA's report was no longer relevant and did not reflect fair value of the shares in PEL.
Mr Jaski responded to the matters raised by Mr Kalfon in a letter dated 15 January 2018, which was annexed to Mr Woods' second affidavit dated 15 January 2018 (Woods 15.01.18, [12], pp 70-72), and Mr Jaski confirmed that he held the views set out in that letter in oral evidence (T39). Mr Jaski pointed out that, although the valuation date for both the independent expert's report and CSA's report was 30 September 2017 (and not, I interpolate, June 2017), the reports were not finalised until 22 December 2017, when they were released to ASX and to shareholders, and that the events on which Mr Kalfon relied were able to be considered prior to finalising the reports. Mr Jaski points out, and I accept, that his report had specifically noted the two announcements to which Mr Kalfon referred (section 8.3.1 p 53). Mr Jaski also expressed the view that, although those announcements led to an initial increase in the uranium price, that increase was within the range of the forecast uranium price adopted in his report. Mr Jaski's position in that respect is consistent with his report, which assumes a significant increase in uranium prices in 2018, and to 2021, and Mr Jaski's cross-examination by Mr Kalfon did not involve any substantial challenge to that proposition.
Mr Jaski also expresses the view, and I accept, that the increase in uranium spot prices or increase in uranium mining companies' share prices to which Mr Kalfon refers would not have a significant impact on the valuation of PEL's assets, particularly on a discounted cashflow basis, where the value attributed to PEL's mining assets already incorporate uranium price forecasts that are substantially higher than the current uranium price, and an alteration in the uranium price would not significantly impact Paladin's other assets. Although Mr Jaski accepted that the Mineral Assets valued by CSA, representing approximately 10% of Paladin's total assets, may increase by up to approximately 20%, if revalued as at mid-January 2018, he also pointed out that that would represent only a minimal increase in the value of PEL's total assets, which was not material either to its total asset value or the net debt owed by it. It does not seem to me that Mr Kalfon's first criticism materially undermines Mr Jaski's report.
Second, Mr Kalfon submitted that the CSA valuations contained a "systemic, extreme, negative bias". Although that submission was directed to the report generally, Mr Kalfon provided only one "example" of the suggested bias, which was said to relate to the valuation of PEL's Michelin uranium project in Canada. Mr Kalfon referred to two other Canadian uranium projects which he submitted provided the best comparison for the value of that project. He fairly accepted that there were differences in the three deposits but submitted that the value attributed to those two other projects showed a substantially greater valuation should be attributed to the Michelin uranium project than was adopted by CSA. Mr Kalfon also pointed to the fact that EDF had previously accepted a proportion of the interest in the Michelin uranium project to secure its prepayment to PEL, in the transaction which subsequently resulted in the dispute with PEL to which I have referred above.
Mr Jaski did not accept that there was negative bias in CSA's report and responded to Mr Kalfon's submissions as to the suggested undervalue of the Michelin Project, pointing to the different character of the uranium deposits held by the two entities to which Mr Kalfon referred; the greater risk and larger onsite and offsite infrastructure requirements of the Michelin project, by contrast with the other projects to Mr Kalfon referred, and also expressed the view that the enterprise value multiples to which Mr Kalfon referred were not directly comparable to transaction multiples. I am not persuaded that Mr Kalfon's criticisms have substantially undermined the approach adopted by Mr Jaski and CSA to the Michelin project and, in any event, a criticism of the approach adopted in respect of that single asset does not substantially undermine the approach adopted by Mr Jaski and CSA generally. In cross-examination by Mr Kalfon, Mr Jaski also accepted that he was aware of a third party valuation undertaken by a valuer for EDF's purposes in respect of the Michelin project, and that he had reviewed that valuation although he could not recall its content, and that he did not base his valuation on another expert's valuation (T43). Mr Pike submitted, in oral submissions in reply (T60), and I accept, that it has not been established that Mr Jaski's approach to that matter was inappropriate.
Mr Kalfon also submitted that the assets of PEL would be more attractive if sold individually rather than the whole of PEL, and that an orderly liquidation of assets would be better for shareholders than the present proposal. Mr Kalfon also addressed the likely return on a liquidation in oral submissions (T49), and fairly accepted in oral submissions that that reflected his assessment, without the benefit of an expensive expert report. While I treat Mr Kalfon's view with respect, as that of an experienced investor, I am not persuaded that it is correct having regard to the comprehensive attempts made by PEL to interest third parties in acquiring its assets prior to the appointment of the voluntary administrators.
Mr Kalfon also submitted that a group of bondholders and Deutsche Bank are attempting to take over PEL "without due consideration to the shareholders". It is plain enough that the bondholders comprising the Ad hoc Committee of Bondholders seek to obtain a controlling interest in PEL, in exchange for the surrender of their debt, since that is the substance of the DOCA which has been approved by PEL's creditors. It may well be, in the circumstances, that Deutsche Bank is cooperating with or actively facilitating that proposal. However, the question posed by s 444GA of the Corporations Act is whether that proposal, if implemented, will unfairly prejudice the interests of shareholders in PEL, and that matter is not established by pointing to the fact that, as will commonly be the case, its proponents seek to implement it. It does not seem to me that Mr Kalfon has established the factual basis for a further finding of unfair prejudice to shareholders, in the transfer of 98% of their shares for no consideration, by comparison with the outcome of a liquidation which would be the likely result if the transaction does not proceed and the DOCA is not effected.
In oral submissions, Mr Kalfon also submitted that the "shortfall" in equity value was in the order of US $90 million (or, correctly, US $99 million) and that a modest change in valuation approach may erode that shortfall. However, as Mr Pike pointed out in oral submissions in reply, the figure of US $99 million is the higher (but still negative) value of Mr Jaski's going concern valuation, and I have pointed above to the difficulties in adopting a going concern valuation in this context. In any event, where a shortfall of at least that amount exists and the basis for a change in valuation approach has not been established, the equity in PEL does not have residual value.
I note, for completeness, that Mr Kalfon lodged brief further submissions with the Court, without leave, after judgment was reserved. The Court would not ordinarily have regard to such submissions, by reason of the public interest in the finality of proceedings. Many of the matters addressed in those further submissions were in any event addressed in the course of the hearing. I do not accept Mr Kalfon's further submission that the fact that existing shareholders would be permitted to retain 2% of their shares under the proposed transaction is an acknowledgment of value in the existing shares, where that facts is equally consistent with a practical recognition that an offer that allows existing shareholders to retain some equity may reduce the extent of opposition to the transaction, or the proponents' wish to preserve a spread of shareholders in a listed company.
I also do not accept Mr Kalfon's speculation that the Ad hoc Committee of Bondholders may, if this application is rejected, offer to permit existing shareholders to retain a higher percentage of shares. First, that proposition is not established by the evidence. Second, a proposition that value should be attributed to the shares because, absent a transfer of those shares by operation of s 444GA of the Corporations Act, the Ad hoc Committee of Bondholders might choose to make a more favourable offer to acquire them seems to me to be inconsistent with the statutory purpose of the provision, recognised in the Explanatory Memorandum and the case law to which I have referred above, and with the focus on the residual value of the shares in the case law to which I have referred above: Weaver v Noble Resources Ltd above at [83]; Re Nexus Energy Ltd (subject to deed of company arrangement) above at [102]. There would also be little scope for the application of s 444GA of the Corporations Act if, in any case where a shareholder objected to his or her shares being acquired, and even if they had no residual value, shareholders could resist the application on the basis that, if the application was refused, they may receive a more favourable offer.
Mr Burrell, also a shareholder in PEL who was heard in opposition to the application, briefly cross-examined each of Mr Woods and Mr Jaski and also advanced written and oral submissions in opposition to the application.
Mr Burrell submitted (Submissions [1]-[2]) that there was no evidence that the Deed Administrators had sought to develop alternate approaches to the DOCA proposal advanced by the Ad hoc Committee of Bondholders or had canvassed proposals from other stakeholders or interested parties. In oral submissions in reply, Mr Pike referred to the efforts that had been made by PEL to seek to sell assets or recapitalise prior to the appointment of the voluntary administrators. Mr Burrell fairly acknowledged in oral submissions that Mr Woods' affidavit provided significant evidence as to the efforts that have been made by the Companies, prior to the voluntary administrators' appointment, to identify a purchaser for the Companies or their assets and to develop a solvent recapitalisation proposal, and I have also referred above to Mr Molyneux's evidence as to those matters. I accept Mr Woods' evidence that there would have been little utility, and real delay and cost, in the voluntary administrators seeking to repeat that process, particularly where there is little evidence of any substantial change in the uranium market in the period since their appointment, and the evidence on which Mr Kalfon relied to support an increased valuation of uranium assets demonstrated that major uranium producers are looking to reduce, or not increase, production, by reason of adverse market conditions.
Mr Burrell also criticised the section 439A report prepared by the voluntary administrators on the basis that it had omitted reference to the proposition that: "Although CNNC made a loan of $90m to [PEL], it has not paid its 25% share or all in cash costs of running Langer Heinrich Mine (LHM) since purchase of that proportion of the mine in 2014 … That amount could be in excess of $100M and would offset that loan which has been included within total debt." (Submissions [3(a)]).
The first part of that submission requires qualification, so far as it appears that CNNC acquired, rather than made, that loan, when it acquired an interest in LHM, and that amount is not owed to PEL. Mr Woods' evidence in cross-examination by Mr Burrell was that he was aware from examining PEL's books and records that the $90m loan was acquired by CNNC from Paladin when it bought its 25% interest in the Langer Heinrich mine and that CNNC did not lend that amount but acquired an interest in that loan and that loan is not owed to PEL but by one of the Langer Heinrich companies to CNNC (T34). Mr Woods gave further oral evidence, by leave, confirming that an amount of $90m is owed by a Langer Heinrich company to CNNC, so that CNNC is a creditor of that company in that amount, and CNNC acquired that loan when it acquired its interest in the joint venture by an assignment of PEL's interest in that loan (T54).
The second part of that submission was undermined by the lack of evidence that CNNC owes any amount for the operating costs of the Langer Heinrich mine to PEL or the Langer Heinrich companies. Mr Burrell referred to an earlier market announcement by PEL but did not have a copy of that announcement and was unable to tender it or show it to Mr Woods in cross-examination, and it is not possible to assess whether Mr Burrell had accurately understood that announcement. Mr Woods' evidence in cross-examination was that he was aware, from discussions with PEL management, of two cash calls made by LHM that were not met by both CNNC and PEL and that PEL then lent money by an inter-company loan to fund the Langer Heinrich mine, which had priority over CNNC's and PEL's equity through interposed entities in that mine; he had taken account of the value of that loan in setting out the returns to creditors in a liquidation scenario in his section 439A report; and, in his view, that matter did not give rise to any omission or change in that report (T37). I should note, for completeness, that Mr Jaski was unable to address a question asked by Mr Burrell on the premise that CNNC had not paid the cash running costs of the Langer Heinrich mine in cross-examination, without reviewing his detailed working papers (T40). Nothing turns on that matter where, on Mr Woods' evidence, the relevant calls issued to PEL and CNNC had been cancelled, and replaced by loan funding by PEL. Mr Woods also gave further oral evidence, by leave, that CNNC is not a debtor to LHM in respect of the cash calls, because they were cancelled and neither CNNC nor PEL were required to meet them, and reconfirmed that PEL had lent money in place of those cash calls, which would rank in priority to any equity returns to CNNC in respect of the investment in LHM (T54).
It does not seem to me that these matters are capable of supporting Mr Burrell's submission that there exists any amount presently due by CNNC to PEL which could reduce the debt addressed in the section 439A report and the independent expert's report. In oral submissions, Mr Burrell submitted that the omission of reference to the non-payment of amounts due by CNNC in information provided to shareholders and in the independent expert's report undermined the validity of that report (T44). Mr Burrell submitted that, once Mr Jaski could not address that matter, his report "may possibly be deficient in that regard and therefore incorrect", and there was a question whether the Court "can accept it with that fragility" (T45). I do not accept that submission. It seems to me, first, that its factual basis is not established, where Mr Woods' evidence is that the calls made to CNNC and PEL were cancelled, and replaced by loan funding, and that loan funding has in fact been addressed. Mr Jaski's uncertainty in cross-examination does not establish the contrary, where he was not given the opportunity to review his working papers in order to address it, although I had raised the possibility that could occur in the course of his cross-examination for Mr Burrell's consideration. The materiality of this matter has also not been established.
Mr Burrell also criticises (Submissions [3(b)]) the section 439A report on the basis that it does not address the new debt "incurred to [PEL] by Deutsche Bank after the recent settling of [EDF] claim on [PEL]". Mr Burrell asks, rhetorically, what is that debt, what is the security for it, and how is it possible for any DOCA or restructure proposal "to be agreed to let alone approved [sic] by the Court without the detail of [Deutsche Bank's] true claim over [PEL]". Mr Pike responds that Mr Burrell had not sought to establish, in his cross-examination of Mr Woods, that amounts previously owing by PEL to EDF were no longer due (T56). The evidence indicates that the relevant debt was owed by PEL to EDF, then assigned by EDF to Deutsche Bank (with the effect that it was then owed to Deutsche Bank) and then assigned by Deutsche Bank to several other parties. There is no evidence that the debt was discharged, and no obvious commercial reason why Deutsche Bank in taking an assignment of the debt from EDF, or third parties in taking an assignment of the debt from Deutsche Bank, would then discharge that debt rather than take advantage of any value attributed to it in the relevant circumstances. It seems to me that the answer to Mr Burrell's rhetorical question is that s 444GA requires the Court to determine whether the relevant transaction is unfairly prejudicial to shareholders in PEL, and there is no suggestion the assignment of EDF's debt to other parties has reduced the debt owed by PEL, or increased the value of equity in PEL, in a manner that would affect that assessment.
Mr Burrell submits (Submissions [3(c)]) that audited quarterly financial reports for PEL have not been made available for September and December 2017. Mr Burrell asks, rhetorically, how are shareholders able properly to value PEL to determine whether the shares are truly worthless, and how the Court can be satisfied of that matter, if proper audited accounts have not been provided. Mr Pike responds that, in the ordinary course, such accounts would not be prepared in respect of a company in administration. Mr Pike also points out that the valuation of the shares in PEL, and the likely return to shareholders on a sale of PEL's assets as a going concern (if, contrary to the fact, PEL was a going concern) or in a liquidation are addressed in Mr Woods' evidence and the section 439A report. It seems to me that Mr Woods' evidence and the independent expert's report provide an adequate basis for the Court to determine the question of prejudice, or unfair prejudice, for shareholders in PEL, where there is no suggestion that quarterly audited financial reports for PEL were in fact prepared over the relevant period.
Mr Burrell submits (Submissions [3(d)]) that discounting the total debt to creditors, if CNNC is included as a creditor, may have facilitated a fair and genuine takeover offer to shareholders, at the share price when the Company was placed in administration, rather than the transfer of 98% of the shares in PEL for no consideration. I have addressed the factual matters relevant to this submission above. It does not seem to me that it is here possible to contemplate an alternative transaction, quite apart from the difficulties of Mr Burrell's approach to the CNNC debt, where there is no suggestion that there is any existing alternative proposal to that put by bondholders, still less an alternative proposal at the price at which PEL's shares were trading immediately before its directors placed it in administration on the basis that it was insolvent or likely to become insolvent.
Mr Burrell also submits (Submissions [3(e)]) that the independent expert's conclusion that the shares in PEL have no value is based on the "specific financial case presented by [the Deed Administrators]" which depends on the "unauthenticated claim that there were no other options for restructuring [PEL]." Mr Burrell refers to approaches to the possibility of approaches, for example, to Indian entities which have (or may have) expressed interest in Namibian uranium. I do not accept that submission. First, the independent's expert report does not seem to me to depend upon the Deed Administrators' assessment of the financial position of PEL, so far as Mr Jaski has undertaken a separate valuation in respect of some assets and relied on CSA's work in respect of the valuation of other assets. Second, I have referred above to the evidence that a comprehensive attempt to solicit alternative proposals was undertaken prior to PEL being placed in administration, and I am satisfied that the voluntary administrators could reasonably consider that there was little prospect that their repeating that process, when PEL was insolvent or likely to become insolvent, would have led to a better result in respect of potential Indian purchasers of Namibian uranium assets or otherwise.
Mr Burrell also refers (Submissions [3(f)]) to the initial solvent restructuring proposal, to which I have referred above, and its failure by reason of EDF's position. Mr Burrell submits that it is clear that there was no communication with EDF by reason of EDF's opposition to the DOCA after its announcement. That submission does not seem to me to be consistent with the evidence, including that the voluntary administrators sought to elicit an alternative proposal from EDF. Mr Burrell puts a further, associated, submission (Submissions [3(g)]) that EDF's transaction with Deutsche Bank demonstrates the lack of effort by the Deed Administrators to negotiate a similar transaction. I am also unable to accept that submission, where there is no reason to think that the voluntary administrators or Deed Administrators or a company in administration or deed administration would or should have the financial capacity to negotiate the purchase of a substantial creditor's debt that may be available to a major investment bank. In any event, it does not seem to me that that submission establishes that the proposed transfer of the PEL shares is prejudicial, or unfairly prejudicial, to holders of equity in PEL, or establishes any discretionary basis on which not to approve the proposed transaction.
Mr Burrell also refers (Submissions [3(g)]) to the issue of further notes contemplated by the DOCA, by which a further $115 million will be raised by PEL, by the issue of notes for which creditors associated with the Ad hoc Committee of Bondholders and/or Deutsche Bank would be eligible to subscribe. Mr Burrell asks, rhetorically, if the demand for that transaction was "so strong", why another $80.5 million could not be raised and shareholders could not be paid out that amount (Submissions [3(h)]). However, as Mr Pike points out, that transaction is conditional upon the DOCA and the transfer of shares in PEL being effected. It therefore cannot establish the financial position of PEL if the relevant transaction is not effected, or as to the demand for notes issued by PEL if the existing debt owed to bondholders is not first extinguished by conversion of that debt to equity. Second, the question which the Court must determine is whether the proposed transfer of shares in PEL is unfairly prejudicial to shareholders, not whether it is possible to hypothesise some other transaction, which does not presently exist, which would have been more favourable to shareholders.
Mr Burrell also submits (Submissions [3(i)]) that the Deed Administrators had released "no details" of the arrangement between EDF and Deutsche Bank, and it seemed "incredible" that they would have little information as to that matter where Deutsche Bank had advanced funds to the Deed Administrators during the course of the administration. That proposition was not put to Mr Woods, and no finding could be made that his evidence as to the extent of his knowledge of that arrangement should not be accepted. Mr Burrell also criticises (Submissions [3(j)]) the Deed Administrators' suggested lack of response to emails from himself and others relating to restructure options. It does not seem to me that that criticism is material, where there is no evidence to suggest that there are, or have been, any restructuring proposals other than that advanced by the bondholders comprising the Ad hoc Committee of Bondholders. Mr Burrell also submits (Submissions [3(k)]) that a present executive of Deutsche Bank was formerly an executive of UBS, which was formerly a substantial shareholder in PEL. It is not clear whether that submission was established by evidence; however, even if that is the case, it was not put to Mr Woods and there is no basis for finding that any such connection gives rise to any impropriety, prejudice or unfair prejudice in respect of the proposed transaction.
Mr Burrell submits (Submissions [3(l)]) that no reason is given, earlier or now, why the earlier solvent restructure which was under consideration by PEL could not be "reapplied". Mr Burrell also made oral submissions which suggested, in effect, a return to the earlier solvent restructuring that PEL and its then advisers had sought to implement. I cannot find that the proposed transaction is prejudicial, or unfairly prejudicial to shareholders, because it does not take that form, where that earlier transaction could not then be implemented by reason of EDF's position, and there is no suggestion that it is presently supported by bondholders. Mr Burrell's further submission (Submissions [3(m)]) relating to the role of KordaMentha, which it is suggested initially advised PEL and subsequently advised bondholders, does not seem to me to take matters further.
Mr Burrell also refers (Submissions [3(n)]) to the fact of the successful issue of notes for $USD115m and submits that that matter suggests that the value of PEL is not zero. Mr Burrell also addressed the question of the further note issues in oral submissions (T45). There are two difficulties with that submission. The first, as I noted above, is that the issue of notes is conditional upon the DOCA and the execution of this transaction, and the position after bondholders have converted their debt to equity does not establish the value of PEL before that occurs. Second, there is no suggestion that the value of secured debt in PEL is zero, or that the value of unsecured debt in PEL is zero in some circumstances, but rather that the value of PEL's assets is not sufficient to allow any value to its equity after taking into account the amount of its debt. The proposition that PEL is able to issue further notes, conditional on implementation of the restructuring proposed by this transaction, does not establish anything as to the value of PEL's equity prior to the transaction.
Mr Burrell advances a further submission that, if the Court approves the relevant transaction, it is possible that the Langer Heinrich mine would be placed in care and maintenance, or alternatively that there may be dealings in shares of PEL such that its market capitalisation could increase by the sale of shares at "inflated" value. It does not seem to me that either scenario assists in determining the questions that I am required to address by s 444GA of the Corporations Act, namely whether the proposed transaction is unfairly prejudicial to shareholders or there is any discretionary reason not to approve the transaction. It does not seem to me that the former has been established; the possibility that a mine may be placed in care and maintenance is not a discretionary reason not to approve the proposed transaction; and the Corporations Act and corresponding legislation in other jurisdictions sufficiently address any suggestion of a future artificial market for the shares in PEL. Mr Burrell also submits that there should be further communication with the Namibian Government in respect of the proposed transaction, where the Langer Heinrich mine is located in Namibia. Mr Burrell also addressed the question of communications with the Namibian Government in oral submissions (T47). It seems to me that those matters are not within the scope of the interests protected by s 444GA of the Corporations Act.
Mr Burrell also submits that the process by which PEL has reached its present state involves "misfortune", "incompetence" or deliberate strategies to obtain control of PEL and also hypothesises a more adverse explanation of events, involving several parties. As I have noted above, s 444GA of the Corporations Act draws attention to the prejudice, or unfair prejudice, to shareholders of a transfer of shares where a company is in deed administration, and that will commonly reflect, at least, a degree of previous misfortune, and often a proposal put by creditors to obtain a controlling equity interest in the company on surrender of their debt. It does not seem to me that any basis for any more adverse explanation of events has been established by the evidence, nor was such an explanation put to Mr Woods in cross examination.
Finally, Mr Burrell submits that the Court should consider a "modified version" of the DOCA involving different terms. That course is not open, in an application of this kind, where the Court may either grant leave for the relevant transaction, if it is not unfairly prejudicial to shareholders, or decline to do so either because it is unfairly prejudicial to shareholders or because there are discretionary reasons to decline such leave. I am not satisfied that the transaction is unfairly prejudicial to shareholders, or that any discretionary basis to decline such leave has been established, and it would not be a proper exercise of the Court's statutory power under s 444GA of the Act not to approve the transaction, based upon any speculation that, if that course were taken, some other proposal which has not yet been articulated might emerge, rather than PEL being placed in liquidation.
Mr Burrell also referred, in oral submissions to the fact that he held a substantial number of shares, which would have been worth in the order of $47,000 when the voluntary administrators were appointed and his shares would be reduced to a value of $800 by the proposed transaction. I will assume, without deciding, the correctness of those figures. I recognise that that result must, at least, be a source of real discontent for Mr Burrell and other shareholders in PEL in a similar position and may give rise to financial hardship for some shareholders. Nonetheless, the question whether the proposed transaction is prejudicial, or unfairly prejudicial, to shareholders cannot be determined by comparison with the position where Mr Burrell was left to hold shares in a solvent company, since PEL is not a solvent company, or with another and more favourable offer made by bondholders or a third party which does not exist. Mr Burrell's remaining holding of shares in PEL valued at $800, after the transaction is implemented, is more favourable to Mr Burrell than the likely result of a liquidation, when his shares in PEL would have no value.

Weaver v Noble Resources Ltd

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