When you have a Tiger by the tail

In Kipoi Holdings Mauritius Ltd v Tiger Resources Ltd (Subject to Deed of Company Arrangement) [2021] WASCA 186¹, the Court of Appeal of the Supreme Court of Western Australia unanimously dismissed Kipoi Holdings Mauritius Ltd (KHML)’s appeals against:

• Master Sanderson’s decision not to vacate the hearing date for the trial and adjourn the trial to allow KHML the opportunity to file further evidence; and

• Master Sanderson’s decision to dismiss KHML’s application to set aside a deed of company arrangement (DOCA).

Background

The proceedings concerned a DOCA in respect of Tiger Resources Limited (the Tiger DOCA). The Tiger DOCA was entered into by the first and second respondents (the Deed Administrators) and the third respondent (DOCA Proponent) pursuant to a resolution of creditors at a meeting held on 16 February 2021 (the Meeting). 

At 10:45pm on the night before the Meeting, KHML submitted its own DOCA proposal.  There was also a hearing scheduled on the day of the Meeting in respect of an application by the (then) administrators to modify the Corporations Act 2001 (Cth) (the Act) to permit the Meeting to be adjourned.  The administrators were partially successful in their application, in that the Court modified the Act to allow creditors (but not the administrators of their own motion) to adjourn the Meeting.

At the Meeting, a resolution was put to creditors to adjourn the Meeting.  That resolution was defeated by 22 of 24 creditors in number, and $155,760,545.02 of $156,041,276.14 (99.8%) in value.

A resolution was then proposed to enter into the Tiger DOCA.  The resolution was approved by 23 of 24 creditors (1 creditor abstained) in number and $155,984,821 of $156,041,276.14 (99.9%) creditors in value.

KHML subsequently commenced proceedings to set aside the Tiger DOCA pursuant to s445D and s447A of the Act, principally on the basis that statements by the Deed Administrators and the DOCA Proponent to creditors contained false or misleading information within the meaning of s 445D(1)(a)(i) of the Act.

In the course of the proceedings, the Deed Administrators sent voting slips to creditors for the purpose of ascertaining the creditors’ views as to KHML’s allegations.  The results of the “virtual vote” were that 18 of 19 creditors in number, and $155,354,256 of $155,493,068 (99.9%) in value said they were not misled. 

One creditor joined the proceedings to oppose KHML’s application to terminate the Tiger DOCA.

Before the trial was heard, the DOCA Proponent paid the consideration under the Tiger DOCA, which set about a chain of events that included the creation and capitalisation of the creditors’ trust contemplated by the Tiger DOCA; and ultimate distribution of funds to Tiger’s unsecured creditors.

Shortly before the trial date, KHML made an application to adjourn the hearing for an indefinite period of time, so as to allow KHML to adduce additional evidence as to matters that had occurred in the Democratic Republic of Congo, where Tiger’s main asset, an interest in a copper mine, is located.

First instance decision

At first instance, Master Sanderson refused KHML’s applications to adjourn the trial and set aside the DOCA.  The Master found (among other things) that creditors had not been misled, and even if creditors were so misled, he was not satisfied that it was in the interests of creditors to set aside the Tiger DOCA.

Appeals

KHML appealed against the Master’s findings in respect of the application to adjourn the trial and the substantive application to set aside the Tiger DOCA.

The Court of Appeal (Buss P, Murphy JA, Mitchell JA) unanimously dismissed the appeals. The Court found that:

• the Master was correct to find that any additional evidence produced by KHML would not have affected the outcome of the primary proceedings; and

• the statements by the Deed Administrators and DOCA Proponent to creditors were not false or misleading information within the meaning of s 445D(1)(a)(i) of the Act.

Lavan comment

While the Court of Appeal’s decision largely turned on matters of fact, there are at least two important takeaways for practitioners from this decision:

• Even if a terms sheet for a DOCA is expressed as “binding”; acceptance by the administrators could not in and of itself, as a matter of law, create a DOCA binding on or in favour of creditors: [124].

• In an application to set aside a DOCA on the basis of misleading or false information, obtaining views from the creditors as to whether they would have voted differently will be relevant to the exercise of the Court’s discretion: [266].