Troy Resources Nl v Taipan Resources Nl
[2000] WASC 298
•24 NOVEMBER 2000
TROY RESOURCES NL -v- TAIPAN RESOURCES NL [2000] WASC 298
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2000] WASC 298 | |
| Case No: | COR:312/2000 | 24 NOVEMBER 2000 | |
| Coram: | STEYTLER J | 24/11/00 | |
| 14 | Judgment Part: | 1 of 1 | |
| Result: | Injunction refused | ||
| PDF Version |
| Parties: | TROY RESOURCES NL (ACN 006 243 750) TAIPAN RESOURCES NL (ACN 060 156 452) |
Catchwords: | Injunction Interlocutory injunction Whether information provided to shareholders for purposes of voting at Annual General Meeting misleading Turns on own facts |
Legislation: | Corporations Law, s 232, s 233 and s 250M(2) |
Case References: | Nil American Cyanamid Co v Ethican Ltd [1975] AC 396 Baillie v Oriental Telephone and Electric Company Limited [1915] 1 Ch 503 Buttonwood Nominees Pty Ltd v Sundowner Minerals (1986) 10 ACLR 360 Campbell v The Australian Mutual Providence Society (1996) 7 SR (NSW) 99 Cheque Point Securities Ltd v Claremont Petroleum NL & Ors (1986) 4 ACLC 711 Demagogue Pty Ltd v Ramensky & Anor (1992) 39 FCR 31 Devereaux Holdings Pty Ltd v Pelstart Resources NL (No 2) (1985) 9 ACLR 956 Emlen Pty Ltd & Anor v St Barbara Mines Limited & Ors (1997) 15 ACLC 1,107 Fraser & Anor v NRMA Holdings Pty Ltd & Ors (1995) 127 ALR 543 Jenashare Pty Ltd v Lemrib Pty Ltd (1933) 11 ACSR 345 Mott v Mt Edon Goldmines (Aust) Ltd (1994) 12 ACSR 658 Ryan v Edna May Junction Gold-mining Company Nl (1916) 21 CLR 487 Wilkinson v Feldworth Financial Services Pty Ltd (1999) 17 ACLC 220 Wright v TNT Management Pty Ltd (T/as Comet Overnight Transport) (1989) 15 NSWLR 679 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Applicant
AND
TAIPAN RESOURCES NL (ACN 060 156 452)
Respondent
Catchwords:
Injunction - Interlocutory injunction - Whether information provided to shareholders for purposes of voting at Annual General Meeting misleading - Turns on own facts
Legislation:
Corporations Law, s 232, s 233 and s 250M(2)
Result:
Injunction refused
(Page 2)
Representation:
Counsel:
Applicant : Mr D G Sanders
Respondent : Mr J Gilmour QC & Mr C D Belyea
Solicitors:
Applicant : Bennett & Co
Respondent : Clayton Utz
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
American Cyanamid Co v Ethican Ltd [1975] AC 396
Baillie v Oriental Telephone and Electric Company Limited [1915] 1 Ch 503
Buttonwood Nominees Pty Ltd v Sundowner Minerals (1986) 10 ACLR 360
Campbell v The Australian Mutual Providence Society (1996) 7 SR (NSW) 99
Cheque Point Securities Ltd v Claremont Petroleum NL & Ors (1986) 4 ACLC 711
Demagogue Pty Ltd v Ramensky & Anor (1992) 39 FCR 31
Devereaux Holdings Pty Ltd v Pelstart Resources NL (No 2) (1985) 9 ACLR 956
Emlen Pty Ltd & Anor v St Barbara Mines Limited & Ors (1997) 15 ACLC 1,107
Fraser & Anor v NRMA Holdings Pty Ltd & Ors (1995) 127 ALR 543
Jenashare Pty Ltd v Lemrib Pty Ltd (1933) 11 ACSR 345
Mott v Mt Edon Goldmines (Aust) Ltd (1994) 12 ACSR 658
Ryan v Edna May Junction Gold-mining Company Nl (1916) 21 CLR 487
Wilkinson v Feldworth Financial Services Pty Ltd (1999) 17 ACLC 220
Wright v TNT Management Pty Ltd (T/as Comet Overnight Transport) (1989) 15 NSWLR 679
(Page 3)
1 STEYTLER J: This is an application for an interlocutory injunction.
2 On 13 June 2000, the defendant, to which I shall refer as "Taipan", and St Barbara Mines Ltd, to which I shall refer as "St Barbara", announced to the Australian Stock Exchange a proposed merger by way of a scheme of arrangement.
3 On 31 July 2000 the directors of Taipan resolved to enter into a convertible note facility with St Barbara, being for $750,000 at a conversion rate of 6.5 cents per share. The purpose of that facility was to allow Taipan (at least on the affidavit evidence of Mr Terence Kenneth Topping, one of its directors) to have access to a facility for the funding of ongoing working capital requirements and to meet ongoing administration costs of the company.
4 The applicant, to which I shall refer as "Troy", is a substantial shareholder in Taipan, holding 42,624,950 shares comprising 20 per cent of the issued share capital in that company. On 19 September 2000, by way of an announcement made to the Australian Stock Exchange, Troy announced its intention to make a cash offer of 7.6 cents per ordinary fully-paid share in Taipan.
5 The announcement expressed that offer to be conditional upon the merger proposal between Taipan and St Barbara not being approved by Taipan shareholders or otherwise not proceeding. It also recorded that, if the offer was made, it would be subject to various conditions including a condition to the effect that there would be no issue of new Taipan shares, options or convertible securities other than pursuant to the terms of convertible notes properly issued by Taipan and other than by way of an issue of partly-paid shares contemplated by an earlier announcement which had been made on 4 July in accordance with the Australian Stock Exchange Listings Rules and the Corporations Law.
6 On 23 October 2000 Troy filed an application in the Supreme Court in action number COR 276 of 2000. It served a copy of the application and supporting documents on the solicitors for Taipan on the following day. That application, which was made under s 232 and s 233 of the Corporations Law, concerned the conduct of the affairs of Taipan and in particular its conduct in relation to the proposed merger. Particular matters raised in that application were as follows:
"1.1 its [Taipan's] decision on 28 June 2000 to postpone a call made on 16 June 2000 in a manner that was contrary to the terms of the Listing Rules of the Australian Stock
(Page 4)
- Exchange Ltd which otherwise govern the affairs of the First Defendant [Taipan];
- 1.2 the First Defendant's decision on 31 July 2000 to issue to the Second Defendant [St Barbara] a Convertible Note facility to be drawndown by the First Defendant in lots of $150,000 with a total facility of $750,000 such Note maturing on 31 August 2001 and convertible into fully paid shares in the First Defendant at 6.5 cents per share;
1.3 its decision at a date and time not known to the Plaintiff [Troy] to drawdown the entirety of the $750,000 pursuant to the Convertible Note issued to the Second Defendant;
1.4 its decision on 6 October 2000 to convert or allow the conversion of the entirety of the funds drawn down on the Convertible Note issued to the Second Defendant and to thereby allot and issue to the Second Defendant 11,538,462 ordinary fully paid shares in the First Defendant;
1.5 on 12 October 2000, at an extraordinary general meeting of the shareholders of the First Defendant the First Defendant allowed the Second Defendant to vote in respect of resolution 1 in the notice of meeting 15,888,462 shares in the First Defendant notwithstanding:
1.5.1 the Second Defendant was, at all material times an associate of Strata Mining NL;
1.5.2 by reason of the acquisition of shares by the Second Defendant, Strata Mining NL alternatively the Second Defendant acquired voting control over shares in Taipan contrary to the prohibition contained in Section 606 of the Corporations Law;
1.5.3 The First Defendant failed to allow the Plaintiff to vote all the fully paid ordinary shares it held in the First Defendant, notwithstanding that the First Defendant had failed to specify any snapshot date in respect of the extraordinary general meeting;
1.5.4 the First Defendant allowed Central Exchange Ltd to vote 4 million fully paid ordinary shares in
(Page 5)
- respect of resolution 1 notwithstanding the First Defendant, by its Chairman and Managing Director Mr Stephen William Miller, had knowledge that Central Exchange had sold its entire shareholding in the First Defendant as at the date of the meeting."
7 There is then a series of claims for relief set out in the application, including a claim for an order that Taipan be required to convene an extraordinary general meeting of its shareholders and to put to such a meeting, for the purpose of considering and, if thought fit, passing as an ordinary resolution, a resolution in terms authorising Taipan to implement the merger by way of scheme of arrangement notwithstanding that in implementing the scheme Taipan would, under Listing Rule 10.1, be deemed to acquire a substantial asset from a company, Strata Mining Corporation NL ("Strata").
8 An order is also sought that, at such meeting of shareholders, Taipan be restrained from counting in respect of such resolution any vote cast by any of St Barbara, Strata and any associate of Strata. Next, an order is sought that, until such time as the meeting is held, Taipan oppose and defend any proceedings brought by St Barbara seeking approval of the court to the scheme of arrangement between Taipan and St Barbara. By way of an alternative order, Troy seeks an order declaring the result of the poll taken at the extraordinary general meeting of the shareholders of Taipan on 12 October 2000 on the basis that the vote cast by St Barbara is not counted.
9 The financial year for Taipan ended on 30 June 2000. Consequently, by reason of s 250M(2) of the Corporations Law, Taipan's annual general meeting is required to be held by 30 November 2000. On 26 and 27 October 2000, Taipan accordingly despatched to its shareholders notice of its annual general meeting and an explanatory memorandum. The notice of annual general meeting gave notice of three proposed resolutions. Resolutions 2 and 3 are material for the purposes of today's proceedings. Resolution 2 reads as follows:
"To consider and if thought fit to pass, with or without amendment, the following resolution as an ordinary resolution:
'That for the purposes of Listing Rule 7.4 of the Listing Rules of Australian Stock Exchange Limited and for all other purposes, shareholders ratify the allotment and issue of 11,538,462 fully
(Page 6)
- paid ordinary shares in the capital of the Company at an issue price of 6.5 cents per share to St Barbara Mines Limited pursuant to the Notice of Conversion of Notes served on the company by St Barbara Mines Ltd on 6 October 2000.' "
- Resolution 3 reads as follows:
"To consider and if thought fit to pass, with or without amendment, the following resolution as an ordinary resolution:
'That for the purposes of Listing Rules 7.1 and 7.9 of the Listing Rules of Australian Stock Exchange Limited and for all other purposes, approval is given to the allotment and issue of up to 25,000,000 securities in the Company at an issue price equivalent to at least 80% of the average market price for securities in that class calculated over the last 5 days on which sales were recorded before the date on which the issue is made.' "
"Resolution 2 seeks shareholder ratification for the allotment and issue of fully-paid ordinary shares in the Company ('Shares') to St Barbara Mines Limited ('St Barbara') pursuant to the Notice of Conversion of Notes served on the Company by St Barbara on 6 October 2000 for the purposes of ASX Listing Rule 7.4.
ASX Listing Rule 7.1 requires that a listed company obtain shareholder approval prior to the issue of shares or securities convertible into shares representing more than 15% of the issued capital of that company in any 12 month period. Shareholder approval for the issue of shares to St Barbara is now sought to replenish the Company's capacity to issue shares in accordance with ASX Listing Rule 7.1.
ASX Listing Rule 7.4 provides the mechanism for subsequent approval of an issue of securities for the purpose of Listing Rule 7.1.
In accordance with the Conditions of Issue of the Notes the subject of the Convertible Note Agreement between Taipan and St Barbara, the Notes were convertible at the option of the Noteholder (St Barbara). On 6 October 2000 St Barbara served
(Page 7)
- a Conversion Notice on Taipan. Accordingly, Taipan allotted and issued 11,538,462 Shares at the Conversion Price of 6.5 cents per share."
11 The explanatory memorandum also records that the funds raised by the issue are to be used for the retirement of debt and for working capital for the company.
12 There is next a reference, in the explanatory memorandum, to resolution 3, which is described as seeking shareholder approval for the company to allot and issue up to 25,000,000 securities in the company. Information is also there provided in relation to resolution 3, including a paragraph which says that the funds raised from the issue will be used for working capital or retirement of debt and for exploration.
13 By a Stock Exchange announcement dated 26 October 2000, Troy announced to the market that it had commenced these proceedings. That announcement contained a summary of the grounds of its action.
14 Then, by letter dated 14 November 2000, the solicitors for Troy threatened Taipan with an application for injunctive relief. The letter recorded its grounds of complaint in the following way:
"The action commenced by Troy Resources NL, being proceedings 276/2000, challenges the issue of the convertible note to St Barbara. In these circumstances, the actions of the directors in seeking to ratify the issue of the convertible note may have the effect of preventing the applicant from having its complaints dealt with by the Court.
Further, the resolution seeking authorisation of the placement of up to 25 million shares in circumstances where the company is the subject of a takeover bid and is seeking the approval of the Court to a scheme of arrangement, in our view, is inappropriate.
For this reason, we seek an undertaking from your client that it will not put resolutions 2 and 3 to the general meeting of shareholders to be held 30 November 2000."
15 The letter then went on to say that, failing the provision by the solicitors for Taipan of a suitable undertaking, Troy would bring an application for interlocutory injunctive relief preventing the resolutions from being put to the meeting.
(Page 8)
16 By letter dated 16 November 2000, the solicitors for Troy, in response to a letter from the solicitors for Taipan, expanded upon their earlier complaint as follows:
"As stated at the Court yesterday, the specific complaint is that the notice of meeting dispatched by your client does not refer to the action commenced by Troy Resources which concerns inter alia, the issue of the convertible note. In these circumstances, our client alleges that the notice of meeting is misleading and deceptive. In this respect we referred the Court to the NRMA cases which held that directors are required to place information before the shareholders in an objective fashion."
17 On 17 November 2000 Troy filed its application for injunctive relief, in the terms of which it sought an order restraining Taipan from putting to the annual general meeting of its shareholders to be held on 30 November resolutions 2 and 3 contained in the notice of meeting.
18 On the same day Taipan sent by facsimile a letter dated 17 November 2000 to the Sydney office of the Australian Stock Exchange, which was posted on the Australian Stock Exchange company announcements Web site. That letter referred to the forthcoming annual general meeting and provided the following information:
"Shareholders will have received the notice of annual general meeting to be held at the Hyatt Regency Perth, 99 Adelaide Terrace, Perth on Thursday, 30 November 2000 at 10am.
The Company has been served today with an application by Troy to the Supreme Court of Western Australia for an injunction to prevent the AGM considering Resolution 2 and Resolution 3. The Company intends to vigorously oppose the granting of an injunction as your directors believe that there is no reason for shareholders not to consider the resolutions.
By way of clarification, with respect to proposed Resolution 3 at the AGM, should the resolution be passed and the directors of Taipan subsequently allot and issue all or any part of the 25,000,000 securities in Taipan on the terms resolved by persons entitled to vote at such meeting, your interest may be diluted by an amount by which the issued shares bear to the total issued shares within that class of shares. Upon this resolution being approved, any issue of shares by Taipan would
(Page 9)
- be a defeating condition of the Troy bid, subject to Troy varying its offer in accordance with the Corporations Law.
You will have seen from recent newspaper reports that Troy has brought an application against Taipan before the Supreme Court of Western Australia pursuant to the Corporations Law.
In essence, Troy has made complaint about Taipan's decisions to:
- • postpone a call made on partly paid shareholders on 16 June 2000;
• issue St Barbara Mines Ltd ('St Barbara') a convertible note facility of $750,000 maturing on 31 August 2001 and convertible into fully paid shares in Taipan at 6.5c per share, the subsequent draw-down of that facility and its conversion into 11,538,462 Taipan shares;
• allow St Barbara to vote its shares at the general meeting held on 12 October 2000 to consider the proposed merger of Taipan and St Barbara; and
• allow Central Exchange Limited to vote 4,000,000 shares registered in its name and to limit Troy's vote to the number of shares disclosed on the share register at the time of the general meeting on 12 October 2000.
Troy has claimed that the convertible note and the subsequent issue to St Barbara were an improper purpose [sic] to secure approval of the proposed merger. Another claim by Troy is that St Barbara was an associate of Strata Mining Corporation NL ('Strata') and further, that by reason of the acquisition of shares by St Barbara, Strata, alternatively, St Barbara, acquired voting control over shares in Taipan contrary to the Corporations Law. In addition, complaints have been raised as to an alleged breach of the Company's constitution in relation to the issue of the shares on the conversion of the convertible note facility to St Barbara on the basis that St Barbara is allegedly associated with Stephen Miller.
Similar complaints in the Court proceedings as those set above, have been raise by shareholders associated with Mr Christopher Ryan and Mr Robert Catto.
(Page 10)
- Shareholders should note that Resolution 2 deals with the ratification of the issue of shares to St Barbara pursuant to the conversion of the convertible note facility. This is the matter complained of by Troy and others. As set out in the explanatory memorandum to the notice of meeting, the ratification of the allotment and issue of shares to St Barbara will replenish the Company's capacity to issue shares in accordance with ASX Listing Rules 7.1 (being the allotment and issue of no more than 15% of the issued capital of the company within a twelve-month period)."
- The letter goes on to say that Taipan's directors consider those contentions to be without merit and have defended the proceedings on a number of grounds.
19 The directors also, by that letter, urge shareholders to vote on the resolutions proposed at the AGM They add, importantly, that:
"Any shareholder who has lodged a proxy can revoke that proxy and lodge a fresh proxy."
20 On the same day, Troy dispatched its bidders statement to Taipan's shareholders. As had been foreshadowed, it was made a condition of the offer that Taipan or a subsidiary of Taipan did not issue shares or grant an option over its shares or agree to make such an issue or grant such an option.
21 It was also a condition of that offer that the Court should dismiss, or that St Barbara should discontinue, St Barbara's application to have the scheme implementing the proposed merger approved.
22 On 20 November 2000 Taipan dispatched to each of its shareholders a hard copy of the letter dated 17 November 2000 which had been posted on the Australian Stock Exchange company announcements Web site.
23 On the following day Mr Topping, and presumably other Taipan shareholders, received from Troy a letter dated 18 November 2000, addressed to shareholders in Taipan. That letter recorded, amongst other things, the following:
"Troy believes that its cash offer represents the most certain and best option currently available to Taipan shareholders; however, the Troy offer is now in jeopardy as a result of two resolutions proposed by Taipan directors for consideration
(Page 11)
- by shareholders at Taipan's AGM to be held on 30 November.
The notice of meeting for the Taipan AGM contains two resolutions dealing with issues of Taipan shares which Troy believes are contrary to the interests of Taipan shareholders and which should be rejected by Taipan shareholders."
24 The letter then records the terms of resolutions 2 and 3 before saying:
"As a reflection of its concerns, on 17 November Troy commenced proceedings in the Supreme Court of Western Australia seeking to prevent the directors of Taipan from putting these two resolutions to the meeting. Troy has been forced to take this action as it believes that Taipan's shareholders have been materially misled by the notice of meeting and the accompanying explanatory memorandum. However, the information supplied in this letter cannot substitute for proper, objective and considered information being provided to you by the directors of Taipan in the explanatory memorandum.
Troy believes that it was inappropriate of the directors of Taipan to have put these resolutions to Taipan shareholders at this time, for a number of reasons:
- • There is nothing stated or implied in the explanatory memorandum relating to either resolution that Taipan has a short term funding requirement;
• Given that the effect of any issue of shares will be to dilute Troy's shareholding in Taipan and that there is no stated purpose for the issue of the shares, Troy queries the motive for both resolutions;
• The Troy takeover offer is conditional on Taipan not issuing any new shares or options prior to the end of the Offer Period. Any issue of new shares as contemplated by these resolutions would provide grounds for Troy to withdraw its offer."
25 The letter also records that Troy disputes the validity of the convertible note issued by Taipan to St Barbara and the issue of the
(Page 12)
- 11,538,462 fully paid shares pursuant to the conversion of that note. It says:
"As a fellow Taipan shareholder, Troy believes that the resolutions should be rejected by the vote of the Taipan shareholders if either or both of Resolutions 2 and 3 should come before the shareholders at the Taipan AGM."
"Any shareholder who has lodged a proxy can revoke it and lodge a fresh proxy."
27 Also on 21 November 2000, Troy made an announcement to the Australian Stock Exchange as follows:
"On Friday, 17 November 2000, Troy Resources NL ('Troy') commenced proceedings in the Supreme Court of Western Australia concerning Taipan Resources NL's ('Taipan') Notice of Annual General Meeting and the Information Memorandum accompanying the Notice of Meeting. Troy has also sought an interlocutory injunction to prevent Resolutions 2 and 3 being put to the Annual General Meeting of shareholders of Taipan.
Resolution 2 of the Taipan Notice of Meeting seeks to ratify the allotment of 11,538,462 shares to St Barbara Mines Limited pursuant to the convertible note on 6 October 2000. This conversion is the subject of a challenge by Troy in proceedings already on foot in the Supreme Court of Western Australia. Troy contends that the Notice of Meeting and Information Memorandum is materially misleading and deceptive or likely to mislead or deceive in that the directors of Taipan failed to disclose in the Notice of Meeting and Information Memorandum the existence of these proceedings or that passing the resolution may affect the proceedings.
Resolution 3 seeks the approval of shareholders to the issue of up to 25,000,000 shares in the company at an issue price of at least 80% of the average market price over the last five days prior to the issue. Troy contends that the Notice of Meeting and Information Memorandum concerning Resolution 3 is
(Page 13)
- materially misleading and deceptive or likely to mislead or deceive in that it fails to mention that any issue of securities is a defeating condition of the Troy bid."
28 Consequently shareholders at the forthcoming AGM have been made aware of Troy's concerns, as regards the two resolutions mentioned by it, by way of the letter dated 17 November 2000 posted on the Australian Stock Exchange company announcements Web site, by the letter in the same terms sent to shareholders by Taipan on 20 November 2000, by Troy's letter addressed to shareholders dated 18 November 2000, and by the Stock Exchange announcements on 26 October 2000 and 21 November 2000.
29 The affidavit evidence also discloses that there have, less significantly, also been some newspaper articles and Stock Exchange announcements by the Takeovers Panel in respect of related applications made to it which have given the events to which I have referred some notoriety.
30 Moreover, as regards the fact that the passing and implementation of proposed resolution 3 would constitute a defeating condition of Troy's bid, the shareholders should be aware of this, in addition, from Troy's Stock Exchange announcement on 19 September 2000, and from the bidders statement itself.
31 I am, in the light of the contents of the various documents to which I have referred, not persuaded that there will, at the time of the meeting the subject of these proceedings, be any deficiency or misleading quality in the information available to the shareholders on the matters sought to be raised by Troy (even if there was such at the time of the mailing of the explanatory memorandum, and even if the resolutions themselves are somewhat general in their description of their purposes) which would justify the grant of interlocutory relief on that ground.
32 I should add, in this respect, that while it might be so that Taipan has not told shareholders of the fact that the funds sought to be raised will be needed, at least in part, to satisfy solicitors' fees (something which, I should mention, was not said in the affidavit material but only in the course of submissions made on behalf of Taipan), this is not a matter which is sufficient, in my opinion, to justify the grant of an injunction.
33 A further assertion was made to the effect that the explanatory memorandum is misleading as regards the explanation of the purpose to which the funds raised will be put, and other associated matters, but these
(Page 14)
- are not matters of which notice has been given or in respect of which complaint has previously been made, and they were, for this reason, quite properly not pressed by Mr Sanders (who appeared on behalf of Troy) as matters going to the merits of the application.
34 I should also say, in respect of submissions accordingly which have been made to me both in writing and orally, that I am not persuaded that any shortcomings in Taipan's letter dispatched on 20 November 2000, and the earlier copy of that letter which was posted on the Australian Stock Exchange company Web site, are sufficiently material to justify the grant of an injunction even if one should be sought on that basis, which it is not.
35 As to the argument, raised on behalf of Troy this morning, that proxies may have been received by Taipan before the letter dated 17 November 2000 was dispatched by it, that letter makes plain that existing proxies can be revoked and fresh proxies lodged. I do not consider that it was necessary to inform shareholders of how that might be done. This was, in any event, yet another point of which no notice had been given.
36 Finally, I should say that I am also not persuaded that Taipan's shareholders will not have enough time to consider the matters which have been raised with them since the date upon which they received the notice of the annual general meeting and the explanatory memorandum. It seems to me that they will have had more than enough time to do so.
37 In all of these circumstances it seems to me that no sufficient basis has been made out, on the grounds which were foreshadowed at least, for the grant of injunctive relief of the kind sought.
38 I consequently propose to dismiss the application for an injunction.
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