JAMES GERARD THACKRAY in capacity as DEED ADMINISTRATOR of SHINE RESOURCES PTY LTD
[2024] WASC 5
•12 JANUARY 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: JAMES GERARD THACKRAY in capacity as DEED ADMINISTRATOR of SHINE RESOURCES PTY LTD [2024] WASC 5
CORAM: WHITBY J
HEARD: 12 JANUARY 2024
DELIVERED : 12 JANUARY 2024
FILE NO/S: COR 189 of 2023
MATTER: IN THE MATTER OF SHINE RESOURCES PTY LTD (SUBJECT TO A DEED OF ARRANGEMENT)
EX PARTE
JAMES GERARD THACKRAY in capacity as DEED ADMINISTRATOR of SHINE RESOURCES PTY LTD
Plaintiff
Catchwords:
Corporations - Voluntary administration - Application to court by administrators
under Corporations Act 2001 (Cth), s 444GA for leave to transfer shares - Whether unfair prejudice suffered to interests of members of the company by transfer
Legislation:
Corporations Act 2001 (Cth)
Insolvency Practice Rules (Corporations) 2016 (Cth)
Supreme Court (Corporations) (WA) Rules 2004 (WA)
Result:
Order made pursuant to s 444GA for transfer of shares
Category: B
Representation:
Counsel:
| Plaintiff | : | J D Malone |
Solicitors:
| Plaintiff | : | Blackwall Legal LLP |
Case(s) referred to in decision(s):
Darren Gordon Weaver, Andrew John Saker and Martin Jones in their capacity as Joint and Several Deed Administrators of Midwest Vanadium Pty Ltd v Noble Resources Ltd [2010] WASC 182
Lewis, in the matter of Diverse Barrel Solutions Pty Ltd (Subject to a Deed of Company Arrangement) [2014] FCA 53
Tucker, in the matter of Black Oak Minerals Ltd (Subject to a Deed of Company Arrangement) (in liq) (2019) 134 ACSR 472; [2019] FCA 293
Weaver v Noble Resources Ltd [2010] WASC 182; (2010) 41 WAR 301
WHITBY J:
(This judgment was delivered extemporaneously on 12 January 2024 and has been edited from the transcript.)
The plaintiff is applying, pursuant to s 444GA, s 447A and s 90‑15(1) of sch 2 of the Corporations Act 2001 (Cth) (Act), for leave to transfer all the issued shares held by each of the members in Shine Resources Pty Ltd (Subject to a Deed of Company Arrangement) (ACN 168 094 808) (Company) to Hampton Transport Services Pty Ltd (ACN 008 733 060) (Hampton) and for ancillary orders, in terms of the plaintiff's minute of proposed orders dated 9 January 2024.
Section 444GA of the Act provides that the administrator of a deed of company arrangement may transfer shares in a company if the administrator has obtained either the written consent of the owner of the shares or the leave of the court.
Evidence
The plaintiff relies on the affidavits of:
(1)James Gerard Thackray sworn on 28 November 2023 (First Thackray Affidavit);
(2)Anthea Rae Scaddan sworn on 30 November 2023 (First Scaddan Affidavit);
(3)Anthea Rae Scaddan sworn on 21 December 2023 (Second Scaddan Affidavit);
(4)Stephanie Jane Maltman sworn on 9 January 2024 (Maltman Affidavit); and
(5)James Gerard Thackray sworn on 9 January 2024 (Second Thackray Affidavit).
The plaintiff also relies on an outline of written submissions filed on 9 January 2024.
Background
It is appropriate to first set out the background to this matter.
The Company is a gold exploration and development company which operated the Chameleon gold mine in Kalgoorlie from February 2021 to late August-early September 2021.
The Chameleon mine was placed into care and maintenance from 2 September 2021 due to the following events:
(1)on 30 August 2021, the eastern wall of the mine collapsed;
(2)on 2 September 2021, wall movement was detected across the eastern and northern walls of the mine;
(3)the Department of Mines, Industry Regulation and Safety issued the Company with a prohibition notice with respect to the mine; and
(4)transport and dewatering service providers suspended operations at the mine causing flooding of the mine pit.
Operations of the mine have not resumed.
Administration of the Company
On 21 October 2021, James Thackray was appointed as voluntary administrator of the Company.
On 10 November 2021 and 11 May 2022, the court made orders extending the period in which the administrator was required, pursuant to s 439(1) of the Act to convene a meeting of creditors of the Company to ultimately, 18 November 2022.
On 10 November 2022, the administrator completed a report to creditors prepared in the accordance with r 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (Insolvency Rules) (Report) and the Report was distributed to the last known creditors of the Company.
Attached to the Report is the following schedule which shows the total creditor's claims of $13,224,652:
Hampton provided mining and haulage services to the Company in relation to the mine and is the Company's largest creditor, with a debt owed to it of just over $10.1 million.
Attempts to sell the Company's assets
On 13 November 2021, the administrator published an advertisement in the West Australian newspaper seeking expressions of interest to acquire the company's assets.
Thirteen parties responded to the advertisement and eight parties executed confidentiality deeds. The administrator established a comprehensive data room for interested parties to access online throughout the expression of interest process.
On 20 January 2022, the administrator received non-binding offers in relation to the Company from the following four parties:
(1)Resource Mining Pty Ltd;
(2)Kingwest Resources Limited;
(3)Viking Mines Ltd; and
(4)a private group of investors.
Although the deadline for final binding offers was initially to expire on 10 February 2022, the administrator received several enquiries and offers after that date which caused him to keep the data room open until September 2022.
On 11 February 2022, the administrator received an offer from Resource Mining Pty Ltd to acquire the Company's tenements.
On 23 February 2022, the administrator received an offer from PARQ Capital Asset Management (Aus) 2 Pty Ltd (PARQ) to acquire the Company's gold rights on Mining Lease 24/336.
On 24 February 2022, the administrator received an offer from Kingwest Resources Limited to purchase the Company's interest in E29/661, associated mining information and associated statutory licences.
Hampton proposal
On 12 May 2022, the administrator received a proposal from Hampton to acquire the shares in the Company.
On 15 September 2022, Hampton supplemented the proposal by providing a deed of company arrangement proposal.
The key terms of the Hampton proposal are:
(1)in its capacity as an unsecured creditor of the Company, Hampton will forego dividends totalling $575,000;
(2)that sum of $575,000 is consideration made up as follows:
a.$525,000 for the transfer of the Company's shares to Hampton; and
b.up to $50,000 for the plaintiff's costs of this application
(3)all of the Company's residual cash, debtors and inventory will be transferred to a creditors' trust for the benefit of all creditors; and
(4)all creditor's claims and other liabilities will be transferred to the creditors' trust, except for liabilities attaching to the mine tenements such as rehabilitation costs and creditors will be paid a dividend from the creditors' trust.
The administrator estimated in the Report that:
(1)if the Hampton proposal was implemented, the creditors will receive between 24.68 and 25.97 cents in the dollar; and
(2)if the Company was placed into liquidation, the creditors will receive between 23.27 and 24.50 cents in the dollar.
The administrator did not receive any offer that would result in a return to creditors that was greater than the return to creditors under the Hampton proposal.
In the administrator's opinion, as set out in the Report:
(1)the Company was insolvent so it was not appropriate to return the control of the Company to the directors;
(2)the Hampton proposal would provide a superior return to creditors and would provide greater certainty and a faster payment of a first and final dividend than if the Company was placed into liquidation;
(3)there were no readily apparent amounts that a liquidator could recover that would increase the funds available to distribute to creditors; and
(4)the administrator recommended that creditors vote in favour of the Hampton proposal.
In April 2023, Hampton agreed to waive its future entitlement to $25,000 of distributions pursuant to the proposed creditors' trust deed. This was an increase to the consideration for the shares in the Company to compensate for additional costs incurred by the Company during the extended negotiation period.
Creditors' meetings
The Report gave the creditors notice of the second meeting of the Company's creditors to be held at the administrator's office on 18 November 2022.
At the meeting, the administrator advised creditors that, in order for the Hampton proposal to be finalised, the meeting should be adjourned for 45 days to allow the Company and PARQ to finalise or progress negotiations in relation to a proposed nickel rights deed and gold rights deed to be entered into by each of them.
As a result, the meeting was adjourned to 20 December 2022. At this meeting, the creditors resolved, inter alia, that the Company execute a deed of company arrangement in accordance with the statement setting out the details of the proposed deed contained in the Report.
DOCA and Conditions Precedent
On 11 January 2023, a deed of company arrangement was executed to give effect to the Hampton proposal (DOCA). The plaintiff was appointed as deed administrator of the DOCA.
A condition precedent to the completion of the DOCA is that the Company and PARQ execute a nickel rights deed, a gold rights deed and amendments to a sale and purchase agreement dated 9 October 2021 (PARQ Condition Precedent).
A further condition precedent of the DOCA is that the court make an order pursuant to s 444GA of the Act to transfer all of the issued shares held by members in the Company to Hampton. The orders sought by the plaintiff in this application would fulfil this condition precedent.
The plaintiff approved a number of extensions to the sunset date in the DOCA, the most recent to 1 March 2024, to allow the negotiations to continue in relation to the fulfilment of the PARQ Condition Precedent, to obtain an independent expert report and to allow the court to hear and determine this application.
On 12 June 2023, the Company and PARQ executed a nickel rights deed, a gold rights deed and a deed of amendment to a sale and purchase agreement between the Company and PARQ (collectively the Mineral Rights Documents).
Hampton is satisfied that the PARQ Condition Precedent, by execution of the Mineral Rights Documents, has been fulfilled.
No opposition to transfer the shares
The Company has 190,841,120 shares on issue. The shares are owned by 50 shareholders (of which 6 shareholders hold their shares jointly with one other shareholder).
The plaintiff has complied with the procedural orders made by the court on 8 December 2023 requiring it to send the relevant documents to the Company's shareholders and to publish the necessary advertisements.
One email bounced back, one set of posted documents was returned to sender. One substantive response was received on behalf of a member which inquired about details of the plaintiff's application. The response did not express support for, nor opposition to the plaintiff's application.
On 29 November 2023, in accordance with r 2.8(3) of the Supreme Court (Corporations) (WA) Rules 2004 (WA), the plaintiff served this application on the Australian Securities and Investments Commission (ASIC).
No party has opposed the plaintiff's application.
Section 444GA of the Act
I turn now to consider s 444GA of the Act. As already noted, the section provides that the administrator of a deed of company arrangement may transfer shares in a company if the administrator has obtained either the written consent of the owner of the shares or the leave of the court. A member of the company, a creditor of the company, any other interested person, or ASIC may oppose an application for leave.
Section 444GA(3) provides that the court can only grant leave if it is satisfied that 'the transfer would not unfairly prejudice the interests of members of the company'. The section itself gives no other guidance as to the considerations properly taken into account by the court when determining whether or not leave should be granted. I note that, pursuant to s 445D of the Act, an application may be made by a creditor of the company, the company itself, ASIC or any other interested person for termination of a deed of company arrangement.
In Weaver v Noble Resources Ltd [2010] WASC 182; (2010) 41 WAR 301, Martin CJ said at [79]:
… the notion of unfairness only arises if prejudice is established. If the shares have no value, if the company has no residual value to the members and if the members would be unlikely to receive any distribution in the event of a liquidation, and if liquidation is the only alternative to the transfer proposed, then it is difficult to see how members could in those circumstances suffer any prejudice, let alone prejudice that could be described as unfair. …
In Lewis, in the matter of Diverse Barrel Solutions Pty Ltd (Subject to a Deed of Company Arrangement) [2014] FCA 53, White J said at [19]:
Whether or not 'unfair prejudice' will result from a transfer of the shares is to be determined having regard to all the circumstances of the case and to the policy of the legislation. Relevant matters would seem to include whether the shares have any residual value which may be lost to the existing shareholders if the leave is granted; whether there is a prospect of the shares obtaining some value within a reasonable time; the steps or measures necessary before the prospect of the shares attaining some value may be realised; and the attitude of the existing shareholders to providing the means by which the shares may obtain some value or by which the company may continue in existence. A relevant comparison will be between the position of the shareholders if the proposal does not proceed and their position if leave to transfer shares is granted.
The court may make orders pursuant to s 447A of the Act to provide the machinery by which the transfer of shares in the Company to Hampton may be put into effect.[1]
[1] Tucker, in the matter of Black Oak Minerals Ltd (Subject to a Deed of Company Arrangement) (in liq) (2019) 134 ACSR 472; [2019] FCA 293 at [17] - [19].
Would the transfer of shares unfairly prejudice members of the Company?
Given the requirements of s 444GA(3), it is necessary to consider the question of whether the transfer of shares in the Company to Hampton would unfairly prejudice the interests of members of the Company.
A point of comparison relevant to the assessment of whether there would be unfair prejudice is between the circumstances of the members of the Company under the proposal for the transfer of shares as compared to their circumstances under a winding up. Consideration of the notion of unfairness only arises if prejudice is established. If the shares of the Company have no residual value to the members of the Company, and if the members would be unlikely to receive any distribution in the event of a liquidation, with liquidation being the only alternative to the transfer of the shares proposed, then it is difficult to see how the members of the Company could suffer any prejudice, let alone unfair prejudice.[2]
[2] Darren Gordon Weaver, Andrew John Saker and Martin Jones in their capacity as Joint and Several Deed Administrators of Midwest Vanadium Pty Ltd v Noble Resources Ltd [2010] WASC 182 [76].
The independent expert report prepared by Thomas Birch of Cor Cordis (Expert Report) states:
(1)the Company's asset position in a liquidation would be between $3,635,246 and $5,765,246;
(2)the Company's liability position in a liquidation would be between $13,884,034 and $13,781,483;
(3)the Company's net equity position in a liquidation would be between negative $8,016,237 and negative $10,248,788; and
(4)therefore, the residual equity value to members of the Company is nil.
I am satisfied, on the basis of the Expert Report, that the Company has no residual value. The creditors' claims substantially exceed the realisable assets of the Company on any scenario.
The alternative to the completion of the DOCA is that the Company would be placed into liquidation. I am satisfied, on the basis of the unchallenged evidence to which I have referred, that placing the Company into liquidation would be:
(1)contrary to the wishes of creditors of the Company, who voted in favour of the DOCA;
(2)likely to result in a smaller return to creditors; and
(3)not provide any benefit to members of the Company as they would not receive a return in a liquidation.
I therefore am satisfied that the transfer of shares in the Company to Hampton would not unfairly prejudice the interests of the members of the Company.
Conclusion and orders
In summary, there is no question of unfairness to members of the Company as a result of the transfer of the shares in the Company to Hampton because the shares of the Company have no value. Therefore, the condition which is required to be met before the leave of the court can be granted to transfer the shares in the Company has been met. I propose to make orders as follows:
(1)Pursuant to s 444GA(1)(b) of the Act, the plaintiff in his capacity as deed administrator of Shine Resources Pty Ltd (Subject to a Deed of Company Arrangement) (ACN 168 094 808) (Company) have leave to transfer all of the issued shares held by each of the members in the Company to Hampton Transport Services Pty Ltd (ACN 008 733 060).
(2)Pursuant to s 447A of the Act and s 90-15(1) of sch 2 of the Act, the plaintiff have leave to execute all necessary share transfer forms and other documents ancillary to the share transfer forms and the entry of the name of Hampton Transport Services Pty Ltd (ACN 008 733 060) in the Company's share register.
(3)The plaintiff have liberty to apply in respect of these orders.
(4)The costs of an incidental to this application be paid out of the assets of the Company.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to the Hon Justice Whitby
12 JANUARY 2024
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