Argonaut Partners Pty Ltd v Abyssinian Metals Limited [No 2]
[2023] WASC 286
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: ARGONAUT PARTNERS PTY LTD -v- ABYSSINIAN METALS LIMITED [No 2] [2023] WASC 286
CORAM: LUNDBERG J
HEARD: 26 JULY 2023
DELIVERED : 31 JULY 2023
PUBLISHED : 31 JULY 2023
FILE NO/S: COR 114 of 2023
BETWEEN: ARGONAUT PARTNERS PTY LTD
Plaintiff
AND
ABYSSINIAN METALS LIMITED
First Defendant
CHRISTOPHER BRUCE TINNEY
Second Defendant
NEIL FREDRICK WARBURTON
Third Defendant
STEPHEN WILLIAM MILLER
Fourth Defendant
SHARLENE LAURA TINNEY
Fifth Defendant
MICHLANGE PTY LTD
Sixth Defendant
MILLCORP SECURITIES PTY LTD AS THE TRUSTEE FOR MILLCORP SECURITIES TRUST
Seventh Defendant
EVENING STAR ENTERPRISES PTY LTD AS THE TRUSTEE FOR MILLCORP SUPER FUND
Eighth Defendant
YOLANDA JOHANNA MILLER
Ninth Defendant
WARBURTON SUPERFUND PTY LTD AS THE TRUSTEE FOR THE WARBURTON SELF ADMINISTERED SUPERANNUATION FUND
Tenth Defendant
Catchwords:
Corporations Law - Urgent interlocutory injunctions sought to restrain exercise of voting rights attached to Disputed Securities - Further injunctions sought to restrain transferring, mortgaging, offering as security or otherwise dealing with the Disputed Securities - Looming EGM seeking to oust directors - Conditional implementation agreement signed with company listed on London Stock Exchange and possible reserve takeover of company - Questions as to status quo - Serious questions to be tried demonstrated - Damages not an adequate remedy to restrain voting at EGM - Pathway of least injustice was to postpone EGM and to restrain dealing in Disputed Securities pending final hearing
Legislation:
Corporations Act 2001 (Cth), s 232, s 233, s 248A, s 1322 and s 1324
Result:
Orders made to postpone the extraordinary general meeting of the first defendant.
Restraints imposed on the second, fifth and seventh to tenth defendants from transferring, mortgaging, offering as security or otherwise dealing in any way with the Disputed Securities, until after judgment in this action or until further order.
Directions made for an expedited final hearing.
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr M J Sims |
| First Defendant | : | Mr D J Pratt |
| Second Defendant | : | No appearance |
| Third Defendant | : | Mr G D Cobby SC |
| Fourth Defendant | : | Mr G D Cobby SC |
| Fifth Defendant | : | No appearance |
| Sixth Defendant | : | Mr G D Cobby SC |
| Seventh Defendant | : | Mr G D Cobby SC |
| Eighth Defendant | : | Mr G D Cobby SC |
| Ninth Defendant | : | Mr G D Cobby SC |
| Tenth Defendant | : | Mr G D Cobby SC |
Solicitors:
| Plaintiff | : | Corrs Chambers Westgarth |
| First Defendant | : | Thomson Geer Lawyers |
| Second Defendant | : | No appearance |
| Third Defendant | : | Tottle Partners |
| Fourth Defendant | : | Tottle Partners |
| Fifth Defendant | : | No appearance |
| Sixth Defendant | : | Tottle Partners |
| Seventh Defendant | : | Tottle Partners |
| Eighth Defendant | : | Tottle Partners |
| Ninth Defendant | : | Tottle Partners |
| Tenth Defendant | : | Tottle Partners |
Case(s) referred to in decision(s):
Adsteam Building Industries Pty Ltd v Queensland Cement & Lime Co Ltd [1984] 2 Qd R 1
Argonaut Partners Pty Ltd v Abyssinian Metals Ltd [2023] WASC 278
Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380
Carr Boyd Minerals Ltd v Ashton Mining Ltd (1989) 15 ACLR 599
Cash Converters Pty Ltd v Hila Pty Ltd (1993) 9 WAR 471
Eastland Medical Systems Ltd v Sims [2010] WASC 33
Garden Cottage Foods Ltd v Milk Marketing Board [1984] AC 130
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105
Paringa Mining & Exploration Co plc v North Flinders Mines Ltd (1988) 14 ACLR 587
Recce Pharmaceuticals Ltd v Brown [2022] WASCA 66
Remrose Pty Ltd v Allsilver Holdings Pty Ltd [2005] WASC 251; (2005) 225 ALR 588
Table of Contents
A. Introduction and summary
B. Injunction application
Overview
The Disputed Securities
Argonaut Partners
Injunctive relief sought in the originating process
Injunctive relief sought at the hearing
Plaintiff's contentions
C. Relevant principles
D. Findings
Relevant events from 2007 to 2022
Circular resolution dated 8 March 2021
Circular resolution dated 17 October 2022
Reverse takeover announcement
E. Disposition
Serious question to be tried – validity of the March 2021 Circular Resolution
Serious question to be tried – satisfaction of the performance criteria
Whether damages would be an adequate remedy
Balance of convenience
Conclusion
F. Orders made
ATTACHMENT A Table of the Disputed Securities
ATTACHMENT B March 2021 Circular Resolution
LUNDBERG J:
A. Introduction and summary
The first defendant (Abyssinian Metals) is a public unlisted company. These proceedings arise out of a dispute as to whether securities issued by Abyssinian Metals to its directors and to certain director-related entities, which are in the nature of performance shares and options, were validly issued in March 2021 and, even if so, whether they validly converted in October 2022 to ordinary shares and exercisable options. At present, these particular ordinary shares represent approximately 13% of the votes eligible to be cast at a general meeting of the members of Abyssinian Metals.
The plaintiff (Argonaut Partners) sues in its capacity as a member of Abyssinian Metals. The second, third and fourth defendants are Mr Tinney, Mr Warburton and Mr Miller, who are the present directors of Abyssinian Metals. The other defendants, as well as Mr Tinney, are all holders of the securities in Abyssinian Metals the validity of which is challenged by the plaintiff in these proceedings.
On the afternoon of 26 July 2023, I heard the plaintiff's application for urgent injunctive relief, which had been filed on 19 July 2023. Mr M J Sims appeared for Argonaut Partners. Mr D J Pratt appeared for Abyssinian Metals and Mr G D Cobby SC appeared for the third, fourth and sixth to tenth defendants.
There was no appearance at the hearing for the second and fifth defendants (Mr and Mrs Tinney) who had only been formally served with the originating process and associated court documents on the day before. Service upon the second and fifth defendants was effected by the plaintiff following the making of orders by the court on 25 July 2023, in response to the plaintiff's ex parte application for leave to serve process outside Australia. I published brief reasons on 26 July 2023 to explain why I considered those orders were appropriate and should be made: Argonaut Partners Pty Ltd v Abyssinian Metals Ltd [2023] WASC 278.
At the conclusion of the hearing, I reserved my decision until 9.30am on 27 July 2023, at which hearing I then made orders to dispose of the interlocutory application by postponing the looming meeting of the members of the first defendant, granting the plaintiff limited injunctive relief, and programming the proceedings to a final hearing on 4 and 5 September 2023. I understand those hearing dates are suitable for all parties and counsel (although I do not yet know the position the second and fifth defendants will adopt in this regard). The final relief sought by the plaintiff will be addressed at that hearing.
The orders made on 27 July 2023 are set out under Heading F below. I indicated I would separately publish my reasons for making these orders, which I now do.
B. Injunction application
Overview
With the final hearing of the plaintiff's claim having been programmed, this left for determination the interlocutory relief sought by the plaintiff.
On 21 July 2023, and by consent, I made orders to facilitate the urgent hearing of the plaintiff's injunction application. The timetable gave limited time to all parties to prepare for the hearing. The orders made were as follows:
1. The plaintiff file and serve submissions in support of its application by 4.00pm on Thursday, 20 July 2023.
2. The third, fourth, sixth, seventh, eighth, ninth and tenth defendants file and serve submissions and any affidavits in opposition to the application by 4.00pm on Monday, 24 July 2023.
3. The first defendant file and serve submissions and any affidavits in opposition to the application by 4.00pm on Tuesday, 25 July 2023.
4. The matter be listed for hearing at 2.00pm on Wednesday, 26 July 2023
In accordance with the timetable, the plaintiff filed its detailed submissions on 20 July 2023 and the first defendant filed a brief outline of submissions on 25 July 2023 (but, given the nature of its role in the proceedings, did not address the substantive legal and factual issues arising on the injunction). The third, fourth and sixth to tenth defendants did not file any submissions.
As to the affidavit material, that almost entirely emanated from the plaintiff's side, with the defendants who appeared at the hearing adopting a strategy of 'keeping their powder dry' at this stage. In support of the interlocutory relief sought, the plaintiff formally read the affidavits of Edward Geoffrey Rigg sworn 19 July 2023 (Rigg Affidavit), the affidavit of Ms Tegan Margaret Harrington affirmed on 19 July 2023 (First Harrington Affidavit), and the affidavit of Ms Harrington affirmed on 26 July 2023 (Fourth Harrington Affidavit).
The third, fourth and sixth to tenth defendants filed a brief affidavit on 24 July 2023, being the affidavit of Ms Kristie Louise White sworn 24 July 2023 (White Affidavit). The White Affidavit annexed two items of correspondence from the defendants' solicitors as to the terms on which the injunctive relief might be resolved, and the response from the plaintiff's solicitors. The first defendant did not file any affidavit material.
The catalyst for the urgent relief has been the looming meeting of the members of Abyssinian Metals, which was due to be held at 10.00am Perth time on Friday, 28 July 2023 (EGM). The business of that meeting was to consider resolutions to remove the second and fourth defendants as directors of the company, and appoint others in their place. An important feature of that EGM is that it was requisitioned by the plaintiff, albeit in conjunction with others. The significance of the EGM emerges from the following context.
The Disputed Securities
These proceedings arise out of a dispute as to the validity of a parcel of securities issued by Abyssinian Metals. The securities were originally issued by the company to its directors and various related entities in March 2021. I will refer to these as the Milestone Shares and Milestone Options. It appears that 60,000,000 Milestone Shares and 20,000,000 Milestone Options were originally issued by the company. No express consideration was paid by the recipients for the issue of these securities. These securities were subject to three different milestones, which required satisfaction before the conversion took effect.
The Milestone Shares are in the nature of performance shares, such that, until conversion occurs, the holders of the shares enjoy very limited rights and are not entitled to vote or receive dividends. Upon each milestone being achieved, various portions of the Milestone Shares and Milestone Options would convert into ordinary shares and exercisable options.
In October 2022, as will appear in more detail hereunder, Abyssinian Metals caused to be issued 15,000,000 ordinary shares and 5,000,000 options, to its directors and various related entities. I will refer to these securities as the Disputed Securities. The issue of these securities is said by the company in its corporate records to have been undertaken as a result of the achievement of the first milestone, such that the conversion of the Milestone Shares and Milestone Options into ordinary shares and exercisable options was appropriately authorised.
The holders of the Disputed Securities are the second, fifth, and the seventh to tenth defendants. The sixth defendant (Michlange Pty Ltd) formerly held some of these securities, but the plaintiff asserts (and it does not seem to be in dispute) that they have since been transferred to the tenth defendant. The table at Attachment A to these reasons delineates the holders of the Disputed Securities. The defendants are highlighted in colours showing the connection between the directors and the various entities.
Argonaut Partners
The plaintiff is a member of Abyssinian Metals. The plaintiff is the principal investment vehicle for the Argonaut Group and a wholly‑owned subsidiary of Argonaut Limited. The Argonaut Group provides corporate advisory, stockbroking and research funds management services, and acted (through one of its entities) as the lead manager and financial adviser for a series of capital raisings undertaken by Abyssinian Metals.
As part of the seed fundraising for Abyssinian Metals in September 2021, the plaintiff purchased 1,210,250 ordinary shares in Abyssinian Metals, at 20 cents per share for an overall price of $242,050.
It appears that, from around February 2022, the Argonaut Group ceased providing services to Abyssinian Metals and has not acquired further shares in Abyssinian Metals.
Following various exchanges of correspondence between the plaintiff and Abyssinian Metals, the details of which I need not dwell upon, on 29 May 2023 the plaintiff and three other members of Abyssinian Metals[1] issued a notice to Abyssinian Metals and its directors under s 203D of the Corporations Act 2001 (Cth) (the Act). That notice stated the intention of the shareholders concerned to move resolutions to remove Mr Miller and Mr Tinney as directors of the company.
[1] The other members are: (1) UBS Nominees Pty Ltd; (2) Treasury Services Group Pty Ltd as trustee for the Nero Resource Fund account; and (3) United Funds Pty Ltd as trustee for the United Funds Unit account.
Then, on 30 May 2023, the solicitors for the requisitioning shareholders issued a notice to Abyssinian Metals and the directors under s 249D of the Act. By that notice, those shareholders requisitioned a general meeting of Abyssinian Metals. The notice confirmed the intention of those shareholders to move resolutions to have Mr Miller and Mr Tinney removed as directors of the company and to seek the appointment of three other persons in their place. The notice outlined a range of conduct of concern to the shareholders, including the alleged issue of shares for an improper purpose and alleged oppressive conduct by the directors.
In due course, on 20 June 2023, Abyssinian Metals caused a notice of meeting to be sent to all shareholders of the company, giving notice of a general meeting of the members to be held on Friday, 28 July 2023, being the EGM.
In the shadows of that EGM, the plaintiff caused these proceedings to be filed. The substantive relief sought by the plaintiff relies on s 232, s 233, s 1322 and s 1324 of the Act, and the general law. The relief stems from the issue of the Disputed Securities, which the plaintiff asserts was invalid, and the alleged oppressive conduct of the affairs of Abyssinian Metals, both actual and foreshadowed, by the second, third and fourth defendants.
Injunctive relief sought in the originating process
Within the originating process filed on 19 July 2023, the plaintiff claimed the following relief on an urgent interlocutory basis:
1. An order restraining the first defendant, until after judgment in this action, or further order, from counting any votes cast in the exercise of voting rights attached to any of the Disputed Securities, including any share issued on the exercise of any option which is a Disputed Security, in respect of any resolution put at any meeting of the first defendant's members.
2. An order restraining the second, fifth and the seventh to tenth defendants, until after judgment in this action, or further order, from exercising the voting rights attached to any of the Disputed Securities, including any share issued on the exercise of any option which is a Disputed Security, in respect of any resolution put at any meeting of the first defendant's members.
3. In the alternative to paragraphs 1 and 2 above, orders expediting the trial of this action and adjourning the general meeting of the first defendant's members to be held on 28 July 2023 to the date which is three weeks after the date of judgment in this action.
4. An order restraining the second, fifth and the seventh to tenth defendants, until after judgment in this action, or further order, from transferring, mortgaging, offering as security or otherwise dealing in any way with the Disputed Securities, including any share issued on the exercise of any option which is a Disputed Security.
As to the postponement of a general meeting, no party disputed that the court had power to postpone the transaction of business at a meeting by way of interlocutory order, or to direct the adjournment of a meeting if the exercise of the power was necessary to protect the rights of the parties pending the outcome of litigation and is otherwise fair and just to those parties and to any other parties who might be affected by the exercise of the power: Paringa Mining & Exploration Co plc v North Flinders Mines Ltd (1988) 14 ACLR 587, 590 (King CJ).
Injunctive relief sought at the hearing
The position adopted by the plaintiff at the hearing on 26 July 2023 was to maintain its application for the interlocutory injunctions to restrain the exercise of voting rights attached to any of the Disputed Securities and to restrain the holders of the Disputed Securities from dealing with the Disputed Securities in any way. This position was adopted notwithstanding the concession made by the defendants who appeared by counsel that the EGM ought be adjourned to allow for the validity questions (and other final relief) to be resolved at a final hearing in September.
The precise relief pressed by the plaintiff at the injunction hearing was thus as follows:[2]
1. The first defendant, until after judgment in this action, or further order, be restrained from counting any votes cast in the exercise of voting rights attached to any of the Disputed Securities (as defined in the originating process of 19 July 2023), including any share issued on the exercise of any option which is a Disputed Security, in respect of any resolution put at any meeting of the first defendant's members.
2. The second, fifth and the seventh to tenth defendants, until after judgment in this action, or further order, be restrained from exercising the voting rights attached to any of the Disputed Securities, including any share issued on the exercise of any option which is a Disputed Security, in respect of any resolution put at any meeting of the first defendant's members.
3. The second, fifth and the seventh to tenth defendants, until after judgment in this action, or further order, be restrained from transferring, mortgaging, offering as security or otherwise dealing in any way with the Disputed Securities, including any share issued on the exercise of any option which is a Disputed Security.
Plaintiff's contentions
[2] Plaintiff's minute of proposed orders dated 26 July 2023.
In support of the injunctive relief sought by the plaintiff, three primary contentions were advanced by the plaintiff.
First, the plaintiff contended that the resolution made by the directors on 8 March 2021 (contained within the March 2021 Circular Resolution as defined below) by which the Milestone Shares and Milestone Options were issued by the first defendant, was invalid. The plaintiff asserts that neither Mr Warburton nor Mr Tinney, who both signed the resolution purportedly as directors, were directors of Abyssinian Metals on that date.
The plaintiff points to the material by which the first defendant advised ASIC that Mr Warburton and Mr Tinney were appointed as directors only on and from 23 March 2021. The plaintiff submits that, if the true position was (as recorded by ASIC) that Mr Warburton and Mr Tinney were not directors of Abyssinian Metals on the date on which the resolution was signed, the resolution will not be a valid directors' resolution under s 248A of the Act. On that basis, the plaintiff submits that the Disputed Securities were therefore not validly issued by the company.
Second, the plaintiff contends that that the March 2021 Circular Resolution is not a valid directors' resolution under s 248A of the Act as it is not compliant with the legislative requirements. The plaintiff points out that s 248A permits a resolution to be passed by the directors of a company without a directors' meeting being held if all the directors entitled to vote on the resolution sign a document containing a statement that they are in favour of the resolution set out in the document.
Further, and importantly, the plaintiff places reliance on s 248A(2) which provides, in effect, that separate copies of a document may be used for signing by directors only if the wording of the resolution and the statement is identical in each copy. The plaintiff submits that the counterparts used by the directors in the present case were different in material respects. On that basis, the plaintiff submits that the resolution was invalid and the Disputed Securities were therefore not validly issued by the company.
Third, in the alternative to the foregoing contentions, the plaintiff asserts that the issue of the Disputed Securities was invalid because the relevant performance criteria for the conversion of the Milestone Shares and Milestone Options set out in the March 2021 Circular Resolution (as to the first milestone) have never been satisfied. This contention involves a deeper factual analysis than the first two contentions referred to above, given the terms of the performance criteria.
C. Relevant principles
The organising principles applicable to the consideration of injunctive relief in this court are not in dispute. The principles were summarised by Newnes JA in Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105 as follows:
The two main enquiries that arise are whether the plaintiff has made out a prima facie case and whether the balance of convenience favours the grant of the injunction. The first inquiry as to a 'prima facie case' does not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed. It is sufficient that the plaintiff show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial. How strong the probability needs to be depends upon the nature of the rights the plaintiff asserts and the practical consequences likely to flow from the orders the plaintiff seeks. The second inquiry is whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs, or is outweighed by, the injury which the defendant would suffer if an injunction was granted: Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618; Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57. Whether an applicant for an interlocutory injunction has made out a sufficient prima facie case and whether the balance of convenience favours the grant of such relief are related, not independent, questions: Warner-Lambert Co LCC v Apotex Pty Ltd [2014] FCAFC 59 [70].[3]
[3] Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105 [87] (Newnes JA, McLure P and Corboy J agreeing).
Allied to the above analysis is the court's assessment whether damages in the measure recoverable at common law would be an adequate remedy for the alleged wrong in question, such that it could not be said the plaintiff would suffer irreparable injury. The observations of Hasluck J in Remrose Pty Ltd v Allsilver Holdings Pty Ltd [2005] WASC 251; (2005) 225 ALR 588 are relevant in this regard.
Hasluck J noted that, where damages are an adequate remedy, and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, regardless of the appearance of the strength of the plaintiff's claim at the injunction stage.[4]
[4] Remrose Pty Ltd v Allsilver Holdings Pty Ltd [114] (Hasluck J).
However, where damages would not provide an adequate remedy for the plaintiff the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial, the defendant would be adequately compensated under the plaintiff's undertaking as to damages for the loss he would have sustained by being prevented from proceeding with the conduct complained of.[5]
[5] Remrose Pty Ltd v Allsilver Holdings Pty Ltd [115] (Hasluck J).
Hasluck J concluded this analysis as follows:
It is where there is doubt as to the adequacy of the respective remedies and damages available to either party or to both, that the question of balance of convenience arises. Where other factors appear to be evenly balanced it is a counsel of prudence to take account of such matters as are calculated to preserve the status quo.[6]
[6] Remrose Pty Ltd v Allsilver Holdings Pty Ltd [116] (Hasluck J).
This statement emphasises the importance of the court defining the circumstances which represent the status quo. It is generally accepted that the status quo is the state of affairs existing before the last change ‑ namely the period immediately preceding the interlocutory injunction application.[7]
[7] Carr Boyd Minerals Ltd v Ashton Mining Ltd (1989) 15 ACLR 599, 605; Remrose Pty Ltd v Allsilver Holdings Pty Ltd [119] (Hasluck J); and Garden Cottage Foods Ltd v Milk Marketing Board [1984] AC 130, 140.
As to the approach to be adopted by the court in considering an interlocutory injunction, it has often been noted that it is no part of the court's function at that stage to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend.[8] An assessment of the strength of a plaintiff's case may nonetheless be desirable, though. In Cash Converters Pty Ltd v Hila Pty Ltd (1993) 9 WAR 471, Kennedy J summarised the proper approach as follows:
Although the normal rule is that the court 'does not undertake a preliminary trial, and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case' (Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622), there are cases when, for the purpose of seeing where the balance of convenience lies, it is desirable for the court to evaluate the strength of the plaintiff's case for final relief. As Brennan J suggested in Brayson Motors Pty Ltd v Commissioner of Taxation (Cth) (1983) 57 ALJR 288 at 292, an evaluation of the strength of the plaintiff's case can determine which claim to legal rights is more likely to be unjustly defeated, either by refusing or by granting the injunction: see also Bullock v Federated Furnishing Trades Society of Australia (1985) 5 FCR 464 at 472 and Cayne v Global Natural Resources Plc [1984] 1 All ER 225 at 233, 236, 238.
[8] Remrose Pty Ltd v Allsilver Holdings Pty Ltd [118] (Hasluck J).
Finally, and in general terms, the court should grant the minimum relief necessary to do justice between the parties: Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 [70] (Gaudron, McHugh, Gummow and Callinan JJ).
D. Findings
I will now turn to set out the factual matters which emerged from the affidavit material presented on the injunction hearing and the factual findings I will make for the purposes of considering the injunctive relief sought by the plaintiff. The factual findings are largely drawn from the affidavit material filed by the plaintiff bearing in mind almost no substantive factual material was adduced by the defendants.
To be clear, these findings are made without the benefit of a full trial of the issues, and without the benefit of cross-examination of any witnesses. The findings are thus interlocutory only and drawn from the face of the affidavit material.
Relevant events from 2007 to 2022
On 28 June 2007, Abyssinian Metals was incorporated as a proprietary company. It changed its name to its present name on 10 December 2019.
On 28 January 2021, Abyssinian Metals issued 249,999,999 ordinary shares for $0.00001 per share. From that date, the members of the company were:
(a) the sixth defendant, Michlange Pty Ltd, a company associated with the third defendant (Mr Warburton), as to 50,000,000 ordinary shares;
(b) the seventh defendant, Millcorp Securities Pty Ltd, a company associated with Mr Miller, as to 62,500,000 ordinary shares;
(c) Mr Tinney as to 50,000,000 ordinary shares;
(d) the fifth defendant (Ms Tinney) as to 50,000,000 ordinary shares; and
(e) the ninth defendant (Ms Miller) as to 37,500,000 ordinary shares.
On 19 April 2021, Abyssinian Metals lodged a notice with ASIC advising that Mr Tinney and Mr Warburton had been appointed as directors with effect from 23 March 2021. This date is important from the perspective of the plaintiff's arguments on this injunction application, as will be seen in the next paragraph.
On 8 March 2021 (that is, apparently a fortnight before Mr Tinney and Mr Warburton were notified to ASIC as becoming directors of Abyssinian Metals), a resolution purporting to be a circular resolution was signed by Mr Warburton, Mr Miller and Mr Tinney.[9] The resolution concerns the issue by Abyssinian Metals of the Milestone Shares and Milestone Options. The resolution was in evidence before me as an attachment to a Form 484 lodged by the company with ASIC on 20 December 2022, giving notice to ASIC of the issue of the 15,000,000 ordinary shares in October 2022 (which form part of the Disputed Securities). I will address this document in more detail below.
[9] First Harrington Affidavit, TMH18 (pg 207 - 214).
On 8 July 2021, Mr Athanasios John Traicos was appointed company secretary.
On 30 July 2021, Abyssinian Metals lodged notices with ASIC advising that on 12 July 2021 its members had resolved to:
(a) convert the company from a proprietary company to a public company limited by shares and, for that purpose, to change its name to Abyssinian Metals Ltd; and
(b) undertake a share consolidation on a 6.25:1 basis, with the result that the 250,000,000 ordinary shares on issue would be consolidated to 40,000,000 ordinary shares.
Following the share consolidation, the members of Abyssinian Metals, and their respective shareholdings, were:
(a) Millcorp Securities Pty Ltd as to 10,000,000 ordinary shares;
(b) Ms Miller as to 6,000,000 ordinary shares;
(c) Mr Tinney as to 8,000,000 ordinary shares;
(d) Ms Tinney as to 8,000,000 ordinary shares; and
(e) Michlange Pty Ltd as to 8,000,000 ordinary shares.
On 2 August 2021, Abyssinian Metals lodged its constitution with ASIC and, on 10 September 2021, the company's conversion to a public company took effect.
Between about 30 August 2021 and 12 April 2022, Abyssinian Metals issued to various seed and early investors (including the plaintiff):
(a) 35,025,000 ordinary shares at $0.20 per share; and
(b) 21,312,102 ordinary shares at $0.75 per share.
Following those share issues, on or about 12 April 2022 the share capital of Abyssinian Metals consisted of 96,337,102 ordinary shares on which $22,989,077.50 had been paid.
On 17 October 2022, the Disputed Securities were issued by Abyssinian Metals as set out in Attachment A to these reasons. The act of issuing these securities is the subject of a circular resolution of the directors of Abyssinian Metals dated 17 October 2022. The resolution was in evidence before me as an attachment to the Form 484 lodged by the company with ASIC on 20 December 2022. I will address this document in more detail below.
On a subsequent date, the ordinary shares and options issued to Michlange Pty Ltd were transferred to Warburton Superfund Pty Ltd.
Mr Miller is recorded as holding directly, indirectly or beneficially the shares owned by Millcorp Securities Pty Ltd, Ms Miller and Evening Star Enterprises Pty Ltd. Mr Tinney is recorded as holding directly, indirectly or beneficially the shares owned by himself and Ms Tinney. Further, Mr Warburton is recorded as holding directly, indirectly or beneficially the shares owned originally by Michlange Pty Ltd and subsequently by Warburton Superfund Pty Ltd.
For the purposes of the injunction hearing, the plaintiff sought to focus attention on the instruments of Abyssinian Metals which are said by the company (at least on their face) to be the authority by which the Milestone Shares and Milestone Options were initially issued by the company and by which some of the Milestone Shares and Milestone Options were converted into ordinary shares and options of the company. The two instruments are both circular resolutions of the directors of Abyssinian Metals, signed by the Mr Warburton, Mr Tinney and Mr Miller. I have introduced these documents earlier in these reasons. Let me now identify and describe the documents in some more detail.
Circular resolution dated 8 March 2021
I refer to the document titled 'Record of resolution by all the Directors of the Company under section 248A of the Corporations Act 2001 (Cth) and pursuant to clause 70 Company's Constitution'.[10] The document defines the 'Company' as Abyssinian Metals Pty Ltd. I will refer to the document as the March 2021 Circular Resolution.
[10] First Harrington Affidavit, TMH18, pg 207 - 214.
The document records that the resolutions were made by all of the directors of Abyssinian Metals under s 248A of the Act and pursuant to clause 70 of the Constitution. The document sets out various background matters, followed by seven resolutions by which various parcels of Milestone Shares and Milestone Options were issued to various persons, followed by a signature block, and two schedules. Schedule 1 is titled 'Material Terms of Milestone Shares'. Schedule 2 is titled 'Material terms of Milestone Options'.
The text of the background is as follows:
The Directors of the Company note the obligation to issue the balance of the consideration due to the shareholders (and/or their nominees) of African Mining & Energy Pty Ltd (ACN 622 566 036) noting that same are shareholders of the Company (AME) as follows:
1.60,000,000 Milestone Shares subject to 3 different Milestones as set out in the Schedule (Milestone Shares); and
2.20,000,000 Milestone Options subject to 3 different Milestones as set out in the Schedule (Milestone Options).
The deferred Milestone Shares and Milestone Options are to be issued to the shareholders of AME in the proportion set out in the Resolutions (AME Recipients).
In accordance with the provisions of the Constitution, the Directors have power to issue shares with varied, qualified or special rights at their discretion and are resolving to so do in the terms set out in the Circular Resolution.
The Milestone Shares and Milestone options are being issued as deferred consideration of the projects of AME, including the Kenticha Project and the Hassai Project and work performed in securing those projects.
Each Directors material personal interest in the subject of the Resolutions are noted and each of the Resolutions have been considered by the Directors independently with the relevant Director abstaining from voting in the Resolution in which they have a material personal interest.
The Directors further note that it is intended that the Company will consolidate its existing share capital on the basis of 1 Share for every 6.25 Shares held by each member (Consolidation) and that all Milestone Shares and Milestone Options are to be issued on a post-Consolidation basis and not to be adjusted by the Consolidation.
The Directors have also determined to put resolutions regarding these matters to the shareholders of the Company.
The March 2021 Circular Resolution then incorporates seven resolutions. It is unnecessary to extract all of the resolutions, but I will include the full terms of the first resolution to show the language which was employed by the directors.
1. Resolution 1 – Issue to Millcorp Securities Pty Ltd
It is resolved, with Stephen Miller abstaining, that, for the purposes of the Company's Constitution, Corporations Act 2001 (Cth) and for all other purposes, the Milestone Shares and Options be issued on the following basis:
·3,694,588 Milestone 1 Shares;
·6,281,250 Milestone 2 Shares;
·3,694,688 Milestone 3 Shares;
·1,231,563 Milestone 1 Options;
·2,463,125 Milestone 2 Options; and
·1,231, 563 Milestone 3 Options,
to Millcorp Securities Pty Ltd or nominees at a time determined by the Directors.
The persons named in the seven resolutions as the persons and entities to whom the shares were issued are Millcorp Securities Pty Ltd, Yolanda Johanna Miller as trustee for the Y M Trust, Christopher Bruce Tinney, Sharelene Laura Tinney, Michlange Pty Ltd, Ali Hussein or Nominee, and Sammy Million or Nominee. Mr Hussein and Mr Million appear to be persons based in Ethiopia who are connected with the company African Mining & Energy Pty Ltd,[11] a company which had apparently been carrying out work on the projects which Abyssinian Metals is pursuing.
[11] First Harrington Affidavit, TMH19, pg 218 - 219.
The March 2021 Circular Resolution concludes with the following words:
In accordance with the Constitution of the Company and section 248A of the Corporations Act 2001 (Cth), we, being all of the Directors of the Company, confirm that we are in favour of the above resolution.
We acknowledge that the resolutions(s) will be passed when the last director signs this circular resolution and that the resolution takes effect as if the resolutions were passed at a meeting of directors.
The document then records two directors signing on one counterpart, which I understand are the signatures of Mr Warburton and Mr Miller, with dates of 8 March 2021. A separate counterpart contains the signature of Mr Tinney, also with a date of 8 March 2021.
The fact the March 2021 Circular Resolution was signed using counterparts gives rise to a factual issue, which has been highlighted by the plaintiff in its arguments on the injunction application. The factual issue emerges from the terms of Schedule 1, which sets out the performance criteria for conversion of the Milestone Shares into fully paid ordinary shares in Abyssinian Metals.
The text of the schedule in the first counterpart is:
To convert on Abyssinian Metals Pty Ltd exercising its option to acquire the Hassai Project in Sudan. ; and Upon formal documentation being approved by the Sudanese Ministry of Minerals for the joint venture over the Hassai Project including the transfer of any required mining and exploration licences, issue 15,000,000 shares and 5,000,000 options.[12]
[12] First Harrington Affidavit, TMH18, pg 210. The text faithfully reflects the original document.
The text of the schedule in the second counterpart is more limited:
To convert on Abyssinian Metals Pty Ltd exercising its option to acquire the Hassai Project in Sudan.[13]
[13] First Harrington Affidavit, TMH18, pg 211.
The difference between the two schedules is stark and presently unexplained. I have attached images of the relevant portions of the two counterparts in Attachment B to these reasons.
Circular resolution dated 17 October 2022
The next important document in the context of these proceedings is the document titled 'Circular Resolution of the Board of Directors of Abyssinian Metals Limited' dated 17 October 2022.[14] I will refer to this document as the October 2022 Circular Resolution. As already noted, this document appears in the evidence as an attachment to the Form 484 lodged by the plaintiff with ASIC on 20 December 2022. I will first outline the salient features of the October 2022 Circular Resolution, and then the relevant aspects of the covering Form 484.
[14] First Harrington Affidavit, TMH18, pg 203 - 206.
The chapeau to the October 2022 Circular Resolution states that:
By this circular resolution, we the undersigned, being all the directors of Abyssinian Metals Limited (Company), hereby resolve as set out below, in accordance with section 248A of the Corporations Act 2001 and the Company's Constitution.
The document then describes the business of the resolution in the following terms:
The business of this circular resolution concerns the issue and allotment of 15,000,000 fully paid ordinary shares in the capital of the Company, and the grant of 5,000,000 Options at an exercise price of A$0.75 per share and with a term of 3 years from the dtae [sic] of issue to the persons/ parties set out in Schedule 1 attached.
The issuance of these Shares and Options (The Securities) accrue from the acheivement [sic] of Milestone 1 as set out in terms and conditions of the Milestone Shares & Options forming part of the proforma capital structure of the Company.
It is noted and recorded that the company has exercsised [sic] its option to enter into a joint venture with Ariab Mining Companhy [sic] with respect to the Hassai VMS Copper-Gold Project.
Attached hereto[15] is the letters of confirmtaion [sic] from both the Sudanese Ministry and the joint venture counterparty, Ariab Mining Company confirming acknowledgment of exercising of the Option by Abyssinian Metals Limited to enter into the joint venture.
[15] There are two documents attached to the October 2022 Circular Resolution, contained on one page and appear to be written in Arabic: First Harrington Affidavit, TMH18, pg 206.
The resolution included in the October 2022 Circular Resolution is:
Accordingly, it is resolved to issue and allot the Securities to the parties as set out in Schedule 1.
The document appears to have been signed by each of the directors.[16] The sole schedule to the document records the names of the persons and entities to whom the shares were issued, in the manner which is effectively set out in Attachment A to these reasons.
[16] First Harrington Affidavit, TMH18, pg 204.
Returning then to the Form 484, which was lodged with ASIC on 20 December 2022, some further matters should be mentioned to complete the narrative. The following matters appear on the face of that document:
(a)the plaintiff issued 15,000,000 ordinary shares on 17 October 2022 and that the number of ordinary shares on issue after the change was 111,337,102;[17]
(b)the amount paid for each of these shares was nil;[18]
(c)the plaintiff stated that the shares were issued under a written contract dated 8 November 2021;[19]
(d)under the heading the 'Parties to the contract', the plaintiff stated as follows: 'Record of resolution by all of the Directors of the Company – Deferred consideration shares Milestone 1 conditions achieved',[20] which tends to suggest the circular resolution is the 'contract';
(e)under the heading 'Nature of the contract', the plaintiff stated as follows: 'The Directors of the Company note the obligation to issue the balance of the consideration due to shareholders (and/or their nominees) of African Mining & Energy Pty Ltd (ACN 622 566 036) as per the contract, and milestone conditions being met. The first milestone having now been met, the Board resolved to issue the deferred consideration shares',[21] which again suggests the resolution is the 'contract'.[22]
Reverse takeover announcement
[17] First Harrington Affidavit, TMH18, pg 192.
[18] First Harrington Affidavit, TMH18, pg 192.
[19] First Harrington Affidavit, TMH18, pg 201. It is presently unclear whether this date is an error and should be a reference to 8 March 2021.
[20] First Harrington Affidavit, TMH18, pg 201.
[21] First Harrington Affidavit, TMH18, pg 201.
[22] The affidavit evidence did not reveal the existence of any other 'contract' by which the Milestone Shares and Milestone Options were issued.
On 7 July 2023, an announcement was made to the London Stock Exchange (LSX) by Medcaw Investments Plc (Medcaw Investments) regarding the terms of a conditional implementation agreement entered into between Abyssinian Metals and Medcaw Investments, which is a UK-based entity.
In simple terms, the agreement identified in the announcement to the LSX is designed to effect what is colloquially known as a 'reverse takeover' of Abyssinian Metals and a 'backdoor listing' on the LSX. It is apparent from the announcement that no decision had been made whether to proceed with an offer for the shares in Abyssinian Metals. Further, at least as of 7 July 2023, there was no offer capable of being accepted by the shareholders of Abyssinian Metals.
E. Disposition
Serious question to be tried – validity of the March 2021 Circular Resolution
The first two contentions advanced by the plaintiff on this injunction application are narrow in compass, do not involve complex questions of law, nor do they require the court to resolve conflicts of evidence on affidavit (at least at this stage). It is therefore readily open to the court to undertake an evaluation of the strength of these contentions for the purposes of this application, although I have not yet heard from the defendants in any substantive manner as to their responsive contentions.
The first contention focuses on the date of appointment of two of the directors who signed the March 2021 Circular Resolution. The second contention addresses whether there was proper compliance with the circular resolution requirements in s 248A of the Act. Together, these contentions challenge the validity of the resolutions by which the directors of Abyssinian Metals authorised the issue of all of the Milestone Shares and Milestone Options in March 2021 (including those shares and options which now represent the Disputed Securities). If the resolutions are invalid, these securities were not validly issued by the company, according to the plaintiff.
On the material adduced for the purposes of the injunction application, it appears that Abyssinian Metals notified ASIC that Mr Tinney and Mr Warburton were appointed as directors on and from 23 March 2021. This is apparent from the face of the Form 484 lodged with ASIC on 19 April 2021, by which the company gave notice of a change to company details.[23] The historical company extract for Abyssinian Metals also records the appointment date for both Mr Tinney and Mr Warburton as 23 March 2021.[24]
[23] First Harrington Affidavit, TMH8, pg 102.
[24] First Harrington Affidavit, TMH20, pg 225.
It follows from the foregoing that, at least on the basis of material adduced on this application, the sole appointed director as at 8 March 2021 was Mr Miller. He had been appointed as a director in June 2007. How it is that Mr Tinney and Mr Warburton came to sign the circular resolution on 8 March 2021 as directors of Abyssinian Metals is not presently explained by the defendants. There may be factual and legal responses to this contention, which the defendants will develop at the final hearing.
So, as matters stand, there is a serious question to be tried that the circular resolution which purports to be signed by all three directors is not valid, but there may be a contention that the resolution nonetheless took effect as a valid resolution made by the sole director of Abyssinian Metals, namely Mr Miller. The plaintiff allows for this possibility in its submissions.[25] As the plaintiff notes, even if the resolutions were argued to be valid on this basis, it would not save those resolutions in respect of which Mr Miller abstained from voting (being resolutions 1 and 2).
[25] Plaintiff's submissions, [46] and footnote 38.
As to the argument concerning s 248A(2) of the Act, if one assumes the three directors were validly appointed as at 8 March 2021, the plaintiff argues that the circular resolution signed by Mr Warburton and Mr Miller is different in material respects to the version signed by Mr Tinney. To be a valid circular resolution, s 248A(2) requires the wording of the resolution and statement of the directors be identical. Section 248A provides as follows:
248ACirculating resolutions of companies with more than 1 director (replaceable rule see section 135)
Resolutions
(1)The directors of a company may pass a resolution without a directors' meeting being held if all the directors entitled to vote on the resolution sign a document containing a statement that they are in favour of the resolution set out in the document.
Copies
(2)Separate copies of a document may be used for signing by directors if the wording of the resolution and statement is identical in each copy.
When the resolution is passed
(3)The resolution is passed when the last director signs.
Note: Passage of a resolution under this section must be recorded in the company's minute books (see section 251A).
There is no question that the 'statement' required by s 248A is identical in the two counterparts.[26] Rather, the plaintiff draws attention to the 'resolution', noting that the performance criteria for milestone 1 in Schedule 1 to the March 2021 Circular Resolution differs between the versions. Assuming for present purposes that the terms of Schedule 1 form part of the 'resolutions', then it must be accepted on its face there is a difference. The version signed by Mr Warburton and Mr Miller contains additional performance criteria for the purposes of milestone 1, namely: 'Upon formal documentation being approved by the Sudanese Ministry of Minerals for the joint venture over the Hassai Project including the transfer of any required mining and exploration licences, issue 15,000,000 shares and 5,000,000 options'. This additional language, on its face, introduces further substantive performance criteria which must be met for the conversion of the Milestone Shares into ordinary shares of Abyssinian Metals.
[26] That is, the statement that the directors are in favour of the resolution set out in the document.
There is therefore, in my view, a serious question to be tried as to whether the March 2021 Circular Resolution can be validly sustained as a circular resolution made pursuant to s 248A of the Act. The circular resolution purports to have been made on this basis. There may be a contention which the defendants would advance in response that, assuming Mr Tinney and Mr Warburton were not directors at the time, the resolution stands as a resolution made by Mr Miller as the sole director of Abyssinian Metals. On that basis, it may be that reliance on s 248A is unnecessary. This is an argument which may need to be addressed at the final hearing of the matter. There may also be arguments which arise at the final hearing which rely on the validating effects of s 1322(4) of the Act. For present purposes, my assessment is that the plaintiff has made good the position, at this interlocutory stage, that there is a sufficient likelihood of success at trial on these first two contentions to justify the preservation of the status quo pending that hearing.
Serious question to be tried – satisfaction of the performance criteria
I turn next to the third contention. The plaintiff asserts the performance criteria applicable to milestone 1 have never been satisfied. The plaintiff approaches this argument on the basis that the performance criteria appearing on the counterpart signed by Mr Warburton and Mr Miller represent the valid criteria (as that version was signed by a majority of the then Board). While allowing for other alternative arguments in this regard, I am content to assume for present purposes this is the case.
As to the proper approach to the construction of the March 2021 Circular Resolution, being the instrument which recorded the terms on which the performance shares would convert to ordinary shares, the plaintiff relied on Recce Pharmaceuticals Ltd v Brown [2022] WASCA 66 (Mitchell, Beech and Vaughan JJA). In that decision, the Court of Appeal held that instruments of this nature are to be construed by determining the meaning of the words of the instrument by reference to their text, context and purpose (at [58] and [65]). The starting point is the language used in the provision, which must be read and construed in the context of the instrument as a whole.
The performance criteria as stated in the March 2021 Circular Resolution signed by Mr Warburton and Mr Miller which must be satisfied in order for the Milestone Shares and Milestone Options (which are subject to milestone 1) to convert are as follows:
(a)Abyssinian Metals must exercise its option to acquire the Hassai Project in Sudan;
(b)formal documentation for the joint venture over the Hassai Project must be approved by the Sudanese Ministry of Minerals; and
(c)the transfer of any required mining and exploration licences is required (which the plaintiff says should be construed to mean the transfer of these licences to the joint venture vehicle).
I recognise there may be nuances in the proper construction of the text which sets out the performance criteria for the conversion of the Milestone Shares, which are not yet apparent to me. At this stage, I have simply approached the criteria solely by reference to the text used in Schedule 1 to the March 2021 Circular Resolution.
In its written submissions, the plaintiff traced through a number of references to the performance criteria and to the Hassai Project which appear in corporate documents issued by Abyssinian Metals.[27] These statements are to the effect, the plaintiff says, that Abyssinian Metals had not entered into any joint venture agreement in relation to the Hassai Project as of 17 October 2022. The statements which appear in company documents include:
[27] Plaintiff's submissions, [56] - [69].
(a)the statement in Abyssinian Metals' investor presentation issued in September 2021 to the effect that the Hassai Project was significantly progressing towards signing an MOU in respect of a 50:50 joint venture, pursuant to which it would have 'an option period of 90 days to undertake appropriate due diligence and subsequently exercise its exclusive option to proceed with the Joint Venture' and that the transaction was 'not guaranteed to proceed';[28]
(b)the statement in Abyssinian Metals' term sheet to potential investors dated 9 March 2022 that it had entered into a memorandum of understanding with Ariab Mining Company in respect of the Hassai project to acquire a 49% interest and that the parties were 'in the process of finalising the long form joint venture agreement', and that '[n]otwithstanding the parties are in general agreement, completion of these agreements has not yet occurred, and no guarantee can be given that they will be completed';[29]
(c)the statement in the directors' report dated 23 November 2022, which forms part of the accounts for the 2022 financial year, that on 17 October 2022 Abyssinian Metals formally entered into a joint venture agreement with Ariab Mining Company, the owner of the Hassai Project, and that the long form joint venture and shareholders agreements were finalized and awaiting final execution by all parties;[30]
(d)the statement in Abyssinian Metals' term sheet to potential investors dated 23 January 2023 that notwithstanding the parties were in general agreement, completion of the joint venture agreement had not yet occurred and no guarantee could be given that they would be completed;[31] and
(e)the statement with respect to the Hassai Project on Abyssinian Metals' website, as of 14 July 2023, that:
The Company is pleased to advise shareholders it has entered into a Memorandum of Understanding (MOU) with Ariab Mining Company (AMC) to undertake due diligence on the Hassai VMS Copper Project (Block 11) (Hassai Project) for an exclusive period of 90 days, during which it retains the exclusive option to become AMC's joint venture partner for the Hassai Project (Option). During this period, the Company is to complete formal legal, technical and other diligence required to exercise the Option, including the completion of an Incorporated Joint Venture and Shareholders Agreement.
…
Upon exercise of the Option and completion of the requisite legal documentation to give effect to the incorporated joint venture (JV), Abyssinian will have a 49% equity share in the Hassai VMS Project and will be the Manager of the JV. The Government of Sudan will be the Company's JV partner holding 51% through its shareholding in AMC.[32]
[28] Rigg Affidavit, EGR5, pg 57 – 104 (especially at pg 80).
[29] Rigg Affidavit, EGR8, pg 115 - 127 (especially at pg 115).
[30] First Harrington Affidavit, TMH1, pg 19 - 29 (especially at pg 23).
[31] Rigg Affidavit, EGR11, pg 158 - 174 (especially at pg 160).
[32] First Harrington Affidavit, TMH25, pg 257 - 263 (especially at pg 257 and 260).
The plaintiff also observes that the directors of the company have made statements that the satisfaction of milestone 1 requires only that the company exercise the option to acquire the Hassai Project, which the directors assert was in fact exercised.[33] The plaintiff surmises that the directors' statements in this regard may have been drawn from schedule 1 to the mandate agreement made by the company and entities associated with the plaintiff in June 2021.[34] Of course, the mandate agreement is not the formal instrument by which the performance criteria for the conversion of the shares is determined.
[33] Statement by Mr Miller and Mr Tinney which is annexed to the letter from Abyssinian Metals dated 20 June 2023 by which notice of the EGM was given: Rigg Affidavit, EGR15, pg 260 - 261. Email from Mr Warburton on behalf of the Board to shareholders dated 11 July 2023: Rigg Affidavit, EGR17, pg 270.
[34] Plaintiff's submissions, [64].
In contrast to this, the plaintiff highlights the term sheet sent by Abyssinian Metals to potential investors dated 9 March 2022, which includes a disclosure that Milestone 1 would be satisfied '[u]pon exercise option to acquire the Hassai VMS Project completion of formal documentation & meeting all regulatory approvals for the transfer of mining & exploration licenses into the incorporated JV entity'.[35] This statement reflects the more fulsome performance criteria which appear in the March 2021 Circular Resolution signed by Mr Warburton and Mr Miller.
[35] Rigg Affidavit, EGR8, pg 116.
At all events, the foregoing reveals the existence of a detailed factual controversy which will need to be resolved at trial. That controversy will need to address the precise terms (and meaning) of the performance criteria by which the Milestone Shares and Milestone Options would convert to ordinary shares and exercisable options, and the source documentation held by Abyssinian Metals which relates to the Hassai Project and the current status of the formal documentation.
In large part, the documents relied upon by the plaintiff for the purposes of the injunction application are secondary in nature (although many have the stamp of authority of Abyssinian Metals on them). That is not a criticism of the plaintiff. The plaintiff is an outsider to the company and has adduced on affidavit such material as it has available to it. Importantly, though, the court should be cautious at this stage as to the view it takes of these matters based only upon these documents and without having heard from the directors of Abyssinian Metals.
As some assessment is required of the contention advanced by the plaintiff, for the purposes of considering the injunctive relief sought by the plaintiff, I can say that, at this stage, my view is that there is a serious question to be tried whether the performance criteria for the conversion of these shares and options was satisfied. The serious question arises because there are statements made by and on behalf of the company which, on their face:
(a)reflect the fulsome performance criteria which appear in the March 2021 Circular Resolution signed by Mr Warburton and Mr Miller; and
(b)yet also recognise that satisfaction of this more fulsome performance criteria has not yet occurred, in that completion of the joint venture agreement has not been achieved (and, indeed, as of early 2023 the company could not give a guarantee as to when this step would be completed).
There is therefore sufficient material before the court on this injunction application to provide a foundation to conclude that the plaintiff has a sufficient likelihood of success on this contention to justify the preservation of the status quo pending trial.
Overall, I would assess the plaintiff's core contentions on the injunction application as to the invalidity of the circular resolution made in March 2021, as being relatively strong. As to the plaintiff's argument that the performance criteria has not been satisfied at all, my assessment at this stage is that the plaintiff's contention is reasonably arguable and certainly sufficient to sustain interlocutory injunctive relief, but I am unable at this stage to characterise that as a strong basis of challenge. This is largely because I recognise that this aspect of the plaintiff's attack requires a deep and closer assessment of the factual material, and there may be nuances as to the course of events which are not yet apparent. I also recognise that all of the plaintiff's contentions have not as yet been answered by the defendants.
Whether damages would be an adequate remedy
The adequacy of damages is an important issue to consider in the context of this injunction application. This is so because we are here concerned with questions as to the exercise of voting rights by the holders of the Disputed Securities, the removal and appointment of directors, and the possibility of changes in ownership of those Disputed Securities through a takeover bid, which are inherently matters not readily compensable in monetary terms.
From the plaintiff's perspective, it has noted that it does not (and cannot) seek damages as a form of relief in these proceedings. It is therefore not an available, much less an adequate, remedy in the circumstances of this case, according to the plaintiff.[36]
[36] Plaintiff's submissions, [83].
Further, the plaintiff submits that if the directors are permitted to exercise the votes attached to the Disputed Shares, with the result that the will of the members of Abyssinian Metals as to the future management of the company is overborne, damages will not be available to the plaintiff to right that wrong.[37]
[37] Plaintiff's submissions, [84].
Similarly, according to the plaintiff, if the directors are permitted to offer the Disputed Shares into a reverse takeover bid, with the result that there is a change in control and ownership of Abyssinian Metals against the will of the members of the company generally, damages will not be available.[38]
[38] Plaintiff's submissions, [84].
The plaintiff submits that the consequences for the plaintiff in either scenario would be virtually incalculable in monetary terms, relying on Eastland Medical Systems Ltd v Sims [2010] WASC 33 [92] (Murphy J).
As to the position of the defendants, I note the plaintiff has proffered an undertaking as to damages in the usual form and there was no suggestion from the defendants this undertaking was anything other than one of substance. The plaintiff properly acknowledged that there would be difficulties in calculating the damages suffered by the defendants if they were restrained from exercising their voting rights on an interim basis and ultimately succeeded at trial.[39] The plaintiff again referred to the observations of Murphy J in Eastland Medical Systems, and to the following statement in Adsteam Building Industries Pty Ltd v Queensland Cement & Lime Co Ltd [1984] 2 Qd R 1:
... there is a marked difference between restraining a disposition of the shares and restraining the exercise of voting rights attaching to them. In the latter instance the damages resulting from the restraint are likely to be virtually incalculable ...[40]
[39] Plaintiff's submissions, [101].
[40] Adsteam Building Industries, [8] (McPherson J, as he then was).
In my view, there is a strong basis to conclude that damages would not be an adequate remedy for any of the parties to this proceeding, in the event restraints on voting are imposed, but the final relief falls in favour of the party restrained. Put another way, the grant of injunctive relief in favour of the plaintiff, to preclude any exercise of voting rights by the holders of the Disputed Securities, in the context of the scheduled EGM which could see two of the current directors removed, would be akin to final relief.[41]
[41] The first defendant filed submissions on 25 July 2023 by which it consented to the postponing of the EGM and by which it submitted that the urgent interlocutory relief sought in orders 1 and 2 was inappropriate. The first defendant submitted that damages would not be an adequate remedy to compensate the holders of the Disputed Securities if they were restrained from voting, or the company was restrained from counting any votes cast pursuant to the Disputed Securities at the EGM and the directors are removed. Accordingly, the urgent relief sought in orders 1 and 2 would be akin to the grant of final relief, according to the first defendant. See the first defendant's submissions, [5] and [6(b)].
As to the possibility of the defendants being restrained from accepting a takeover bid, I accept difficulties would arise in assessing the damage suffered by those parties if the bid failed (and failed by reason of the inability of the Disputed Securities to be offered) and yet the defendants succeeded at trial. As further explained below, my present assessment is that the agreement is highly conditional and has not yet crystalised into any binding offer capable of acceptance by the members of Abyssinian Metals. The possibility of a formal takeover bid, ahead of the final trial, was thus largely a matter of speculation and not such as to undermine the efficacy of imposing restraints on the defendants' ability to transfer or deal with the securities in the meantime.
In the event that scenario were to emerge ahead of the September hearing (i.e. a formal takeover bid was made), I have allowed the defendants liberty to apply to approach the court to seek appropriate orders, on short notice.
Balance of convenience
On my assessment, there were a number of features of this matter, and the confluence of events, which strongly pointed against the grant of relief along the lines sought in proposed orders 1 and 2 (as set out at [27] above). To be clear, the relief in proposed orders 1 and 2 was sought by the plaintiff on the assumption that the EGM would not be postponed. That is, the plaintiff was in effect proposing that the EGM it had itself participated in requisitioning should proceed, and so the resolutions for the removal of the second and fourth defendants should be voted on. However, the plaintiff sought orders that the holders of the Disputed Securities should be restrained from voting at the EGM.
This scenario is one with which I had great difficulty countenancing. It would have left the second and fourth defendants at jeopardy of removal as directors, in advance of any final determination of the relief sought by the plaintiff. If these parties were removed as directors, and it transpired that the final relief sought by the plaintiff should not be granted, those successful parties (by then, perhaps former directors) would be left to call upon the undertaking as to damages proffered by the plaintiff. For my part, as I have already noted, I considered that the loss suffered by those defendants would be extremely difficult to quantify in this respect.
At the injunction hearing, I expressed to counsel for the plaintiff my provisional view that the injunctions sought in proposed orders 1 and 2 (to restrain the exercise of voting power attached to the Disputed Securities, on the assumption the EGM would proceed) should not be made for the following reasons:
First, that the urgency of the present situation was at least in part a function of the plaintiff's own actions. The primary reason for the urgency was the looming EGM, which was requisitioned by the plaintiff and others.
Second, all of the parties appear to accept that a postponement of the EGM would not cause any prejudice or detriment to any party, or to the company itself. Indeed, a postponement of the EGM represented the alternative relief sought by the plaintiff in the originating process filed on 19 July 2023 (as summarised at [24] above). A decision to postpone the EGM dramatically shifts the balance of convenience in the case and avoids the court interfering in a 'power struggle and boardroom battle', to adapt the phrase employed by O'Loughlin J in Paringa Mining & Exploration, 593.
Third, there is a good basis to conclude that damages would not be an adequate remedy for any of the parties to the proceeding, in the event restraints are imposed one way or another, but the final relief falls in favour of the party restrained.
Counsel for the first defendant articulated an additional reason against the grant of the primary injunctive relief sought by the plaintiff. As matters stand, the second and fifth defendant have been served but have not as yet appeared and the time limit within which they must enter an appearance has not expired. Accordingly, counsel submitted that the grant of the primary injunctive relief sought by the plaintiff would not only amount to final relief against the second and fifth defendants, but would be granted on an ex parte basis.[42]
[42] First defendant's submissions, [6(c)].
I am concerned that the second and fifth defendants to these proceedings, Mr and Mrs Tinney, have not as yet entered an appearance and have thus played no part in the urgent injunction hearing. I recognise that steps were earlier taken to bring notice of these proceedings to the attention of Mr Tinney. I also recognise that the issues in dispute between the parties have been simmering for some time now. The dispute did not emerge out of thin air in the last week. However, orders to permit the plaintiff to serve the proceedings on Mr and Mrs Tinney outside Australia were only made on 25 July 2023, following an urgent ex parte application. On any view, they have had little time to prepare for the urgent interlocutory hearing and to seek and obtain legal advice about the issues raised by the plaintiffs. Accordingly, I accept the concern expressed by the first defendant has some weight.
As to the third order sought by the plaintiff (concerning dealing in the Disputed Securities), this appeared to be properly focused on preserving the status quo until the final determination of these proceedings, essentially prohibiting the holders of the Disputed Securities from dealing with those securities ahead of that hearing. This form of restraint did not suffer from the same potential vices as the restraints on the exercise of voting power.
In response to this proposed order, Senior Counsel for the third, fourth and sixth to tenth defendants proffered undertakings from the sixth to tenth defendants by which:[43]
(a)those parties would not transfer, mortgage, offer as security or otherwise deal with the securities until an order of the court is made discharging the undertaking;
(b)however, those parties would be at liberty to accept any takeover bid made in relation to all the issued shares of Abyssinian Metals; and
(c)in the event such a takeover bid was made and accepted, those parties would not transfer, mortgage, offer as security or otherwise deal with the takeover consideration.
[43] The undertakings were proffered in two separate documents: (1) Undertakings on behalf of the sixth defendant dated 27 July 2023; and (2) Undertakings on behalf of the seventh to tenth defendants dated 27 July 2023.
The takeover bid identified in the undertakings was described at the hearing by reference to the conditional implementation agreement entered into between Abyssinian Metals and Medcaw Investments, which I have described at [75] above. That agreement is highly conditional. It is also apparent that no decision had been made whether to proceed with an offer for the shares in Abyssinian Metals and there was no offer capable of being accepted by the shareholders of Abyssinian Metals. I note that no additional evidence as to the status of the agreement with Medcaw Investments was presented by the defendants in opposition to the injunction application.
In effect, to allow the holders of the Disputed Securities to exercise rights associated with those securities to accept a takeover offer would significantly disturb the status quo in my view, even if allowance was made for the proceeds to be retained. The real question which arises in this regard is not whether the proceeds should be retained, but whether the exercise of rights attached to the securities to accept the takeover should be permitted at all. On the contentions advanced by the plaintiff, some of which are relatively strong and another which is at least reasonably arguable, these Disputed Securities were invalidly issued. The court should be cautious in the circumstances that these potentially invalid securities are not deployed by the holders to impact a potential takeover of the company, and to then create additional interests and rights held by third parties (i.e. Medcaw Investments). This is all particularly so where a final trial of the issues can be heard relatively expeditiously. In the intervening period, I consider the preservation of the status quo is important. By that I mean the circumstance in which the holders of the Disputed Securities retain ownership and control of those securities should be maintained, and the rights attached to those securities should not be deployed in a manner which might impact the composition of the board of the company or the outcome of a vote at a general meeting. It is this status quo which the strength of the plaintiff's contentions justifies preserving until trial.
Conclusion
In these circumstances, my assessment was that the pathway by which the least injustice would be caused to all parties was to postpone the looming EGM until after the resolution of these proceedings, which effectively resolved any immediate issues as to the exercise of voting power connected with the Disputed Securities in the short term. To restrain the holders of the Disputed Securities from exercising their voting right at the EGM could well have had a material impact on the voting composition at the meeting, and lead to an outcome whereby the second and fourth defendants were removed as directors and replaced by other persons. Damages would not be an adequate remedy in that scenario, if the defendants were ultimately successful at trial.
Further, given the apparent strength of the plaintiff's contentions as to the validity of the issue of the Disputed Securities, which had not been answered by the defendants (as at the date of the injunction hearing), and the highly conditional and uncertain nature of the agreement with Medcaw Investments, it was appropriate that the status quo as to the identity of the holders of the Disputed Securities be preserved and that a circumstance in which any further third parties might acquire interests in those securities should be avoided.
F. Orders made
Accordingly, for the foregoing reasons, I made the following orders on 27 July 2023 (as amended by the slip rule on 31 July 2023 to include the definition of 'Disputed Securities'):
Plaintiff's injunction application
1. The extraordinary general meeting of the members of the first defendant scheduled to be held on 28 July 2023 be postponed to the date which is 21 days after the date of judgment in this proceeding.
2. Pursuant to s 1322(4)(d) of the Corporations Act 2001 (Cth), the time within which the meeting referred to in order 1 must be held be extended to permit the meeting to be held on the date determined in accordance with order 1.
3. Upon the plaintiff's undertaking as to damages filed on 20 July 2023 (Folio 8), which is taken by the court to be an undertaking given by the plaintiff, the second, fifth and the seventh to tenth defendants, until after judgment in this action, or until further order, be restrained from transferring, mortgaging, offering as security or otherwise dealing in any way (which includes accepting any takeover bid made in relation to all of the issued shares of the first defendant) with:
(a) the Disputed Securities; or
(b) any share issued on the exercise of any option which forms part of the Disputed Securities.
4. The costs of the plaintiff's injunction application be in the cause.
5. The second, fifth, and the seventh to tenth defendants have liberty to apply to the court on 48 hours' notice in relation to the restraints imposed by order 3.
6. The parties generally have liberty to apply.
Final hearing
7. The matter be listed for final hearing on 4 and 5 September 2023.
8. By 4.00pm on 10 August 2023, the defendants file and serve any affidavits on which they intend to rely.
9. By 4.00pm on 24 August 2023, the plaintiff file and serve any affidavits in response on which it intends to rely and an outline of submissions, chronology and list of authorities.
10. By 4.00pm on 30 August 2023, the defendants file and serve an outline of submissions, chronology and list of authorities.
11. By 4.00pm on 30 August 2023, the parties are to give notice as to whether any deponent of an affidavit is required to attend the final hearing for the purposes of cross-examination.
Undertakings
12. Leave is granted to the seventh, eighth, ninth, and tenth defendants to withdraw the undertakings which were provided to the court on 26 July 2023.
Definitions
For the purposes of these orders, the term 'Disputed Securities' has the meaning given in the originating process filed by the plaintiff dated 19 July 2023 (Folio 1).
ATTACHMENT A
Table of the Disputed Securities
| Issued on 17 October 2022 | Issued on 17 October 2022 | Currently Held | Currently Held | ||
| Defendant | Name of Holder | Ordinary Shares | Options | Ordinary Shares | Options |
| Second Defendant | Christopher Bruce Tinney (Director) | 2,955,750 | 985,250 | 2,955,750 | 985,250 |
| Third Defendant | Neil Frederick Warburton (Director) | 0 | 0 | 0 | 0 |
| Fourth Defendant | Stephen William Miller (Director) | 0 | 0 | 0 | 0 |
| Fifth Defendant | Sharlene Laura Tinney | 2,955,750 | 985,250 | 2,955,750 | 985,250 |
| Sixth Defendant * | Michlange Pty Ltd | 3,177,000 | 1,059,000 | 0 | 0 |
| Seventh Defendant | Millcorp Securities Pty Ltd as the Trustee for Millcorp Securities Trust | 2,235,286 | 745,093 | 2,235,286 | 745,093 |
| Eighth Defendant | Evening Star Enterprises Pty Ltd as the Trustee for Millcorp Super Fund | 1,459,402 | 486,467 | 1,459,402 | 486,467 |
| Ninth Defendant | Yolanda Johanna Miller as the trustee for the Y M Trust | 2,216,812 | 738,940 | 2,216,812 | 738,940 |
| Tenth Defendant * | Warburton Superfund Pty Ltd as the trustee for the Warburton Self-Administered Superannuation Fund | 3,177,000 | 1,059,000 | ||
| Total Number of Securities | 15,000,000 | 5,000,000 | 15,000,000 | 5,000,000 |
* The securities issued to Michlange Pty Ltd appear to have been wholly transferred to Warburton Superfund Pty Ltd at some later point.
ATTACHMENT B
March 2021 Circular Resolution
Image 1 - Extract from the first counterpart
Image 2 - Extract from the second counterpart
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SAO
Associate to the Honourable Justice Lundberg
31 JULY 2023
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