U and D Coal Ltd v Australian Kunqian International Energy Co Pty Ltd - [2014] VSC 386

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

CORPORATIONS LIST
S CI 2014 01300

U & D COAL LTD (ACN 165 894 806)	Plaintiff
v
AUSTRALIAN KUNQIAN INTERNATIONAL ENERGY CO PTY LTD (ACN 153 835 440)	Defendant

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JUDGE:	SIFRIS J
WHERE HELD:	Melbourne
DATE OF HEARING:	18 August 2014
DATE OF JUDGMENT:	22 August 2014
CASE MAY BE CITED AS:	U & D Coal Ltd v Australian Kunqian International Energy Co Pty Ltd
MEDIUM NEUTRAL CITATION:	[2014] VSC 386

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CORPORATIONS – Compromise required company to acquire shares in itself – Compromise subject to Court approval – Court approval granted under s 259A(c) of Corporations Act 2001 (Cth) – No prejudice to creditors or shareholders as a whole.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P W Collinson QC with Mr O Bigos	Minter Ellison
For the Defendant	Mr P D Crutchfield QC Mr R Craig	Jones Day

HIS HONOUR:

Introduction

On 5 December 2013 the plaintiff, U & D Coal Ltd (‘UND’), lodged a replacement prospectus (‘the Prospectus’) with the Australian Securities and Investments Commission (‘ASIC’) in relation to an initial public offering (‘IPO’) of 250 million shares at 50 cents per share.

Pursuant to the Prospectus, the defendant, Australian Kunqian International Energy Co Pty Ltd (‘KQ’) applied for 100 million shares in UND (‘IPO Shares’) for an aggregate subscription price of $50 million (‘Subscription Monies’).

On 10 March 2014, KQ issued a notice under s 737of the Corporations Act 2001 (Cth) (‘the Act’) (‘s 737 Notice’) which alleged, inter alia, that the Prospectus contravened s 724 of the Act and entitled KQ to request the return of the IPO Shares to UND and have the Subscription Monies repaid to it.

The validity of the s 737 Notice was disputed by UND. UND commenced this proceeding to set aside the s 737 Notice.

The originating process came on for hearing on 18 August 2014. Senior Counsel for each party announced that the proceeding had settled and that on 15 August 2014 UND and KQ had executed a Deed of Settlement.

Deed of Settlement

The relevant provisions of the Deed of Settlement are set out hereunder:

3. Court Order
The parties agree to make a joint application to the Supreme Court of Victoria for consent orders that:
(a)UND may acquire and cancel the IPO Shares from KQ on the terms of this Deed (Court Order); and
(b)the Proceeding is dismissed with no order as to costs (with a right to reinstatement in the event that this Deed is terminated pursuant to clause 2).

4. Loan
4.1 Loan Agreement
Immediately upon the grant of the Court Order, KQ will loan to UND the sum of $20 million (Loan Sum) on the following terms:
(a)interest on the Loan Sum is to accrue at the rate of the 3 month Bank Bill Swap Rate plus a margin of 0.9%;
(b)interest on the Loan Sum is to be capitalised quarterly;
(c)the Loan Sum and…

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.

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Details

AGLC: U and D Coal Ltd v Australian Kunqian International Energy Co Pty Ltd [2014] VSC 386
Case: [2014] VSC 386
Decision Date: 22 August 2014

CaseChat Overview and Summary

U and D Coal Ltd brought an application against Australian Kunqian International Energy Co Pty Ltd in the Federal Court of Australia. The dispute arose out of a compromise agreement which required U and D Coal Ltd to acquire its own shares from one of its shareholders, Australian Kunqian. The compromise was subject to the approval of the Court under section 259A(c) of the Corporations Act 2001 (Cth). The primary issue for determination was whether the Court should grant its approval of the compromise. In considering this, the Court had to determine whether the compromise would result in prejudice to creditors or shareholders as a whole.

The Court examined the compromise agreement and found that it was fair and reasonable to the shareholders of U and D Coal Ltd as a whole. The Court was satisfied that the compromise would not result in any prejudice to the creditors or shareholders of the company. The Court noted that the compromise would allow U and D Coal Ltd to reduce its share capital and improve its financial position, which would ultimately benefit the company and its stakeholders. The Court was also satisfied that the compromise was in the best interests of the company and its shareholders.

The Court held that the compromise was fair and reasonable and did not result in any prejudice to creditors or shareholders as a whole. The Court approved the compromise under section 259A(c) of the Corporations Act 2001 (Cth). The Court found that the compromise would allow U and D Coal Ltd to reduce its share capital and improve its financial position, which would ultimately benefit the company and its stakeholders. The Court noted that the compromise was in the best interests of the company and its shareholders. The Court's approval of the compromise was therefore granted.

The Court ordered that the compromise be approved under section 259A(c) of the Corporations Act 2001 (Cth). The Court found that the compromise was fair and reasonable and did not result in any prejudice to creditors or shareholders as a whole. The Court noted that the compromise would allow U and D Coal Ltd to reduce its share capital and improve its financial position, which would ultimately benefit the company and its stakeholders. The Court was satisfied that the compromise was in the best interests of the company and its shareholders.

Orders