Argonaut Partners Pty Ltd v Abyssinian Metals Limited [No 3] - [2023] WASC 322

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   ARGONAUT PARTNERS PTY LTD -v- ABYSSINIAN METALS LIMITED [No 3] [2023] WASC 322
CORAM:   LUNDBERG J
HEARD:   ON THE PAPERS
DELIVERED          :   24 AUGUST 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:

Practice and procedure - Consent orders proposed by all parties upon resolution of proceedings - Duty of the court when considering consent orders - Whether appropriate to make declaration by consent - Scope of power in section 233 of the Corporations Act 2001 (Cth) - Consent orders approved

Legislation:

Corporations Act 2001 (Cth), s 232 and s 233
Rules of the Supreme Court 1971 (WA), O 18 r 16 and O 43 r 16
Supreme Court Act 1935 (WA), s 25(6)

Result:

Declaration and associated orders made

Category: B

Representation:

Counsel:

Plaintiff	:	No appearance
First Defendant	:	No appearance
Second Defendant	:	No appearance
Third Defendant	:	No appearance
Fourth Defendant	:	No appearance
Fifth Defendant	:	No appearance
Sixth Defendant	:	No appearance
Seventh Defendant	:	No appearance
Eighth Defendant	:	No appearance
Ninth Defendant	:	No appearance
Tenth Defendant	:	No appearance

Solicitors:

Plaintiff	:	Corrs Chambers Westgarth
First Defendant	:	Thomson Geer Lawyers
Second Defendant	:	In person
Third Defendant	:	Tottle Partners
Fourth Defendant	:	Tottle Partners
Fifth Defendant	:	In person
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):

Argonaut Partners Pty Ltd v Abyssinian Metals Limited [2023] WASC 278
Argonaut Partners Pty Ltd v Abyssinian Metals Limited [No 2] [2023] WASC 286
Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) [2011] FCA 382; (2011) 279 ALR 609
Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2012] FCAFC 56; (2012) 201 FCR 378
Beaumont v Peel [2018] NSWSC 95
Commissioner for Consumer Protection v Jorissen [2014] WASC 291
Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482
Construction, Forestry, Mining and Energy Union v De Martin and Gasparini Pty Ltd (No 3) [2018] FCA 1395
Fencott v Muller [1983] HCA 12; (1983) 152 CLR 570
Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421
In the matter of Bio Health Pharmaceuticals Pty Ltd [2020] NSWSC 1790
In the matter of Crow Inn Pty Limited (No 2) [2020] NSWSC 1749
Lord v Dernacourt Investments Pty Ltd (Unreported, NSW Supreme Court, 14 March 1994, McLelland CJ in Eq)
Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343
Noel v Becker [1971] 1 WLR 355
Queensland Co-Operative Milling Association v Hutchinson (1976) 2 ACLR 188
Quinlan v Fiboze Pty Ltd (1988) 14 ACLR 312
The Food Improvers Pty Limited v BGR Corporation Pty Ltd (No 4) [2007] FCA 220

LUNDBERG J:

On 15 August 2023, a memorandum of consent orders was filed with the court by the solicitors for the first defendant, pursuant to O 43 r 16 of the Rules of the Supreme Court 1971 (WA) (RSC), signed by or on behalf of all parties. The consent orders presented as the embodiment of a settlement of the proceedings, in that the parties were agreeing to final, substantive relief which would bring an end to the proceedings, and obviate the need for the expedited trial which had been scheduled for 4 and 5 September 2023. The orders were not submitted to the court with any qualifications or conditions.
The background to these proceedings can be found in the reasons for decision published on 26 July 2023 in Argonaut Partners Pty Ltd v Abyssinian Metals Limited,[1] and on 31 July 2023 in Argonaut Partners Pty Ltd v Abyssinian Metals Limited [No 2].[2] The first defendant (Abyssinian Metals) is a public unlisted company. In short terms, these proceedings arose out of a dispute as to whether milestone shares and options issued by Abyssinian Metals in March 2021 to its directors and to certain director-related entities, which are in the nature of performance shares and options, were validly issued and, even if so, whether they validly converted in October 2022 to 15,000,000 ordinary shares and 5,000,000 exercisable options (these are the Disputed Securities referred to in the memorandum of consent orders).
[1] Argonaut Partners Pty Ltd v Abyssinian Metals Limited [2023] WASC 278.
[2] Argonaut Partners Pty Ltd v Abyssinian Metals Limited [No 2] [2023] WASC 286.
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 Disputed Securities in Abyssinian Metals the validity of which is challenged by the plaintiff in these proceedings.
On 27 July 2023, I ordered that a looming extraordinary general meeting of shareholders of the first defendant (originally scheduled for 28 July 2023) be postponed and I granted limited injunctive relief pending the final determination of issues at an expedited trial to be heard on 4 and 5 September 2023.
The memorandum of consent orders filed on 15 August 2023 included two proposed orders dealing with the securities in Abyssinian Metals which were the subject of challenge by Argonaut Partners, namely a declaration as to invalidity and associated orders pursuant to s 233 of the Corporations Act 2001 (Cth) (CA). The declaration sought was that the Disputed Securities issued by the first defendant on 17 October 2022 were invalid and of no effect. The proposed orders pursuant to s 233 CA would set aside the issue of the Disputed Securities and rectify the share register and options register held by the first defendant.[3]
[3] The declaration and the associated orders were all sought by the plaintiff in the originating process filed on 19 July 2023 (see proposed orders 6, 11 and 12). The originating process itself was brought pursuant to s 232, s 233, s 1322 and s 1324 CA, as well as under the general law.
An exchange of communications between my chambers and the solicitors for the parties then followed in relation to the memorandum of consent orders. The communications identified two principal issues: the necessity for the court to be satisfied that the declaration should be made, and the necessity for the court to be satisfied that the power in s 233 CA supported the orders sought in relation thereto.[4]
[4] A subsidiary issue was also raised, namely the necessity for the second and fifth defendants to file appearances in the proceeding before the consent orders could be made (those parties having signed the memorandum of consent orders but having not at that stage entered an appearance in the proceedings, pursuant to either rule 2.9 of the Supreme Court (Corporations) (WA) Rules 2004 or O 12 r 1 RSC). On 17 August 2023, a joint notice of appearance was filed by the second and fifth defendants, recording that they appeared without solicitors.
Ultimately, I considered the orders sought were within power and appropriate to be made and, on 18 August 2023, I granted the declaration and made the associated orders. The orders made are set out in Attachment A. These reasons explain the basis on which I considered it appropriate to grant the declaration and confirm my view that the orders made pursuant to s 233 CA were within power and should be made.
I will commence with some brief observations. Where consent orders are sought which are of such a nature that they call for no exercise of judgment by the court, the court should be slow to refuse to make those orders, particularly where the orders are authorised with the consent of all parties, where there is no question the parties are sophisticated and/or properly advised, and where the orders would appear to quell a dispute which would otherwise require final determination by the court. Among other authorities, the decision of the English Court of Appeal in Noel v Becker[5] provides support for this approach.
[5] Noel v Becker [1971] 1 WLR 355, 357 (Davies LJ); 357 (Edmund Davies LJ); with Karminski LJ agreeing.
But the court is not obliged to simply rubber stamp orders presented by the parties, particularly where the parties are seeking declaratory relief by consent or where a statutory jurisdiction is to be exercised.
The fact that the parties have agreed that a declaration should be made does not relieve the court of the obligation to satisfy itself that the making of such a declaration is appropriate. There are a number of authorities which endorse this proposition, and several in recent times in Australia in settings in which the declarations were as to breaches of the law and pecuniary penalties were sought.[6] I see no reason why the same approach should not apply to the making of consent declarations in non-regulatory settings.[7]
[6] I refer, by way of example, to Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) [2011] FCA 382; (2011) 279 ALR 609 [7] (Perram J) (overturned in Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2012] FCAFC 56; (2012) 201 FCR 378 on a separate issue); Commissioner for Consumer Protection v Jorissen [2014] WASC 291 [10] (Commissioner Sleight); Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 [59] (French CJ, Kiefel, Bell, Nettle and Gordon JJ); and Construction, Forestry, Mining and Energy Union v De Martin and Gasparini Pty Ltd (No 3) [2018] FCA 1395 [74] (Wigney J).
[7] Consistent with the observation of Wigney J in Construction, Forestry, Mining and Energy Union v De Martin and Gasparini Pty Ltd (No 3) [2018] FCA 1395 [74].
In assessing whether a consent declaration can or should be made, it is necessary to be satisfied the declaration is within power, does not contravene any well-established principles associated with the granting of declaratory relief, and is otherwise appropriate to be made as a matter of an exercise of the court's discretion.
Further, where the court is being asked to exercise the jurisdiction under s 233 in making consent orders, it is necessary that the court be satisfied the requisite basis for the exercise of the jurisdiction has been established and the orders are of a nature that could have been made by the court in final orders following a contested hearing.[8]
[8] See, for example, Beaumont v Peel [2018] NSWSC 95 [5] (Black J).
I turn now to the consent declaration which was sought. The relevant powers of this court to grant declaratory relief are found in s 25(6) of the Supreme Court Act 1935 (WA) and O 18 r 6 RSC, which both convey wide powers.
Section 25(6) provides as follows:
No action shall be open to objection on the ground that a merely declaratory judgment is sought thereby, and it shall be lawful for the Court to make binding declarations of right without granting consequential relief.
Order 18 r 16 RSC provides as follows:
No action or other proceeding shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the Court may make binding declarations of right whether or not any consequential relief is or could be claimed.
The consent declaration, as to the invalidity of securities issued by the first defendant, was supported by these powers.
As to matters of principle, the following issues arose for consideration in the current context. First, there must be a justiciable controversy, absent which the court would not be performing a judicial function.[9] Second, there must be a proper contradictor. Third, there must be some utility in the granting of the declaratory relief in question. I address these matters below in turn.
[9] Fencott v Muller [1983] HCA 12; (1983) 152 CLR 570, 603.
I was satisfied, having regard to the evidence filed for the purposes of the injunction application which I heard on 26 July 2023, and the conclusions I reached for the purposes of resolving that application, that there was a justiciable controversy. By this I mean the declaratory relief raised a real and not a theoretical issue,[10] and the party seeking the declaratory relief (Argonaut Partners) had a real interest in raising the issue.
[10] Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421, 437 - 438 (Gibbs J); Construction, Forestry, Mining and Energy Union v De Martin and Gasparini Pty Ltd (No 3) [2018] FCA 1395 [75] (Wigney J); and Gething M, Curwood M and Joseph R, Civil Procedure: Western Australia (vol 1 at Service 177), [18.6.1].
The challenge to the validity of the Disputed Securities (which had been issued to various of the defendants) was mounted in this case by Argonaut Partners in its capacity as a shareholder of Abyssinian Metals. That same party had participated in requisitioning a general meeting of the members of Abyssinian Metals at which votes will be cast by its members in respect of certain resolutions. By virtue of the orders made by the court as part of the injunction application, the general meeting had been postponed for some weeks.
The determination of the validity of the Disputed Securities (particularly the shares already issued, as distinct from the options) will necessarily have an effect on the voting results at the future general meeting, which has the potential to impact all parties to this proceeding as well as other members of Abyssinian Metals.
There was a proper contradictor to the relief sought, namely the various defendants who held the Disputed Securities. Simply because their initial opposition had melted away, and consent orders were now sought, did not mean the case lacked a proper contradictor. This much is clear from the Full Federal Court's decision in Australian Competition and Consumer Commission v MSY Technology Pty Ltd. The question becomes, in such a circumstance, whether the declaration should be granted as a matter of the court's discretion, not whether there is any want of power.
I was also satisfied there was utility in the granting of the declaratory relief. The proceedings before me concern the issue of securities in a public company, which were issued to or for the benefit of directors of that company by way of performance shares. A declaration which provides that the issue of those securities is invalid and of no effect provides certainty to the parties and to the first defendant generally as to the status of those securities. Additionally, the declaration clarifies that the securities were invalidly issued ab initio, not merely from the date of the associated orders which set aside their issue. The declaration means that any rights or entitlements which attached to those securities had no effect from the date of their issue, and nor can those rights or entitlements be enforced.
Turning finally to the question of discretion, I was satisfied this was an appropriate case in which to grant the declaration as sought. I reached that position having regard to the preliminary views concerning the contentions advanced by the plaintiff which I had reached for the purposes of determining the injunction application, namely:
(a)There was a serious question to be tried as to whether the circular resolution in March 2021 by which the milestone shares and milestone options were initially granted was valid. I assessed the plaintiff's core contentions as to the invalidity of this resolution as being relatively strong: Argonaut Partners Pty Ltd v Abyssinian Metals Limited [No 2] [77] - [84] and [96].
(b)Further, there was a serious question to be tried as to whether the performance criteria for the conversion of the milestone shares and milestone options were satisfied at all. My assessment was that the plaintiff's contention in this regard was reasonably arguable and certainly sufficient to sustain interlocutory injunctive relief, but I was unable at that stage to characterise that as a strong basis of challenge. This was largely because I recognised that this aspect of the plaintiff's attack required a deep and closer assessment of the factual material, and there may have been nuances as to the course of events which were not yet apparent. I also recognised that all of the plaintiff's contentions had not at that stage been answered by the defendants: Argonaut Partners Pty Ltd v Abyssinian Metals Limited [No 2] [85] - [96].
The above views together supported a conclusion, at that interlocutory stage, that there was a sufficient likelihood of success at trial on the first two contentions advanced by the plaintiff to justify the preservation of the status quo pending that hearing. The plaintiff's contentions directly undermined the validity of the initial issue of the milestone shares and options, as well as the conversion said to have occurred in October 2022.
Further, I was prepared to grant the consent declaration given the memorandum of consent orders embodied an apparent settlement of the issues raised in the proceeding, those orders had been sought by all parties to the proceedings, and the granting of the order would bring an end to the immediate controversy between the parties and obviate the need for the expedited trial in September.
I will next address the exercise of the statutory jurisdiction. The parties to the proceedings consented to orders pursuant to s 233 CA by which the issue of the Disputed Securities was set aside, and the share register and options register held by the first defendant would be rectified accordingly.
Section 232 CA provides that orders may be made under s 233 CA if the conduct of a company's affairs (or the other matters identified in the section) are (i) contrary to the interests of the members as a whole, or (ii) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity. The originating process filed on 19 July 2023 invoked both s 232 and s 233 CA, and asserted that the relief sought was predicated on the alleged oppressive conduct of the affairs of Abyssinian Metals, actual and foreshadowed.
Section 233(1) CA is expressed in extremely wide terms, although as just noted, the gateway to the making of those orders is satisfaction of the matters detailed in s 232 CA. Section 233(1) provides that:
(1)The Court can make any order under this section that it considers appropriate in relation to the company, including an order:
(a)that the company be wound up;
(b)that the company's existing constitution be modified or repealed;
(c)regulating the conduct of the company's affairs in the future;
(d)for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law;
(e)for the purchase of shares with an appropriate reduction of the company's share capital;
(f)for the company to institute, prosecute, defend or discontinue specified proceedings;
(g)authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company;
(h)appointing a receiver or a receiver and manager of any or all of the company's property;
(i)restraining a person from engaging in specified conduct or from doing a specified act;
(j)requiring a person to do a specified act.

The orders sought with the consent of all parties in the present proceedings are the setting aside of the issue of the Disputed Securities and the rectification of the share register and options register maintained by Abyssinian Metals.
The setting aside of the issue of securities where the underlying conduct is alleged to be oppressive within the meaning of s 232 CA is an order of the nature that is authorised by s 233 CA. The setting aside of the issue of the securities is in 'relation to the company' in the sense contemplated by the chapeau to s 233(1) CA. It is also an order falling with s 233(1)(c) CA in that it regulates the conduct of the company's affairs in the future.
As to the correction of the registers, I recognise that s 175 CA specifically deals with the correction of registers kept by a company. That provision allows an aggrieved person to make application to the court to have such registers corrected. This provision assumes the court's general equitable powers to rectify the register - it is not a provision which itself confers jurisdiction.[11]
[11] In the matter of Crow Inn Pty Limited (No 2) [2020] NSWSC 1749 [258] (Rees J), and the cases cited therein.
Rather, it has been held that the most appropriate source of power to correct a share register in circumstances where oppression is alleged is to be found in s 233 CA (rather than s 175 CA),which as I have noted above confers an extremely wide discretionary power on the Court to make appropriate orders: In the matter of Crow Inn Pty Limited (No 2).[12] A recent example of an oppression dispute in which orders of the kind proposed in the memorandum of consent orders were made pursuant to s 233 CA can be found in In the matter ofBio Health Pharmaceuticals Pty Ltd.[13]
[12] In the matter of Crow Inn Pty Limited (No 2) [2020] NSWSC 1749 [259] (Rees J). See also Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343. [85] (Barrett J) and The Food Improvers Pty Limited v BGR Corporation Pty Ltd (No 4) [2007] FCA 220 [10] (Rares J).
[13] In the matter ofBio Health Pharmaceuticals Pty Ltd [2020] NSWSC 1790 [47] (Leeming JA).
The authorities recognise that it is open for orders to be made by consent pursuant to s 233 CA (and its predecessor provisions), given the reality that many oppression cases settle and orders are sought from the court by the parties to give effect to the settlement. In Quinlan v Fiboze Pty Ltd[14] Young J remarked (at 314):
I should add that there is no difficulty to my mind in making an order under s 320 by consent, indeed that course appears to be almost the norm, see eg Re Golden Bread Pty Ltd [1977] Qd R 44 at 49.
[14] Quinlan v Fiboze Pty Ltd (1988) 14 ACLR 312.
Where parties to a proceeding consent to an order being made by the court, it is well established that the parties must be taken to have implicitly admitted the existence of any necessary condition of the court's power to make that order.[15] In Queensland Co-Operative Milling Association v Hutchinson,[16] W B Campbell J (with whom Wanstall SPJ agreed) held as follows, in the context of an oppression case:
The consent order presupposes that the parties must have been taken to have mutually conceded that the jurisdiction of the Court under s186 had been made out, namely: that there had been oppression in relation to one or more members and that it was just and equitable that an order be made.
[15] Lord v Dernacourt Investments Pty Ltd (Unreported, NSW Supreme Court, 14 March 1994, McLelland CJ in Eq).
[16] Queensland Co-Operative Milling Association v Hutchinson (1976) 2 ACLR 188.
Here, the admissions implicit in the consent orders submitted to the court include that at least one of the factual states of affairs in s 232 CA must be taken to have existed, which thus provides the foundation for the making of orders pursuant to s 233 CA.
In any event, I was comfortably satisfied the orders sought by the parties pursuant to s 233 CA should be made bearing in mind the evaluation of the evidence which I had undertaken, and the conclusions I had reached, for the purposes of the injunction application: Argonaut Partners Pty Ltd v Abyssinian Metals Limited [No 2] [85] - [96].
The order made on 18 August 2023 are set out in Attachment A.

ATTACHMENT A

Declaration and orders made by the Court on 18 August 2023

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
24 AUGUST 2023