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Re Hunter Resources Ltd

Re Hunter Resources Ltd

Case [1992] FCA 144 26 March 1992

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Re: HUNTER RESOURCES LIMITED (ACN 010 267 428)
No. N G3031 of 1992
FED No. 144
Corporations Law
(1992) 10 ACLC 538
(1992) 7 ACSR 436
(1992) 107 ALR 398
(1992) 34 FCR 418

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.(1)

CATCHWORDS

Corporations Law - Reduction of capital - meaning of "reduction" - whether reduction permissible if achieved by offering shares in parent company where no cross shareholding - sufficient consideration for reduction - meaning of "agrees to become a member" within meaning of s.184 Corporations Law.

Corporations Law: ss. 184, 195.

HEARING

SYDNEY

#DATE 26:3:1992

Counsel for the Applicant: Mr S.J. Archer

Solicitors for the Applicant: Clayton Utz

Counsel for Australian Mr T.F. Bathurst QC
Securities Commission: Miss R. McColl and Mr T. Castle

Solicitors for Australian Commission: Australian Securities Commission

ORDER

1. The application be dismissed.

2. The applicant pay the costs of the Australian Securities Commission.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

Hunter Resources Limited ("the company") applied to the Court for an order confirming a reduction of its share capital pursuant to s. 195 of the Corporations Law. The Australian Securities Commission ("the Commission") intervened in the proceeding pursuant to s. 1330(1) of the Corporations Law and opposed the application of the company.

On Monday, 23 March 1992, I dismissed the company's application and ordered it to pay the costs of the Commission. I said that I would give my reasons later. These are the reasons.
The company was incorporated in Queensland on 24 June 1981 as a public limited liability company. The name of the company on incorporation was Wansford Investments Limited, but it changed its name to Hunter Resources Limited on 4 August 1983.
The nominal capital of the company is $50,000,000 divided into 200,000,000 ordinary shares of $0.25 each. The issued share capital of the company is $33,095,323 consisting of 132,381,293 ordinary shares of $0.25 each, which are fully paid.
The issued share capital of the company is held as follows:

(a) Technomin International Limited ("Technomin International"), holds 85,785,851 ordinary shares, which are fully paid and represent approximately 64.8% of the issued capital of the company;

(b) Restech International Limited ("Restech International") holds 2,164,623 ordinary shares which are fully paid and represent approximately 1.64% of the issued capital of the company;

(c) 2,131 independent corporate and individual shareholders hold the remainder of the company's issued shares.

Technomin International is a wholly owned subsidiary of Oriana Gold N.L. ("Oriana Gold"), which is a wholly owned subsidiary of Technomin Australia N.L. ("Technomin Australia"); 82.77% of the issued shares in Technomin Australia are held by Restech Australia Pty Limited ("Restech Australia") which is a wholly owned subsidiary of Restech International.
Restech International is a company incorporated in New Zealand and is the ultimate holding company of the company. The corporate structure appears below.

(CORPORATE STRUCTURE OMITTED)

On 23 December 1991 Restech International caused Technomin Australia…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Hunter Resources Ltd

Details

AGLC: Hunter Resources Ltd (ACN 010 267 428) [1992] FCA 144 ((1992) 10 ACLC 538; (1992) 7 ACSR 436; (1992) 107 ALR 398; (1992) 34 FCR 418)
Case: [1992] FCA 144
Decision Date: 26 MARCH 1992

CaseChat Overview and Summary

The case of Re Hunter Resources Ltd was heard in the Federal Court of Australia, where the dispute involved the interpretation and application of the Corporations Law concerning the reduction of capital by a company. The applicant, Hunter Resources Ltd, sought to reduce its capital by offering shares in its parent company, a transaction that was challenged by the Australian Securities Commission. The central issue was whether such a transaction constituted a "reduction" of capital under the Corporations Law and whether it required the agreement of the company’s members.

The legal issues addressed by the Court included the meaning of "reduction of capital" and whether it was permissible for the company to reduce its capital by offering shares in its parent company, where there was no cross-shareholding arrangement. Another key issue was whether the transaction provided sufficient consideration for the reduction and whether it complied with the requirement that members "agree to become a member" under section 184 of the Corporations Law.

The Court found that the transaction proposed by Hunter Resources Ltd did not constitute a permissible reduction of capital. The reasoning of the Court was based on the interpretation of the relevant statutory provisions and the lack of agreement from the members of the company. The Court held that the transaction did not meet the requirements for a capital reduction under the Corporations Law, as it did not involve a reduction of the company's share capital. Furthermore, the Court found that the offer of shares in the parent company did not provide sufficient consideration for the reduction and did not meet the statutory requirement for member agreement.

As a result of the Court's findings, the application by Hunter Resources Ltd was dismissed. The Court also ordered that the applicant pay the costs of the Australian Securities Commission, reflecting the unsuccessful nature of the application.

Orders

Orders of the court

1. The application be dismissed.

2. The applicant pay the costs of the Australian Securities Commission.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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Citations

Hunter Resources Ltd (ACN 010 267 428) [1992] FCA 144 ((1992) 10 ACLC 538; (1992) 7 ACSR 436; (1992) 107 ALR 398; (1992) 34 FCR 418)

Most Recent Citation

In the matter of Victorian Grain Services Limited [2000] VSC 334

Cases Citing This Decision

Humm Group Limited, in the matter of Humm Group Limited [2022] FCA 614
Citation 1 (Para 26)

…ecognised that such an arrangement may be implemented pursuant to a scheme approved in accordance with Pt 5.1 of the Act: see Re Hunter Resources Ltd (1992) 34 FCR 418 at 443-444 per Lockhart J; Australian Securities and Investments Commission v Wellington Capital Limited [2013] FCAFC 52; 94 ACSR 293 at [75]-[79] pe…
Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2020] NSWSC 1778
Citation 2

…Re Hodgson (1886) 31 Ch D 177; [1881-85] All ER Rep 931 Re Hunter Resources Ltd (1992) 34 FCR 418 Re Meyer Douglas Pty Ltd [1965] VR 638 Re National Safety Council of Australia (in liq); Elders Finance Group Ltd v Perrins (1992) 10 ACSR 101 Re Rectron Electronics Pty Ltd [2013] VSC 384 Realtek Pty Ltd v Wetamast Pty…
Wellington Capital Limited v. Australian Securities & Investments Commission & Anor [2014] HCATrans 198
Citation 3

…If your Honours could go to Hunter Resources (1992) 7 ACSR 436, which is of some significance, Justice Lockhart was dealing with a reduction of capital under what was then section 195 of the Corporations Law at a time when the court still had an approval role. The nature of the transaction was that the company sough…
Australian Securities and Investments Commission v Wellington Capital Limited [2013] FCAFC 52
Citation 4 (Para 40)

…ction does not necessarily contemplate a contract between the member and the company, but there must be assent to membership: Re Hunter Resources Ltd (1992) 34 FCR 418 at 425 (Lockhart J).…
Re Texon Petroleum Ltd [2013] FCA 29
Citation 5 (Para 7)

…. Each Scheme includes a provision under which Texon shareholders agree to accept shares as scheme consideration: see eg. Re Hunter Resources Limited (1992) 34 FCR 418; Re Advance Bank Australia Limited (1997) 22 ACSR 513 at 528-529; Re CSR Ltd (2010) 183 FCR 358. Schemes are bona fide and properly proposed…
Re Nine Entertainment Group Ltd (No 1) [2012] FCA 1464
Citation 6 (Para 17)

…It is true, as Lockhart J held in Re Hunter Resources Limited (1992) 34 FCR 418 at 425, that the predecessor of the present s 231 requires the agreement or assent of a person to become a member of a company. His Honour held that a reduction of capital which had the practical effect of compelling shareholders in the…
Australian Securities and Investments Commission v Wellington Capital Limited [2012] FCA 1140
Citation 7 (Para 22)

…In terms of this latter point, a series of cases was brought to my attention. The first is Re Hunter Resources Limited (1992) 34 FCR 418 ( Re Hunter Resources ), in which Lockhart J at 425 rejected a proposed reduction in capital of a corporation because s 184 (the then equivalent provision of s 231) also required t…
In the matter of Victorian Grain Services Limited [2000] VSC 334
Citation 8 (Para 1)

…f the scheme: see in Re NRMA Ltd ; Re NRMA Insurance Ltd , supra at 610; Re Advance Bank Australia Limited (1997) 22 ASCR 513. In Re Hunter Resources (1992) 34 FCR 418, Lockhart J held that if a company wished to achieve the objective (of providing that a shareholder should become a member of another company) "it sh…
Westchester Financial Services Pty Ltd v Acclaim Exploration NL [1999] WASC 87
Citation 9 (Para 2)

…led AUNL. The argument is that the members will be compelled to acquire shares without "agreeing" to do so: see s 246A(b) and Re Hunter Resources Ltd (1992) 34 FCR 418 and Re Etrade Australia Ltd (1999) 30 ACSR 516. If so, a scheme of arrangement may be necessary.…
Re ETRADE Australia Ltd [1999] NSWSC 254
Citation 10

…of arrangement was needed wherever the reduction of capital involves the shareholder being compelled to acquire shares ( Re Hunter Resources Ltd (1992) 34 FCR 418 where the shares, as here, were in another company), and a scheme was thus employed for that purpose, overlapping with the reduction. The present proposa…

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Cases Cited

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Legislation Cited

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Companies Act 1985 c.6
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