In the matter of U&D Coal Limited [2014] NSWSC 1128

Supreme Court New South Wales

Medium Neutral Citation: In the matter of U&D Coal Limited [2014] NSWSC 1128 Hearing dates: 30 July 2014 Date of orders: 30 July 2014 Decision date: 30 July 2014 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Injunction continued until 31 July 2014. Catchwords: EQUITY – injunctions – interlocutory injunction – where determination of interlocutory application may have a practical final effect Category: Procedural and other rulings Parties: Australian Kunqian International Energy Co. Pty Ltd (plaintiff) U&D Coal Ltd (ACN 165 894 806) (first defendant) Hao Liu (second defendant) Wei Liu (third defendant) Yinan Zhang (fourth defendant) Representation: Counsel: A S Bell SC w T E O'Brien (plaintiff) P Brereton SC w J A C Potts (first defendant) G K Rich SC w J A Arnott (second to fourth defendants)

Solicitors: Jones Day (plaintiff) Minter Ellison (first defendant) Piper Alderman (second to fourth defendant) File Number(s): 2014/215884

Judgment (ex tempore) 1. HIS HONOUR: On 22 July 2014 the Court granted leave for the plaintiff to file an originating process, abridged time for service and, upon the plaintiff's usual undertaking as to damages, ordered that until and including 29 July 2014 the defendants be restrained from considering at a meeting or otherwise or adopting a resolution to agree to issue shares in the first defendant to Sky Holdings Group Ltd or any other person. The matter was adjourned to 28 July 2014 and directions made for service. 2. On 28 July when the proceedings returned before the Court, they proceeded as the final hearing of the application. At the conclusion of 29 July the Court ordered that the injunction pronounced on 22 July continue until and including 30 July. Although that extension was not formally consented to, it was not opposed on that occasion. 3. The proceedings remain part-heard and will continue at least tomorrow, 31 July. Towards the end of today's proceedings, the defendants indicated that they did not consent to the further continuation of the injunction, which will therefore, unless extended, expire at the end of today. That is in circumstances where it is said that the offer to subscribe for shares by Sky Holdings, which is the transaction impugned in the proceedings, may cease to be available at the conclusion of today, there being some evidence that Sky has indicated that the offer will be withdrawn if not accepted by 30 July 2014. That is by no means the only evidence on the topic, and whether that is truly Sky's intention is another matter, but there is at least a risk that the offer will be withdrawn if not accepted today. 4. The particular difficulty in the present circumstances is that determination of the interlocutory question in either direction, while it will not absolutely determine the case one way or the other, will go a very significant way towards doing so. If the injunction is continued, then there is a risk that the offer will be withdrawn, the transaction will not proceed, the company will not be able to raise from Sky the funds that it seeks to raise and, in that way, the plaintiff will effectively win. Alternatively, if the injunction is not continued, the transaction will probably proceed, the shares will be issued, the plaintiff's interest diluted, and the plaintiff's proposed resolutions for the general meeting to be convened on 6 August defeated, so that the plaintiff will effectively have lost before the final determination of the matter. 5. Where the determination of an application for an interlocutory injunction will in a practical sense finally resolve the matter, the approach of the Court is that explained by McLelland J in Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533. In that case, his Honour indicated that in such circumstances the relative strengths of the competing cases became a much more important consideration than on an ordinary application for an interlocutory injunction where, although the strength of the case might be relevant, all the plaintiff has to do ordinarily is to surmount the hurdle of establishing a seriously arguable case and the balance of convenience is usually determinative. 6. I think it is best that I say little at this stage about the relative strengths of the case – given that the final hearing is progressing before me now - save to indicate that I have taken that matter well into account in reaching the conclusion to which I shall come. 7. It also seems to me that, while there is a significant possibility that determination of the interlocutory application may have a significant final effect, that is not necessarily so. In particular, if the injunction is granted, then there is at least a prospect that the Sky Holdings offer will remain open, or be extended, or be renewed. And there is also a prospect, revealed by the evidence, that at least one other financier, Shengtai, may be prepared to make a substantially equivalent offer. Or, failing that, the plaintiff has itself indicated a willingness to provide a loan or subscribe for shares in a substantially similar amount. 8. On the other hand, if the injunction were to be declined, it is quite possible that the Court could subsequently set aside the transaction with Sky Holdings if it proceeded. Indeed, courts usually prefer to allow meetings to go ahead and quash them after the event, rather than restrain them in anticipation. However, the significant complication in this case is that third-party rights of Sky Holdings would intervene if the transaction is not restrained. Sky Holdings is a foreign company not presently subject to the jurisdiction, although it might well be able to properly be joined to the proceedings. It would have to be given notice of any application to set aside the transaction. The possibility that there would be further dealings with the shares once issued to Sky, such that still further third-party rights intervened, cannot be excluded. 9. In the context to which I have referred, I do not think that the plaintiff's ability to meet an undertaking as to damages looms as a particularly large consideration, but it has proffered an undertaking; and although on the material tendered its liabilities very slightly in relative terms exceed its assets, it apparently has assets of in excess of $214 million, of which about $85 million are current assets held in bank accounts, whereas its current liabilities are only some $62 million. Having regard to those matters and to the other considerations to which I have referred in my judgment, the injunction should be continued. 10. The Court orders that the injunction contained in paragraph 1 of the order made on 22 July 2014 and continued on 29 July 2014 be further continued until and including 31 July 2014.