Re Samgris Resources Pty Ltd (in liquidation)

Case [2022] QSC 126

SUPREME COURT OF QUEENSLAND

CITATION:

Re Samgris Resources Pty Ltd (in liquidation) [2022] QSC 126

PARTIES:

WILLIAM JAMES HARRIS AND ANTHONY NORMAN CONNELLY IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATRS OF SAMGRIS RESOURCES PTY LTD (IN LIQUIDATION) (ACN 147 457 181)

(applicants)

v
SAMGRIS RESOURCES PTY LTD (IN LIQUIDATION) ACN 147 457 181

(respondent)

FILE NO:

BS 5825 of 2022

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

17 June 2022

DELIVERED AT:

Brisbane

HEARING DATE:

7 June 2022

JUDGE:

Kelly J

ORDER:

1. Pursuant to s 488(2) of the Corporations Act 2001 (Cth), the applicants have special leave to distribute the whole of the surplus funds of Samgris Resources Pty Ltd (in liquidation) (ACN 147 457 181) as follows:

a.   An amount equal to 50% of the surplus funds to McKay Brooke Resources Limited of 22/F World Wide House, 19 Des Vouex Central, Hong Kong CHINA; and

b.   An amount equal to 50% of the surplus funds to Allways Resources Holdings Pty Ltd (ACN 154 218 256) of Suite 3, Level 1, 12 Riverview Terrace, Indooroopilly QLD 4068.

2. Pursuant to reg 5.6.71 of the Corporations Regulations 2001 (Cth), the requirement that there be annexed to this order a Schedule in Form 551 is dispensed with.

3. The requirement of r 7.5(6) of sch 1A of the Uniform Civil Procedure Rules 1999 (Qld) that the applicants were to serve this application by prepaid post to each creditor who proved in the liquidation of Samgris Resources Pty Ltd (in liquidation) (ACN 147 457 181) and any contributory is dispensed with.

4. Pursuant to s 90-15(1) of sch 2 (Insolvency Practice Schedule (Corporations)) to the Corporations Act 2001 (Cth), the applicants are justified in calculating the distribution of the surplus to be made to McKay Brooke Resources Limited of 22/F World Wide House, 19 Des Vouex Central, Hong Kong CHINA and Allways Resources Holdings Pty Ltd (ACN 154 218 256) of Suite 3, Level 1, 12 Riverview Terrace, Indooroopilly QLD 4068 by making adjustments in the manner specified in paragraph 5 of the affidavit of William James Harris filed 6 June 2022 (CFI 6).

5. Pursuant to s 90-15(1) of sch 2 (Insolvency Practice Schedule (Corporations)) to the Corporations Act 2001 (Cth), the applicants would be justified in not taking any steps in any proceedings commenced outside of Australia in respect of the claim of Asia Pacific Joint Mining Pty Ltd (in liquidation) (ACN 156 619 484) that was the subject of the CIETAC Arbitration and the proof of debt of Asia Pacific Joint Mining Pty Ltd (in liquidation) (ACN 156 619 484).

6. Pursuant to rr 1.3(1) and 1.8(2) of sch 1A of the Uniform Civil Procedure Rules 1999 (Qld), it is ordered that rule 7.5(2) of sch 1A of the Uniform Civil Procedure Rules 1999 (Qld) does not apply and in lieu it is directed that the applicants have given sufficient notice of the matters identified in rule 7.5(2) by the email correspondence…

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Details
AGLC
Re Samgris Resources Pty Ltd (in liquidation) [2022] QSC 126
Case
[2022] QSC 126
Decision Date

CaseChat Overview and Summary

The applicants, appointed liquidators of Samgris Resources Pty Ltd, sought advice and orders for the distribution of surplus funds and other matters following the company’s liquidation in 2018. Samgris Resources Pty Ltd was incorporated in 2010 and entered into agreements with two Shaanxi companies in 2011 for the acquisition of shares. After disputes arose over the second instalment of the agreed payment, the Shaanxi companies referred the matter to arbitration in China in 2019. The liquidators consented to orders preventing asset distribution until the final arbitral award. In August 2019, a joint venture vehicle submitted a proof of debt, which was rejected in April 2020. The joint venture vehicle was subsequently placed into liquidation in August 2020, and the arbitral award was delivered in October 2021 dismissing the claims. The liquidators distributed a final dividend to admitted creditors in December 2021, leaving a surplus. The liquidators intend to distribute this surplus equally between the remaining contributories, ARH and MBR.

The primary legal issues before the court were whether the liquidators made appropriate inquiries to identify creditors, if a surplus existed for distribution, if the surplus should be distributed immediately, and if the liquidators should be granted special leave to distribute the surplus equally between ARH and MBR. The court also needed to consider the application in the Beijing Fourth Intermediate Peoples’ Court to set aside the arbitral award and the liquidators' release from their duties.

The court found that the liquidators had made appropriate inquiries and identified the creditors. It was established that a surplus existed for distribution. The court considered the rule in Cherry v Boultbee and found that the liquidators had not acted in bad faith. The court concluded that the surplus should be distributed immediately and granted special leave for the liquidators to distribute the surplus funds equally between ARH and MBR. The court also ruled that the liquidators should not be required to take any steps in the Beijing Fourth Intermediate Peoples’ Court proceeding, and ordered their release and the deregistration of the company.

The court ordered that the surplus funds be distributed equally between McKay Brooke Resources Limited and Allways Resources Holdings Pty Ltd, dispensed with certain procedural requirements, justified the liquidators' calculation of the distribution, and released the liquidators from their duties. The court also ordered the sealing of a confidential affidavit and directed that the liquidators' costs and expenses be paid out of the company's assets.

Orders

Orders of the court

1. Pursuant to s 488(2) of the Corporations Act 2001 (Cth), the applicants have special leave to distribute the whole of the surplus funds of Samgris Resources Pty Ltd (in liquidation) (ACN 147 457 181) as follows:

a. An amount equal to 50% of the surplus funds to McKay Brooke Resources Limited of 22/F World Wide House, 19 Des Vouex Central, Hong Kong CHINA; and

b. An amount equal to 50% of the surplus funds to Allways Resources Holdings Pty Ltd (ACN 154 218 256) of Suite 3, Level 1, 12 Riverview Terrace, Indooroopilly QLD 4068.

2. Pursuant to reg 5.6.71 of the Corporations Regulations 2001 (Cth), the requirement that there be annexed to this order a Schedule in Form 551 is dispensed with.

3. The requirement of r 7.5(6) of sch 1A of the Uniform Civil Procedure Rules 1999 (Qld) that the applicants were to serve this application by prepaid post to each creditor who proved in the liquidation of Samgris Resources Pty Ltd (in liquidation) (ACN 147 457 181) and any contributory is dispensed with.

4. Pursuant to s 90-15(1) of sch 2 (Insolvency Practice Schedule (Corporations)) to the Corporations Act 2001 (Cth), the applicants are justified in calculating the distribution of the surplus to be made to McKay Brooke Resources Limited of 22/F World Wide House, 19 Des Vouex Central, Hong Kong CHINA and Allways Resources Holdings Pty Ltd (ACN 154 218 256) of Suite 3, Level 1, 12 Riverview Terrace, Indooroopilly QLD 4068 by making adjustments in the manner specified in paragraph 5 of the affidavit of William James Harris filed 6 June 2022 (CFI 6).

5. Pursuant to s 90-15(1) of sch 2 (Insolvency Practice Schedule (Corporations)) to the Corporations Act 2001 (Cth), the applicants would be justified in not taking any steps in any proceedings commenced outside of Australia in respect of the claim of Asia Pacific Joint Mining Pty Ltd (in liquidation) (ACN 156 619 484) that was the subject of the CIETAC Arbitration and the proof of debt of Asia Pacific Joint Mining Pty Ltd (in liquidation) (ACN 156 619 484).

6. Pursuant to rr 1.3(1) and 1.8(2) of sch 1A of the Uniform Civil Procedure Rules 1999 (Qld), it is ordered that rule 7.5(2) of sch 1A of the Uniform Civil Procedure Rules 1999 (Qld) does not apply and in lieu it is directed that the applicants have given sufficient notice of the matters identified in rule 7.5(2) by the email correspondence exhibited to the affidavit of Jordan David Thomas Waldock filed 6 June 2022 (Court file 7).

7. The applicants be released as joint and several liquidators of Samgris Resources Pty Ltd (in liquidation) (ACN 147 457 181) and ASIC shall deregister the Samgris Resources Pty Ltd (in liquidation) (ACN 147 457 181) pursuant to s 480(d) of the Corporations Act 2001 (Cth) 60 days after the date of this order.

8. The affidavit entitled “Confidential affidavit of William James Harris” sworn 6 June 2022 be sealed in an envelope and marked “Not to be opened without an order of the Court or a Judge”.

9. The applicants’ costs and expenses of this application be paid out of the assets of Samgris Resources Pty Ltd (in liquidation) (ACN 147 457 181).

Background

Background to the litigation

The applicants are the liquidators of Samgris Resources Pty Ltd (in liquidation) ACN 147 457 181 (“the Company”). The liquidation commenced on 23 March 2018. By an Originating Application filed 19 May 2022, the applicants applied for advice, special leave to distribute a surplus and ancillary orders which were intended to facilitate the finalisation of the liquidation.Relevant background to the liquidation The Company was incorporated on 19 November 2010. The Company’s sole shareholder was then Dr Wanfu Huang and its issued share capital was one million ordinary shares, fully paid up at $1.00 per share. The Company and Dr Huang entered into various agreements concerning coal exploration. In particular:(a)on or about 9 March 2011, the Company and Shaanxi Coal and Chemical Industry Co Ltd and Shaanxi Coal Geology Co Ltd (“the Shaanxi Companies”) entered into an agreement entitled “Australian Coal Resources Exploration and Development Corporation Framework Agreement” (“the Framework Agreement”); and(b)on or about 15 October 2011, the Company, Dr Huang and the Shaanxi Companies entered into an agreement entitled “Investment Agreement” (“the Investment Agreement”). Pursuant to the Investment Agreement, the Shaanxi Companies were to incorporate a joint venture vehicle (“the purchaser”), to acquire 200,000 shares in the Company owned by Dr Huang (“the Acquisition Shares”) for a price of $11,000,000.00. The purchaser was thereafter to subscribe for an additional 1,000,000 shares in the Company (“the Subscription Shares”) for a price payable by way of instalments totalling $55,000,000.00. The intention was that, at completion of these investments, the purchaser would own sixty per cent of the shares in the Company. In or around November 2011, Dr Huang caused the registration of:(a)Allways Resources Holdings Pty Ltd (ACN 154 218 256) (“ARH”); and(b)a Hong Kong company, McKay Brooke Resources Limited (“MBR”). Dr Huang was the sole Director and the majority shareholder of each of ARH and MBR. On or about 2 April 2012, the Shaanxi Companies registered Asia Pacific Joint Mining Pty Ltd (ACN 156 619 484) (“APJM”) for the purpose of it becoming the purchaser. On 10 April 2012, Dr Huang consolidated his 1,000,000 shares in the Company to 18,000 shares (with the effect that his shares became worth approximately $55.55 per share). There was no change to the share capital of the Company which remained at a balance of $1,000.000.00. On 19 April 2012, 491,000 shares were issued to each of ARH and MBR in exchange for a non-cash consideration of certain exploration permits for coal being transferred to the Company to the value of $982.00. The effect of this share issue was that:(a)the total number of shares in the Company remained 1,000,000 and comprised:(i)18,000 owned by Dr Huang;(ii)491,000 owned by ARH; and(iii)491,000 owned by MBR;(b)the paid up share capital of the Company was $1,000,982.00 comprising:(i)$1,000,000.00 paid up by Dr Huang;(ii)$491.00 paid up by ARH; and(iii)$491.00 paid up by MBR.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

During the trial, his Honour had been told that a dispute as to whether APJM was obliged to make the second and third closing payments, totalling $33 million, had been referred to arbitration.[6] His Honour had variously noted that “The question of the merits or otherwise of that dispute is not before me”[7] and “whether monies are in fact owing by one side to the other pursuant to the relevant agreements (or consequent upon breach of them) are not questions which are before me.”[8][6]Allways Resources Holdings Pty Ltd & Anor v Samgris Resources Pty Ltd & Anor [2017] QSC 74 [57].[7]Allways Resources Holdings Pty Ltd & Anor v Samgris Resources Pty Ltd & Anor [2017] QSC 74 [57].[8]Allways Resources Holdings Pty Ltd & Anor v Samgris Resources Pty Ltd & Anor [2017] QSC 74 [176].The liquidation, an arbitration and a foreign court proceeding In fact, arbitration proceedings were not commenced until on or about 30 July 2019, when the Shaanxi Companies commenced an arbitration against the Company in the Chinese International Economic and Trade Arbitration Commission (“the CIETAC Arbitration”). The Shaanxi Companies there sought an order prohibiting the applicants from distributing the assets of the Company, a ruling that the Company pay to APJM the sum of $38,360,000.00 (an alleged price adjustment calculated pursuant to clause 2.3 of the Investment Agreement) and a ruling that the Company pay to APJM an exploration report fee of $662,526.09. The applicants consented to interlocutory orders in the arbitration to avoid unnecessary litigation costs. Whilst the interlocutory orders prevented the applicants from making any distributions pending the final arbitral award, they did not prejudice the applicants’ duties to realise the assets and pay preferential claims in accordance with the usual insolvency waterfall under the Act. On or about 6 August 2019, APJM submitted a proof of debt in the liquidation for the sum of $39,022,526.09 (“the APJM Proof of Debt”). The amount of $39,022,526.09 was said to be comprised of $38,360,000 arising out of the Investment Agreement and $662,526.09 as exploration costs. The APJM Proof of Debt contained a section which was headed “Consideration (state how the Debt arose)”. Under this heading the APJM Proof of Debt stated “See annexed filed application to CIETAC dated 30 July 2019”. On 1 April 2020, APJM sought confirmation that it would be entitled to vote at a meeting of creditors that was to be convened by the applicants on 9 April 2020. On or about 7 April 2020, the applicants rejected the APJM Proof of Debt. APJM did not appeal the rejection of the APJM Proof of Debt. On or about 19 April 2020, APJM was joined to the CIETAC Arbitration. On 6 August 2020, APJM was placed into liquidation. On or about 8 October 2021, an arbitral award dismissed the claims made by APJM and the Shaanxi Companies in the CIETAC Arbitration. On 28 October 2021, the applicants issued a circular to creditors giving notice of their intention to declare a final dividend on or before 23 December 2021.