Altius Mining Limited v Sakura Capital Limited

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FEDERAL COURT OF AUSTRALIA

Altius Mining Limited v Sakura Capital Limited [2012] FCA 13

Citation: Altius Mining Limited v Sakura Capital Limited [2012] FCA 13
Parties: ALTIUS MINING LIMITED (ABN 35 126 540 547) v SAKURA CAPITAL LIMITED, KIT FOO CHYE and JANNIE CHAN SIEW LEE
File number: VID 31 of 2012
Judge: MURPHY J
Date of judgment: 13 January 2012
Date of hearing: 12 January 2012
Place: Melbourne
Division: GENERAL DIVISION
Category: No Catchwords
Number of paragraphs: 30
Counsel for the Applicant: Mr D Crennan
Solicitor for the Applicant: TressCox Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 31 of 2012
BETWEEN:

ALTIUS MINING LIMITED (ABN 35 126 540 547)
Applicant
AND:

SAKURA CAPITAL LIMITED
First Respondent

KIT FOO CHYE
Second Respondent

JANNIE CHAN SIEW LEE
Third Respondent

JUDGE:

MURPHY J

DATE OF ORDER:

13 JANUARY 2012

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The Annual General Meeting of Altius Mining Limited be adjourned from 11 am, 16 January 2012 until 9 am, 6 February 2012 at Level 23 South Tower, 525 Collins Street, Melbourne Victoria.

2.The Applicant urgently amend its proceedings to seek, in the alternative, the cancellation of two million shares held by the First Respondent or by the Second Respondent, and to serve those proceedings on the First and Second Respondent forthwith.

3.The proceedings as amended be treated as urgent and be listed for hearing before 6 February 2012 if the other business of the Court so allows, on an estimate of a half  day hearing.

4.Costs Reserved.

5.Liberty to Apply.

Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 31 of 2012
BETWEEN:

ALTIUS MINING LIMITED (ABN 35 126 540 547)
Applicant
AND:

SAKURA CAPITAL LIMITED
First Respondent

KIT FOO CHYE
Second Respondent

JANNIE CHAN SIEW LEE
Third Respondent

JUDGE:

MURPHY J

DATE:

13 JANUARY 2012

PLACE:

MELBOURNE

REASONS FOR JUDGMENT

INTRODUCTION

  1. In this proceeding the public company Altius Mining Limited, formerly named Remine Gold Limited, seeks urgent interim injunctions to restrain Sakura Capital Limited and Mr Kit Foo Chye from voting both at the Annual General Meeting of Altius scheduled for Monday, 16 January 2012, and at an Extraordinary General Meeting scheduled for 6 February 2012.

  2. The share register of Altius records that each of Sakura and Mr Chye own two million fully paid ordinary shares in the company with full voting rights. Altius disputes that this is correct and contends that only one of either Sakura or Mr Chye owns two million shares. Altius seeks the injunctions in order that if the AGM and the EGM proceed, only one of either Sakura or Mr Chye exercise the voting rights attached to the two million shares owned by one or other of them.

  3. The hearing took place after normal sitting hours on 12 January 2012 as it was the only time that the matter could be conveniently heard by the Court…

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Details
Case
[2012] FCA 13
Decision Date

CaseChat Overview and Summary

In the matter of Altius Mining Limited versus Sakura Capital Limited, the court was tasked with deciding whether to grant an injunction to restrain either Sakura Capital Limited or Mr Chye from exercising their voting rights over two million shares, as well as whether to adjourn the Annual General Meeting (AGM) to resolve the issue of ownership of these shares. The dispute arose from an alleged administrative error where two million shares were issued to both Sakura Capital Limited and Mr Chye, who was a former non-executive director and had raised capital for the company. The matter was heard on 12 January 2012, as it was the only time the court could hear it before the AGM on 16 January 2012. The application was made ex parte due to the inability to serve the respondents with the proceedings within the required time.

The primary legal issues the court had to address were whether the applicant had made out a prima facie case and if the inconvenience or injury the applicant would suffer if an injunction were refused outweighed the injury the respondent would suffer if an injunction was granted. The applicant argued that the disputed shares could impact the outcome of certain resolutions at the AGM, particularly those related to the composition of the board. The court considered that the two million shares in question, out of approximately 259 million shares, might not be sufficiently material to the outcome of the voting at the AGM. However, considering the close proxy voting results and the potential attendance of shareholders representing 20 million votes, the court found that the disputed shares could indeed be material to the outcome of the vote. The applicant also argued that if the disputed shares resulted in the removal of important executive officers from the board, it might be difficult to later compensate for the potential damage to the company.

The court granted the injunction and adjourned the AGM, finding that the applicant had made out a prima facie case and that the potential injury to the applicant if the injunction were not granted outweighed the injury to the respondents. The court ordered that the AGM be adjourned until 6 February 2012 and that the applicant amend its proceedings to seek the cancellation of the two million shares held by either Sakura Capital Limited or Mr Chye. The proceedings were to be treated as urgent and listed for hearing before 6 February 2012, if possible, with an estimated half-day hearing. The costs were reserved, and liberty to apply was granted.

Orders

Orders of the court

1. The Annual General Meeting of Altius Mining Limited be adjourned from 11 am, 16 January 2012 until 9 am, 6 February 2012 at Level 23 South Tower, 525 Collins Street, Melbourne Victoria.

2. The Applicant urgently amend its proceedings to seek, in the alternative, the cancellation of two million shares held by the First Respondent or by the Second Respondent, and to serve those proceedings on the First and Second Respondent forthwith.

3. The proceedings as amended be treated as urgent and be listed for hearing before 6 February 2012 if the other business of the Court so allows, on an estimate of a half day hearing.

4. Costs Reserved.

5. Liberty to Apply.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The hearing took place after normal sitting hours on 12 January 2012 as it was the only time that the matter could be conveniently heard by the Court prior to the AGM on 16 January 2012. The applicant's lawyers advise the Court that the application was made ex parte as they could not serve the respondents with the proceedings within time.BACKGROUND Mr Alexander King, the Managing Director of Altius, has sworn an affidavit of 12 January 2012 to which there are 21 exhibits. He deposes that in mid-2009 Remine engaged Mr Chye to amongst other things, assist in capital raising. By a service agreement between Remine and Mr Chye dated 10 November 2009 (“Service Agreement”) Mr Chye was to be appointed a non-executive director of the company and also provide other services. Relevantly, the Service Agreement provided that Mr Chye's remuneration for his work included an entitlement to two million fully paid ordinary shares in the company. Mr Chye ultimately raised $2 million of capital in an IPO for Remine. Shortly following execution of the Service Agreement Mr Chye was appointed a non executive director. Mr King deposes that Mr Chye then contacted him and requested that the two million shares to which he was entitled be issued to his nominee company, Sakura, rather than in his name. As a result, the two million shares were issued to Sakura on behalf of Mr Chye. Mr King deposes that in January 2010, on Mr Chye’s recommendation an associate of his, Ms Sophie Karzis, was appointed as company secretary. Importantly, Mr King swears that in May 2010 Mr Chye contacted him and asserted that he had not received the two million shares that he was due to be issued pursuant to the Service Agreement. He sought that the shares be issued to him as soon as possible. Mr King states that he told Mr Chye to speak to Ms Karzis about this as he was otherwise occupied. It is now apparent from the Altius share register that Mr Chye was issued with a further two million shares in May 2010, presumably in purported performance of the Service Agreement. Mr King deposes that he did not discover this fact until late November 2011, which he did in the context of disputes involving Mr Chye and other shareholders. According to Mr King, in June 2010 Mr Chye resigned as a non-executive director after a dispute with him about whether he was properly supporting Altius’ capital raising activities. Ms Karzis resigned shortly thereafter. In mid-2011 Altius raised further capital in an IPO. Mr King deposes that the principal investor, Mr Xiaojing Wang, was introduced to the investment by Mr Chye. He invested $9.5 million for approximately 47.5 million shares and subject to approval by the Board of Directors was to have two seats on the Board. Subsequently, Mr Wang came into dispute with the Board when, amongst other things, the offer of two seats on the Board was reduced to one seat. The 2011 AGM was scheduled for 28 November. The following resolutions were listed on the agenda for that meeting:(a) Adoption of the remuneration report (Resolution 1)(b) Re-election of Joe Fekete, director (Resolution 2)(c) Election of Dr Jannie Chan Siew Lee (Resolution 3)(d) Election of Robert McLennan (Resolution 4)(e) Issue of options to Dr Jannie Chan Siew Lee (Resolution 5)(f) Issue of options to Alexander King (Resolution 6)(g) Issue of options to Joe Fekete (Resolution 7)(h) Issue of options to Robert McLennan (Resolution 8)(i) Approval of Altius director and employee benefits plan (Resolution 9)

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

On 9 January 2012 Altius received a notice calling for an Extraordinary General Meeting which is scheduled for 6 February 2012. This notice calls for the removal of all directors of the current Board and the appointment of new directors in their stead. CONSIDERATION On the evidence before the Court there is a real question as to whether both Sakura and Mr Chye should have each been issued with two million shares. There is though a question as to whether the dispute about these shares is sufficiently material to voting at the reconvened AGM or at the EGM that injunctive relief is appropriate. Counsel for the applicant informed the Court that Altius has approximately 259 million shares and that its register records only about 400 shareholders. The shares are trading at approximately 9 cents at present. On its face, a dispute regarding the ownership of two million out of 259 million shares, is unlikely to be sufficiently material to the outcome of voting at the meeting to justify disturbing the conduct of the reconvened AGM. I was however informed by counsel for the applicant, and it is apparent from a tabulation by Computershare of the proxy voting results for the reconvened AGM as at 11 January 2012 for Resolutions 1-9, that at least insofar as Resolutions 2, 3 and 4 are concerned the proxy voting is presently sufficiently close that the disputed two million shares might be material to the outcome of the vote. This materiality could also increase as proxy votes will continue to be lodged until 48 hours prior to the meeting. Counsel for the applicant also informed the Court that he was instructed that shareholders representing approximately 20 million votes are likely to attend the AGM to vote in person, which could also operate to increase the materiality of the disputed shares. Resolutions 2, 3 and 4 relate to the composition of the Board. The Court was informed by counsel that two of the directors seeking re-election are important executive officers. The applicant contends that if, as a result of the disputed two million shares held by either Sakura or Mr Chye these officers are not re-elected, it may be difficult to later unravel or compensate for the damage to the company if it ultimately establishes that these shares were issued as a result of an administrative error and should be cancelled. There is some force in this submission. The applicant urges the Court to injunct Mr Chye or Sakura to restrain one or other of them from exercising their voting rights over the two million shares held by that shareholder. In the alternative, and in response to questioning by the Court, the applicant seeks that the AGM be adjourned for a short period to enable the question of ownership to be urgently resolved by the Court. The principles regarding the grant of interlocutory relief are well-established:(a) The first question is whether the applicant has made out a prima facie or arguable case, in the sense that if the evidence remains as it is, there is a probability that the trial of the action will entitle the plaintiff to the relief sought. This means that the applicant must show a sufficient likelihood of success to justify interlocutory orders pending trial, not that it is more probable than not that it will succeed trial. The strength that the probability needs to be depends upon the nature of the rights that the applicant asserts and the practical consequences likely to flow from the order it seeks.(b) The second question is whether the inconvenience or injury which the applicant would be likely to suffer if an injunction were refused outweighs or is outweighed by the inconvenience or injury which the respondent would suffer if an injunction was granted.