FEDERAL COURT OF AUSTRALIA

Stratford Sun Limited v OM Holdings Limited [2009] FCA 1245

PRACTICE AND PROCEDURE – preliminary discovery – O 15A r 6 of the Federal Court Rules – applicant contemplating commencing a proceeding founded on a possible breach of the Australian Stock Exchange Listing Rules – whether reasonable cause to believe that the applicant may have a right to obtain relief – whether in the exercise of the Court’s discretion the application would be dismissed.

Corporations Act 2001 (Cth) Ch 6, ss 793C, 793C(2), 1324

Federal Court Rules O 15A r 6

St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147

Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435

Re Delta Gold (2001) 40 ACSR 347 

STRATFORD SUN LIMITED v OM HOLDINGS LIMITED (ARBN 081 028 337)

WAD 75 of 2009

SIOPIS J

4 NOVEMBER 2009

PERTH

THE COURT ORDERS THAT:

1.                  The applicant’s notice of motion dated 19 May 2009 is dismissed.

2.                  The applicant is to pay the respondent’s costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

1                     The applicant is incorporated in the British Virgin Islands, has its principal office in St Helier, Jersey, and is a wholly owned subsidiary of Consolidated Minerals (Jersey) Ltd (Cons Mins).  Cons Mins owns and operates a manganese mine in Western Australia.

2                     The respondent, OM Holdings Limited (OMH), through a wholly owned subsidiary, operates the Bootu Creek Manganese mine in the Northern Territory.  OMH is incorporated in Bermuda but has its head office in Singapore.  Its shares are listed exclusively on the Australian Stock Exchange (ASX).  It has a registered office in Perth and maintains a share registry in Perth.  Cons Mins and OMH are competitors in the manganese mining industry.

3                     At a general meeting of members of OMH held in Singapore on 23 September 2008, nine resolutions were passed.  Among the resolutions which were passed were resolutions which approved the issue of options to acquire shares in OMH to directors and executives of OMH.  More specifically, there were resolutions passed which approved the grant of 20 million options to be issued free to Mr Peter Ivan Toth, one million options to be issued to Mr Wong Fong Fui, 12 million options to be issued to Mr Ong Beng Chong and four million options to be issued to Mr Low Ngee Tong.  There was also a resolution passed to approve the issue of 10 million options to Mr Paul Vincent Thomas, the managing director of OMH’s subsidiary, OM (Manganese) Limited.

4                     The applicant was at the date of the meeting, a shareholder and member of OMH.  The applicant did not attend the general meeting of members in Singapore but appointed a proxy to vote against the resolutions.  At the date of the meeting the applicant held, through nominee companies, 12,843,161 shares in OMH.

5                     After the meeting, the applicant continued to purchase shares in OMH through nominee companies, and at the date of the commencement of this proceeding, the applicant held 57,231,393 shares comprising approximately 11.78% of the issued shares in OMH.

6                     In January 2009, the applicant started to request documents relating to the proceedings at the general meeting on 23 September 2008 which approved the issue of the options to the directors and executives.  The initial request was made by the applicant itself but subsequently solicitors for the applicant have also made requests.  Some documents were provided in response to the requests but this did not satisfy the applicant.

7                     On 19 May 2009, the applicant filed this application for preliminary discovery under O 15A r 6 of the Federal Court Rules (the Rules).  For the reasons which follow, this application is dismissed.

BACKGROUND

8                     By a letter dated 13 May 2008, OMH announced to the ASX that it had secured the services of Mr Peter Ivan Toth who would be appointed as the joint chief executive officer effective from 3 September 2008.  The letter went on to state that Mr Toth’s remuneration would include the issue of 10 million unlisted options, subject to shareholder approval.

9                     The letter also stated that Mr Ong Beng Chong, who was then a non‑executive director of the company, had accepted the appointment to be the company’s chief financial officer with effect from 1 August 2008.  The letter went on to say that Mr Ong’s remuneration would include the issue of six million unlisted options subject to shareholder approval.

10                  In an announcement to the ASX dated 5 June 2008, OMH announced the appointment of Mr Wong Fong Fui, who was the chairman and group chief executive officer of Boustead Singapore Limited, as an independent non-executive director of the company with immediate effect.  The letter went on to state Mr Wong would be issued with one million unlisted options subject to shareholder approval.

11                  On 4 July 2008, OMH made an announcement to the ASX that its board of directors had approved, following a recommendation by the remuneration committee, the issue of four million options to Mr Low Ngee Tong subject to shareholder approval.  The letter also referred to an intention to issue 10 million options to Mr Paul Thomas, the managing director of OM (Manganese) Limited.

12                  On 21 August 2008, the applicant commenced acquiring, through nominee companies, shares in OMH.  As mentioned above, by the date of the meeting, the applicant had through nominee companies, acquired about 12.8 million shares in OMH.

13                  On 1 September 2008, OMH dispatched a notice of general meeting dated 27 August 2008 and the explanatory memorandum to members of OMH.  The ASX had previously approved the notice of general meeting of OMH and the explanatory statement.

14                  The notice of general meeting gave notice of the intention to hold a general meeting of members on 23 September 2008 and referred to each of the resolutions seeking approval to issue the options to each of Mr Toth, Mr Wong, Mr Ong, Mr Low and Mr Thomas respectively.  The notice of meeting also contained a prominent statement that OMH would disregard any votes cast by, or on behalf of, each of those persons, or by any associate of those persons.

15                  The explanatory statement also referred to the “relevant interests” held by each of Mr Toth, Mr Wong, Mr Ong and Mr Low and disclosed that Mr Ong held shares in OMH and that Mr Low held shares directly and indirectly in OMH and also held options to acquire shares in OMH.  The statement also disclosed that Mr Low’s spouse, Ms Heng Siow Kwee was a senior executive of one of OMH’s subsidiaries, and that she held 42,132,130 ordinary shares indirectly, 500,000 ordinary shares directly and 500,000 unlisted options directly.

16                  The explanatory statement also stated that the purpose of issuing options to the persons named was to “provide them with an incentive to grow the company and enhance shareholder value”.

17                  The meeting was held on 23 September 2008, in Singapore.  The minutes of the meeting record as follows:

PRESENT:Mr John H R Raubenheimer   Non-Executive Chairman and Shareholder

                   Mr Low Ngee Tong               Chief Executive Officer & Shareholder

                   Mr Ong Beng Chong              Executive Director & Shareholder

                   Ms Julie Wolseley                  Non-Executive Director/Joint Company

                                                                Secretary & Shareholder

                   Mr Tan Peng Chin                 Non-Executive Director

                   Mr Thomas Teo Liang Huat   Non-Executive Director

                   Ms Heng Siow Kwee             Joint Company Secretary & Shareholder

                   Mr Paul Thomas                    Managing Director of OM (Manganese)

                                                                Ltd & Shareholder

Attendance:  As per the Shareholder Attendance Register and Visitor Attendance Register.

Apologies:    Apologies from Messrs Peter Ivan Toth and Wong Fong Fui were tabled.  No other apologies were noted.

18                  Also present at the meeting were two representatives from Computershare Investor Services Pty Limited.  One of those persons was Ms Melissa Anne Stevens.  An affidavit sworn by Ms Stevens was read in this proceeding.

19                  The minutes go on to record that each of the resolutions approving the grant of options to each of Mr Toth, Mr Wong, Mr Ong, Mr Low and Mr Thomas - being resolutions 4-8 - respectively, was carried “unanimously on a show of hands”.

20                  After the meeting, the applicant continued to acquire more shares in OMH through nominee companies.  On 27 November 2008, OMH by the issue of a disclosure of relevant interest request, learned for the first time that the applicant was the holder of 48,277,915 shares in OMH, which it had been accumulating over time through the use of nominee companies.

21                  After 27 November 2008, the applicant continued to acquire more shares in OMH, and as mentioned above, by the date of this application held more than 57.2 million shares in OMH.

22                  On 15 January 2009, a special general meeting of the members of OMH was held at which a resolution was proposed to amend the by-laws of OMH to include takeover protection provisions broadly based on those found in Ch 6 of the Corporations Act 2001 (Cth).  I interpose to say that by reason of OMH being incorporated in Bermuda, it was common ground that Ch 6 of the Corporations Act did not apply to OMH at that time.

23                  The applicant was opposed to the resolution and actively campaigned to persuade members to vote against the amendment to the by-laws of OMH.  However, the majority of members of OMH supported the resolution and the resolution was passed at the special general meeting held on 15 January 2009, by an overwhelming margin.

24                  By a letter dated 29 January 2009, the applicant made a request of OMH for the supply of the shareholder register used to determine the entitlement to vote at the 23 September 2008 general meeting, a record of the proxies received and a record of the shareholders present and voting.  OMH responded by providing the applicant with a copy of the minutes of the general meeting and referring the applicant to the announcement as to the results of the meeting.

25                  By letter dated 13 March 2009 from Freehills, the applicant’s solicitors, to the directors of OMH, Freehills stated:

The issue of options to OMH directors with purported shareholder approval at the OMH general meeting on 23 September 2008…resulted in very significant dilution of ConsMin’s shareholding in OMH.

Our client has instructed us to seek documents from OMH which relate to the issue of options to certain OMH directors in September 2008 under the purported authority of that meeting, for the purpose of deciding whether to commence proceedings for substantive relief from OMH and/or those directors.

26                  The letter then described the documents the applicant wished to inspect.  The documents sought related to the following four broad categories:  the issue of the options as incentives; the share and option holdings of Mr Low and his spouse, Ms Heng Siow Kwee; proceedings at the meeting on 23 September 2008; and correspondence between officers or employees of OMH relating to potential or completed corporate transactions (including the acquisition of shares in OMH between 21 August 2008 and 1 December 2008).

27                  The letter also advised that if the requested documents were not provided, the applicant anticipated applying for orders for preliminary discovery from OMH and/or its directors as potential parties to proceedings in the Federal Court of Australia.

28                  In response to that letter, OMH by a letter dated 23 March 2009, declined to provide the documents.  However, it appears that discussions took place between the parties at around this time.

29                  By a letter dated 28 April 2009, Freehills referred to the discussions which had occurred between their client and OMH directors and stated that the discussions had not resolved the applicant’s concerns about the affairs of OMH and went on to say:

In the absence of representation on the Board of OMH, or any other means of obtaining accurate and timely information in relation to this or any other matter in relation to OMH’s affairs, our client has no choice but to take such steps as are available to it to compel the disclosure of information about transactions which give rise to real and substantial concerns as to their propriety.

At present, those concerns are focused upon the issue of options in relation to which we have previously corresponded.

30                  In May 2009, the applicant notified OMH that it intended to propose at the annual general meeting of OMH, that one of its nominees be appointed to the board of directors of OMH.

31                  On 15 May 2009, the board of directors of OMH advised the ASX that it would not support the applicant’s nominee for an appointment as a director of OMH and had advised members to vote against that resolution.

32                  On 19 May 2009, the applicant filed this application for preliminary discovery from OMH.

33                  At the annual general meeting of members of OMH, held on 26 May 2009, the resolution that one of the applicant’s nominees be appointed as a director of OMH was defeated by an overwhelming margin.

THE APPLICATION

34                  In its application for preliminary discovery brought under O 15A r 6 of the Rules, the applicant sought discovery from OMH of the following documents:

(a)        Documents in the possession, custody or power of the Respondent recording or referring to the matters upon which the Respondent and its directors relied in reaching the conclusion that the issue of options contemplated in Resolutions 4 to 8 for shareholder approval at the Meeting were “designed to provide them with an incentive to grow the company and enhance shareholder value” and to be “regarded as efficient means for the company to supplement their cash based remuneration” including, without limitation:

(1)        commissioned reports, including reports by external remuneration consultants;

(2)        briefing papers to the Respondent’s Board;

(3)        records of meetings of the Respondent’s directors, whether formally as directors or otherwise, and whether in the form of notes or formal minutes;

(4)        emails, file notes and notes of meetings prepared or received by officers of the Respondent.

(b)        Documents in the possession, custody or power of the Respondent or any officer of the Respondent referring to or recording the relationship between the Respondent’s director Mr Low Ngee Tong and his spouse Ms Heng Siow Kwee with respect to their respective shareholdings and option holdings in the Applicant, including, without limitation:

(1)        the Respondent’s share and option registers;

(2)        records of disclosure of substantial holdings; and

(3)        other business records of the Respondent.

(c)        Documents in the possession, custody or power of the Respondent recording or referring to the votes cast at the Meeting and specifically all documents which evidence or record:

(1)        who voted for and against each of Resolutions 4 to 8 (inclusive);

(2)        who moved and seconded Resolutions 4 to 8 (inclusive) at the Meeting;

(3)        the signed minutes of the Meeting and all drafts of those Minutes;

(4)        all documents tabled at the Meeting including the attendance register (in whatever form);

(5)        all instruments of proxy, attorney or appointment of corporate representatives for the Meeting;

(6)        all notes taken by officers and employees of the Respondent at the Meeting setting out who were present at the Meeting; and

(7)        all notes taken by officers and employees of the Respondent at the Meeting recording which shareholders voted in favour of and against Resolutions 4 to 8.

(d)        All correspondence and documentation in the possession, custody or power of the Respondent which passed between officers or employees of the Respondent with respect to any potential or completed corporate transactions involving the Respondent (including the acquisition of shares in the Respondent) between 21 August 2008 and 1 December 2008.

35                  In support of the application, the applicant relied upon the affidavit of Mr Vladislav Kuzmenkov sworn on 14 May 2009.  Mr Kuzmenkov is resident in the United Kingdom, and is the director of a company which provides advice to the applicant.

36                  In his affidavit, Mr Kuzmenkov said that as a result of the resolutions being passed at the meeting, the options that were issued will on their exercise, significantly dilute the shareholding of the applicant.

37                  Mr Kuzmenkov said that on the exercise of the options the share capital of OMH would be increased to 520,097,150 shares and the applicant’s proportionate shareholding would be reduced to approximately 10.9%.  As previously mentioned, the evidence was that as at the date of Mr Kuzmenkov’s affidavit, being 14 May 2009, the applicant’s shareholding comprised approximately 11.78% of the issued shares in OMH.

38                  Mr Kuzmenkov then went on to depose that he considered that the applicant may have a cause of action against OMH in relation to the impugned issue of the options.  Mr Kuzmenkov said that specifically he considered that there may be “associations between directors and/or shareholders which were not disclosed or not fully disclosed in the material provided to shareholders prior to the meeting”.  Mr Kuzmenkov also deposed that he considered that “one of the reasons for issuing options may have been to dilute the shareholding of non-related entities”.  Mr Kuzmenkov then set out the reasons for holding these views.

39                  First, said Mr Kuzmenkov, the number of options being issued was “very large, and four of eight of the incumbent directors of OMH were beneficiaries of the option issue, such that each of the beneficiaries had reason to support the issue of the options to each other”.  There was, said Mr Kuzmenkov, “no discussion of this in the explanatory statement”.

40                  Secondly, Mr Kuzmenkov said that the explanatory statement showed that one of the directors, Mr Low and his wife had direct and indirect shareholdings and option holdings in OMH.  Mr Kuzmenkov said that the explanatory statement was unclear as to the actual shareholding and option holding of Mr Low and his wife, “such that it was not possible to determine the level of association”.

41                  Thirdly, it was said that the September 2008 meeting was convened and held after Cons Min and the applicant commenced acquiring shares in OMH.

42                  Fourthly, said Mr Kuzmenkov, from the publicly available information it was not possible to discern which shareholders voted for the resolutions, which abstained and which voted against the resolutions.

43                  Mr Kuzmenkov went onto to say that if there were undisclosed associations then OMH and its directors may have breached the ASX Listing Rules relating to the form and content of notices of meetings and disclosure of associations and disqualification of associates from voting which, in turn, may give rise to causes of action by the applicant, particularly under s 793C(2) or s 1324 of the Corporations Act.

44                  OMH relied upon two affidavits of Ms Julie Anne Wolseley, a director and company secretary of OMH.  OMH also relied upon an affidavit of Ms Stevens to which I have already referred, and on an affidavit of Mr Jerome Patrick Allan.

45                  In her second affidavit, Ms Wolseley, who was not cross-examined, relevantly deposed that neither Ms Heng Siow Kwee personally, nor her sole controlled company, Dino Company Limited, voted on any of the resolutions 4-7 at the meeting.  It was also said that Mr Ong did not vote on resolution 6, and that Mr Low did not personally, or on behalf of his sole controlled company, vote on resolution 7.

THE HEARING

46                  At the hearing, counsel said that the applicant was no longer contemplating bringing a proceeding based on the allegation that in agreeing to issue the options the directors acted for the improper purpose of diluting the applicant’s interest in OMH.  The applicant, said counsel, was only contemplating a possible action in respect of a failure by OMH adequately to disclose the relevant associations affecting the directors who stood to benefit from the passing of the resolutions for the issue of the options.

47                  Accordingly, said counsel, the applicant now only sought preliminary discovery of documents described in subpara (b) and subpara (c) of its application (see [34] above).

ORDER 15A R 6 OF THE RULES

48                  Order 15A r 6 of the Rules provides as follows:

Where–

(a)        there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained;

(b)        after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief; and

(c)        there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision-

the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).

49                  The applicant contended that there was reasonable cause to believe that it may be entitled to relief under “at least, sections 793C(2) or 1324 of the Act”.  This was because there was reasonable cause to believe that OMH had failed to comply with the ASX Listing Rule 14.11 in relation to the impugned resolutions which were passed at the general meeting of members on 23 September 2008.

50                  It was contended that the ASX Listing Rule 14.11 required that the notice of the meeting contain a notice which stated that the company would disregard any votes cast in favour of the options resolutions by a person excluded from voting or by an “associate” of that person.  Further, the Listing Rule also stated that the relevant interpretation of “associate” for the purposes of the Listing Rule is the interpretation in s 11 and ss 13‑17 of the Corporations Act.  Relevantly, s 15 of the Corporations Act provides that the reference to an “associate” includes a reference to a “person in concert with whom the primary person is acting, or proposes to act”.

51                  The applicant contended that there may have been an agreement or understanding between each of the beneficiary directors and executives that each, as a shareholder, would vote in favour of each of the resolutions to approve the issue of the options to each of the other beneficiaries, provided that each of the other beneficiaries voted in favour of the resolution to approve the issue of the options to him.  The existence of such an agreement or understanding would render each of the parties to that agreement or understanding an associate of the others.  There was, said the applicant, no disclosure of any such association in the materials which were sent to the members of OMH prior to the general meeting.  Further, the applicant said that there was reasonable cause to believe that in breach of the voting exclusion statement in the notice of general meeting, votes from persons who were associates, by reason of being party to the mutual voting pact postulated by the applicant, may have been counted in favour of each of the impugned resolutions.  However, said the applicant, it did not have sufficient information to know whether this had occurred because it did not know who had voted in favour of each of the impugned resolutions.  The minutes did not reveal which shareholders had voted in favour of each of the resolutions.  The applicant contended that the minutes revealed that there were eight people listed as being present and only six of whom were shareholders.

52                  The applicant went on to contend that without further information the case was not clear and that the applicant could not make an informed decision as to whether to commence a proceeding for the relief which it was contemplating bringing against OMH.

53                  At the centre of the applicant’s case is the contention that there may have been a mutual voting agreement or understanding between the directors and executives who were to benefit from the passing of the resolutions in the terms postulated by the applicant.

54                  In support of this contention, counsel for the applicant said that there was at least the prospect disclosed on the face of the notice of meeting that there was a “congruence of interest” between the relevant directors and executives in relation to the four resolutions.  Further, there were a couple of very large shareholders who had an interest, one of whom is the spouse of the other.

55                  Counsel for the applicant also referred to the proxy forms which had been completed by Mr Ong and Mr Low and Mr Low’s controlled company.  The applicant pointed out that on his proxy form, Mr Ong directed his votes in favour of resolutions approving the issue of options to the other directors and executives but abstained in relation to the resolution for the issue of options to himself.  The applicant said that the same pattern was apparent in the proxy forms completed by Mr Low on his behalf and on behalf of his controlled company.  This was evidence, said the applicant, of the directors crossing their votes in favour of the resolution approving the issue to each other of the options.

56                  Counsel for the applicant also contended that there was an inadequate disclosure in the explanatory memorandum of the spousal relationship between Mr Low and his wife, Ms Heng Siow Kwee.

57                  The first question is that which arises under O 15A r 6(a) of the Rules, namely, whether there is reasonable cause to believe that the applicant may have a right to obtain relief from OMH.

58                  The principles to be applied in determining whether there is a reasonable cause to believe that an applicant may have a right to obtain relief are set out in the following observations of Hely J in St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147 at 153-154, at [26]:

The following propositions emerge from the authorities in which the proper application of O 15A r 6 has been considered by judges of this court:

…

(c)        the test for determining whether the applicant has “reasonable cause to believe”, as required by subpara (a), is an objective one:  Hooper at FCR 11‑12 [39]; ALR 367; IPR 30; Malouf v Malouf [1999] FCA 710; BC9902833 at [16]; Quanta Software International Pty Ltd v Computer Management Services Pty Ltd (2000) 175 ALR 536 at 541-2 [24]; 49 IPR 25 at 31; Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 391; BC9602085 at 23.  Further, the words “or may have” cannot be ignored.  The applicant does not have to make out a prima facie case:  Quanta Software at ALR 541-2 [24]; IPR 31; Paxus Services at ALR 733; IPR 85;

(d)        belief requires more than mere assertion and more than suspicion or conjecture.  Belief is an inclination of the mind towards assenting to, rather than rejecting a proposition.  Thus it is not sufficient to point to a mere possibility.  The evidence must incline the mind towards the matter or fact in question.  If there is no reasonable cause to believe that one of the necessary elements of a potential cause of action exists, that would dispose of the application insofar as it is based on that cause of action:  John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679; BC200403021 at [13], [14], [17] and [73].

59                  More recently, in the case of Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435 at 445-446, at [48] the Full Court observed:

It was not incumbent upon Optiver to establish every element of the relevant causes of action, but a reasonable cause to believe that it “has or may have” the right to relief alleged.  Of course, this is not to say that it is not necessary to examine the various elements of the potential cause of action that is sought to be relied upon to determine whether there is a reasonable cause to believe that each of the necessary elements exist (see Austrac Operations Pty Ltd v New South Wales [2003] ATPR 41‑960 at [11]; Leighton Contractors Pty Ltd v Page Kirkland Management Pty Ltd [2006] FCA 288 at [5]; Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (2007) 164 FCR 450 at [44]).  Nor can an application for preliminary discovery be sustained without evidence that must incline the mind towards the matter of fact in question (see Austrac [2003] ATPR 41-960 at [37]; John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679 at [13]-[14], [17], [73]; Dartberg 164 FCR 450 at [44]).  (Original emphasis.)

60                  Thus, whilst it is the case that O 15A r 6 permits fishing, nevertheless, there must be an evidentiary foundation, which will permit a belief or tilting of the mind towards the existence of the factual premise upon which the potential cause of action being contemplated by the applicant, is founded.

61                  In my view, the case made by the applicant does not, on the evidence before the Court, rise above the level of speculation or conjecture.

62                  First, the existence of a mutual agreement or understanding between the four directors and executives who stood to benefit by the passing of the impugned resolutions, postulated by Mr Kuzmenkov in his affidavit (see [39] above), is inconsistent with, and undermined by the fact two of the four beneficiaries, mainly, Mr Toth and Mr Wong were at the relevant time, not shareholders of OMH.  Those two persons, therefore, lacked capacity to vote at a general meeting and were, therefore, not in a position to confer the reciprocal benefit essential to the postulated pact, on the other beneficiary directors and executives.

63                  Secondly, the fact that the proxies lodged by Mr Ong and Mr Low showed that each voted for the resolutions approving the issue of the options to the other beneficiaries, does not, in my view, comprise evidence of the existence of the mutual voting agreement or understanding postulated by Mr Kuzmenkov.  Such action on the part of Mr Ong and Mr Low is quite consistent with the exercise of an independent free choice by each of them.  Without more, there is nothing in that conduct which gives rise to the tilting of the mind towards the existence of the voting pact postulated by Mr Kuzmenkov in his evidence.

64                  In my view, the evidence does not permit an inclination of the mind towards the existence of the mutual voting agreement or understanding which underpins the claim which the applicant alleges that it is contemplating bringing against OMH.

65                  Further, I reject the applicant’s contention that there was an inadequate disclosure of the spousal relationship between Mr Low and his wife.  The explanatory memorandum made it clear that Mr Low was Ms Heng Siow Kwee’s spouse.  The explanatory memorandum also made clear the extent of Ms Heng Siow Kwee’s direct and indirect holdings in OMH.  In any event, there is the unchallenged evidence of Ms Wolseley that Ms Heng Siow Kwee did not, either on her own behalf, or on behalf of her sole controlled company, vote in favour of resolutions 4-7.

66                  In addition, in light of the extent of the disclosure already made, the applicant has not identified the added benefit that getting access to the nominated OMH documents would bring to the making of its decision as to whether to commence a proceeding.

67                  It follows that I am not satisfied that the applicant has satisfied the requirement of O 15A r 6(a) of the Rules.  On that basis, I dismiss the application.

68                  In any event, I would in the exercise of my discretion, not have granted the relief sought by the applicant.  This is because, for the following reasons, I am not satisfied that the applicant did not commence this application for the ulterior purpose of putting pressure on OMH as part of a wider commercial stratagem.

69                  First, I am not satisfied that the applicant has identified with sufficient specificity the benefit it would obtain from any relief available to it in this Court founded on a breach of the ASX Listing Rules.  During argument counsel for the applicant was nebulous as to the practical benefit to the applicant of obtaining a direction from the Court under s 793C(2) of the Corporations Act.  Further, as counsel for the applicant correctly conceded, it is problematic as to whether any relief would be available under s 1324 of the Corporations Act in relation to the postulated breach of the ASX Listing Rules.

70                  As Allsop J observed in relation to the predecessor section to s 793C of the Corporations Act, in the case of Re Delta Gold (2001) 40 ACSR 347 at 356, at [33]:

The terms of s 777 make it plain that a breach of the listing rules is not an unlawful act.  The legislation provides for a method of enforcement of those rules; but breach of the listing rules is not to be equated with breach of a statute or acting in a contravention of a statute.

71                  Further, the applicant did not identify any other causes of action that it was contemplating bringing.  Any such causes of action which might be available to it would presumably be those afforded by Bermudan law.  However, there was no evidence of Bermudan law and no evidence identifying any claim founded on Bermudan law, which the applicant was contemplating bringing.

72                  Secondly, at the forefront of the applicant’s application as filed, was a contention that the directors of OMH may have acted for an improper purpose in approving the issue of the impugned options to the directors and the executives.  Mr Kuzmenkov deposed that the applicant was contemplating bringing a claim on the basis that one of the directors’ purposes in approving the issue of the options to the recipients may have been to dilute the shareholding of the applicant in OMH.  Evidence on the public record in the form of notifications to the ASX showed that the decision to issue the options was made in advance of the applicant commencing to acquire shares in any substantial numbers in OMH.  Further, there was no challenge to the evidence of Ms Wolseley that OMH first learned of the applicant’s interest in shares in OMH on 27 November 2008 – some two months after the general meeting, and some six months after the initial ASX announcement in relation to the intention to issue options to Mr Toth and to Mr Ong.

73                  It is the case that counsel for the applicant did not press the “improper purpose” contention at the hearing.  However, Mr Kuzmenkov’s willingness to file an affidavit which deposed to evidence in support of this, correctly abandoned, contention, is probative on the question of the applicant’s purpose in commencing this proceeding.

74                  The reason I have not made a positive finding that the applicant’s application was brought to exert commercial pressure on OMH as part of a wider commercial stratagem, is that it would, in my view, be unfair to make such a finding in the absence of the cross‑examination of Mr Kuzmenkov.

75                  The application is dismissed with costs.

Associate:

Dated:         4 November 2009