Federal Court of Australia

Lake House Corporation Limited v Timor Resources Holdings Pty Ltd [2026] FCA 335

ORDERS

THE COURT DECLARES THAT:

1.    An Independent Director may only be appointed to, and removed from, office pursuant to cll 2.8 and 2.9 of the Shareholders’ Deed.

2.    The notice of general meeting dated 18 February 2026 is invalid and of no effect.

THE COURT ORDERS THAT:

1.    The Company and the Nepean Shareholders be restrained from holding or purporting to hold a general meeting of the Company at which resolutions are proposed to remove Mr Moyes and/or appoint Dr King as an Independent Director of the Company.

2.    The Nepean Shareholders pay Lake House’s costs of the proceedings on an indemnity basis. Such costs be paid by lump sum.

3.    Lake House file and serve any affidavits and written submissions on the quantification of costs by 2 April 2026.

4.    The Nepean Shareholders file and serve any affidavits and written submissions on the quantification of costs by 17 April 2026.

5.    Lake House file and serve any affidavits and written submissions in reply on the quantification of costs by 1 May 2026.

(Defined terms bear the meaning given to them in the reasons for judgment).

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Delivered ex tempore, Revised from transcript

JACKMAN J:

1    Timor Resources Holdings Pty Ltd (the Company) was registered on 14 March 2017 as a privately owned Australian oil and gas exploration company. The Constitution for the Company was executed by Mr David Fuller on 23 April 2018 (Constitution). It empowered the directors to appoint a person as director to fill a casual vacancy or as an addition to the existing directors, up to a limit determined by the Company of no more than 10 directors (cl 13.2 read with cl 13.1(b)). It empowered the Company by resolution to remove any director and to appoint another person in his or her stead (cl 13.3), and it provided for resolutions to be decided on a show of hands or poll of members (cl 12.5).

2    Pursuant to a convertible note deed of 7 June 2022, the plaintiff (Lake House) subscribed to 32,549,991 convertible notes at a face value of US$1 each, which could be converted following execution of a Shareholders’ Deed in a prescribed form. In mid-2024, a dispute arose as to the Company's failure to provide mandatory quarterly reporting, the refusal by Ms Suellen Osborne and the Company to execute the prescribed Shareholders’ Deed, and the prospect that conversion could trigger a change in control. Ms Osborne is a director appointed by the second to ninth defendants (the Nepean Shareholders) and was then the CEO of the Company.

3    The dispute was resolved by a new Shareholders’ Deed executed by the Company and its members on 26 August 2024 (Shareholders’ Deed), which released the Company from all claims relating to the prior breach and provided a direction from Lake House to convert 29,424,193 notes.

4    The shareholders provided for the maximum number of directors to be six or such other number that the board of the Company unanimously determined (cl 2.6). It empowered each shareholder holding a “Relevant Proportion” of securities, equal to or more than 20 percent, to appoint a specified number of directors, ranging from one to four depending on the shareholder’s relevant proportion, with shareholders controlled by the same persons taken in aggregate (cl 2.7) (Shareholder Directors). It contained detailed provisions for the appointment of an “Independent Director,” by unanimous agreement of the Shareholder Directors or, where there was no such agreement, within a month of any removal or resignation, by a process of appointment of an independent dispute resolver (cl 2.8).

5    It also provided that “the Board may (by Special Director Approval), from time to time, remove the Independent Director” (cl 2.9).

6    The term “Special Director Approval” was defined as “a resolution that is passed by the Board, by Simple Majority, with such number of affirmative votes equal to the total number of Directors appointed to the Board from time to time, less one” (cl 1.1). In relation to “Special Director Approval matters” listed in sch 3, item 7 included the following: “(Appointment of Independent Director) Without limiting clause 2.8(a), appoint or remove an Independent Director, other than an appointment pursuant to clause 2.8”. The Shareholders’ Deed also provided:

2.4    Reserved Matters

Despite any other provision of this deed, Company mut not do nor commit to do and must procure that no Group Company does or commits to do, and the parties must use all voting rights and any other powers of control available to them (whether as a Shareholder, through a Director or otherwise) to procure that no Group Company does, or commits to do or undertake:

(a)    subject to clause 3.3(c), any action or thing listed in Schedule 3 without Special Director Approval;

(b)    subject to and without limiting clause 2.4(c), any action or thing prescribed in the Corporations Act as requiring the approval of a company’s shareholders without the prescribed approval of Shareholders set out in the Corporations Act; or

(c)    subject to and without limiting clause 2.4(b), any action or thing prescribed in Schedule 4 without Special Shareholder Approval.

7    Clause 3.3 (c), which is referred to in cl 2.4(a), deals with board approval of the Business Plan and Budget, and thus has no application to the present dispute.

8    The term “Group Company” was defined to include the Company as well as its subsidiaries (cl 1.1). The Shareholders’ Deed also provided:

1.5    Precedence of this deed

Where this deed and the Constitution deal with the same or a similar topic differently:

(a)    this deed prevails in relation to that topic; and

(b)    if a shareholder gives the Company a notice specifying the difference and requesting an amendment to the Constitution that will remove that difference and the Board agrees with the difference and requested amendment, each Shareholder must take all necessary steps to amend the Constitution to make the Constitution consistent with this deed.

9    The term “Constitution” is defined as “the constitution of the Company from time to time” (cl 1.1). Clause 26.5 provides that the Shareholders’ Deed and the Constitution constitute the entire agreement of the parties about the subject matter.

10    On the same day as executing the Shareholders’ Deed, Lake House subscribed to another 2,000,000 convertible notes at a face value of US$1. After the Company had secured a concession from a third party in respect of any change in control, the other notes held by Lake House were converted on 30 June 2025 and 12 September 2025. As a result, Lake House currently holds 31,552,633 of the 65,660,350 shares in the Company, comprising 48.05% of the total shares.

11    The Company currently has five directors. In accordance with the Shareholders’ Deed, two are Shareholder Directors appointed by Lake House (namely Mr Brown and Mr Timblick), two are Shareholder Directors appointed by the Nepean Shareholders (namely Ms Osborne and Mr D Andrade), and one is the Independent Director (namely Mr Moyes), who was appointed by unanimous agreement of all Shareholder Directors.

12    Disputes have arisen as to the events of board meetings on 3 and 4 February 2026 and 3 March 2026, primarily over whether Ms Osborne resigned or agreed to do so and whether she retains any delegated CEO power. In that context, Ms Osborne and the Nepean Shareholders have now alleged that Mr Moyes has not acted impartially or in the best interests of the Company as a whole. Mr Moyes and Lake House do not agree.

13    On 18 February 2026, various shareholders including the Nepean Shareholders purported to issue a notice of general meeting on 13 March 2026 to consider and, if thought fit, pass resolutions to remove Mr Moyes as the Independent Director, and to appoint Dr King in his place. In response to correspondence noting that the steps proposed in the notice could not be taken without the consent of the directors appointed by Lake House, the solicitors for the Nepean Shareholders wrote on 10 March 2026, that, amongst other things, the appointment and removal of directors was governed by the Constitution, and the Shareholders’ Deed was of no effect insofar as it conferred power on the board to remove the Independent Director by Special Director Approval.

14    Lake House commenced these proceedings on 11 March 2026, seeking declarations either that the Shareholders’ Deed modified cl 13.3 of the Constitution such that an Independent Director may only be appointed or removed from office pursuant to cll 2.8 and 2.9 of the Shareholders’ Deed, or (irrespective of whether the Shareholders’ Deed modified the Constitution) that an Independent Director may only be appointed or removed from office pursuant to cll 2.8 and 2.9 of the Shareholders’ Deed. Lake House also seeks a declaration that the notice of general meeting, dated 18 February 2026, is invalid and of no effect, and a permanent injunction restraining the Company and the Nepean defendants from holding such a meeting.

15    On 12 March 2026, the proceeding was listed for final hearing today upon an undertaking of Nepean Shareholders to vote to adjourn the meeting to 20 March 2026. On Friday, 13 March 2026, the solicitors for the Nepean Shareholders wrote, maintaining their position as set out in earlier correspondence, but stated that their clients were prepared to agree “without any admission” to vote against the resolutions, provided that the proceedings were discontinued with no order as to costs. On Monday, 16 March 2026, the solicitors for Lake House responded, noting, amongst other things that, under the proposal, the Nepean Shareholders could purport to convene another meeting to remove and appoint the Independent Director. Lake House proposed terms that would dispose of the issues before the court. It is not necessary to decide whether the Shareholders’ Deed was effective to modify the Constitution. Assuming that it was not effective to do so (but without deciding the point), the Shareholders’ Deed would still be effective as a contract governing how the parties will exercise their rights and powers in relation to the Company.

16    The Nepean Shareholders correctly accept that the Shareholders’ Deed binds the parties contractually. A company's internal management may be governed not only by the replaceable Rules and Constitution referred to in s 134 of the Corporations Act 2001 (Cth) (the Act), but also by the terms of a contract at law. If authority is needed for that rather obvious proposition, it may be found in Elders Forestry Ltd v BOSI Security Services Ltd [2010] SASC 223; (2010) 80 ACSR 122 at [114] (Kourakis J).

17    Appointment or removal of an Independent Director otherwise than in accordance with the Shareholders’ Deed would amount to a breach of that contract by the Company, and by each party which failed to use its voting rights against removal. Like other negative stipulations, the promises by the Company and other parties on that topic are enforceable by injunction in advance of such a breach: JC Williamson Ltd v Lukey (1931) 45 CLR 282 at 301 (Dixon J).

18    To my surprise, the Nepean Shareholders submitted that cll 2.4, 2.8 and 2.9 of the Shareholders’ Deed do not deal with the same or a similar topic as cl 13.3 of the Constitution “differently” (within the meaning of cl 1.5 of the Shareholders’ Deed). The Nepean Shareholders submit that cll 2.8 and 2.9 of the Shareholders’ Deed confer powers on directors regarding the appointment and removal of Independent Directors, and do not regulate shareholders’ rights. That submission ignores the fact that the Shareholders’ Deed is a binding contract between the Company and its shareholders and ignores cl 2.4(a) of the Shareholders’ Deed which expressly prohibits the Company from doing certain things and obliges shareholders to use all voting rights and powers of control to procure that the Company not do those things.

19    The Nepean Shareholders then submit that the prohibition in cl 2.4(a) does not apply because clause 2.4(b) does not apply, in that the effect of cl 2.4(b) is that removal and appointment of a director by resolution of the Company is provided for in s 203C of the Act. That submission turns on an elementary misreading of cl 2.4. Clause 2.4 provides, in effect, that the Company must not (and shareholders must procure that the Company does not) do any of the things referred to in (a), (b) or (c).

20    The attempt to remove an Independent Director and replace that person by resolution of the Company falls within schedule 3, item 7 and thus falls within cl 2.4(a). Whether or not it also falls within 2.4(b) or (c) is entirely irrelevant. An allied submission by the Nepean Shareholders is that cl 2.4 permits the conduct referred to in cl 2.4(b). But the provision does not permit anything; rather, it prohibits things subject to certain qualifications, and it certainly does not permit conduct which falls within the prohibition in cl 2.4(a).

21    For completeness, I note that the Nepean Shareholders relied on a statement by Brereton J in Cody v Live Board Holdings Limited [2014] NSWSC 78; [2014] 97 ACSR 606 at [16] to the effect that, so far as possible, the shareholders’ agreement in that case should be read together with the Constitution so as to be consistent with it. In the present case it is simply not possible to construe cll 2.4(a), 2.8(a) and 2.9 of the Shareholders’ Deed so as to be consistent with cl 13 of the Constitution; however, as a matter of principle, I do not see why one should even attempt to do so.

22    The declaration sought in para 2 of the originating process is to the effect that an Independent Director may only be appointed to, and removed from, office pursuant to cll 2.8 and 2.9 of the Shareholders’ Deed. A question arises, although it is academic in the circumstances of the present case, as to whether that should be expanded to include appointment of an Independent Director by way of Special Director Approval as referred to in cl 2.4(a), rather than only by the means referred to in cl 2.8 (namely, unanimous agreement of the Shareholder Directors or by the process of appointment of an independent dispute resolver).

23    In my view, the declaration should not be so expanded. Clause 2.4(a) is cast in general terms in relation to each of the 22 items in sch 3. However, item 7 begins with the words “Without limiting cl 2.8(a)”. In my view, those opening words were intended to reserve the requirement in cl 2.8(a) as to unanimity among the Shareholder Directors, rather than creating a new way of appointing an Independent Director by way of Special Director Approval. The specific provision should be treated as paramount to the otherwise general language of cl 2.4(a). That is reinforced by the view which I have already expressed that cl 2.4 does not permit matters to be done; rather, it prohibits matters subject to certain qualifications.

Costs

24    As to costs, Lake House seeks an order for indemnity costs, to be assessed as a lump sum. In my view, there is absolutely no merit in the Nepean Shareholders’ submissions as to the effect of the Shareholders’ Deed as a contract binding on the parties. As a result, there is no merit in their opposition to a declaration that the notice of meeting dated 18 February 2026 is invalid and of no effect and the grant of a permanent injunction restraining any such meeting. I accept that there was a bona fide dispute as to whether the Shareholders’ Deed operated as a modification of the Constitution, but that is of no practical consequence for the ultimate resolution of the dispute, and it has not been necessary for me to resolve that particular aspect in order to decide the case.

25    In short, the Nepean Shareholders have adopted a position which, properly advised, they should have known had no chance of success. I infer that they have proceeded in wilful disregard of the obvious meaning of the Shareholders’ Deed. Their open offer of 13 March 2026 was unreasonable, both because it preserved the ability of the Nepean Shareholders to convene another general meeting seeking to remove and appoint Independent Directors, and because it made no provision for Lake House’s costs incurred up to that point in time.

26    I also take into account pursuant to s 37N(4) of the Federal Court of Australia Act 1976 (Cth) that the conduct of the Nepean Shareholders in resisting an obviously justified case is not an efficient use of the judicial and administrative resources available to the court as contemplated by s 37N(2)(b). In my view, it is appropriate to order that the Nepean Shareholders pay Lake House’s costs of the proceedings on the indemnity basis. Lake House seeks that those costs be paid by way of lump sum, which I regard as appropriate. I will therefore set a timetable for the exchange of written submissions and affidavits on the amount of the costs order, which I anticipate dealing with on the papers.

Associate:

Dated:    23 March 2026

SCHEDULE OF PARTIES