Supreme Court New South Wales Medium Neutral Citation: In the matter of BG Iron and Steel Pty Ltd [2014] NSWSC 1433 Hearing dates: 22 August 2014 Decision date: 17 October 2014 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Orders made declaring that resolutions of the board of first defendant purportedly passed on relevant date were passed in breach of relevant agreement, and for second to sixth defendants to pay the first to fourth plaintiffs' costs of proceedings, including the costs of and occasioned by earlier application for interlocutory relief, as agreed or as assessed. Catchwords: PROCEDURE - judgments and orders - disputed issues remaining before orders can be made to give effect to primary judgment in proceedings - injunctions - whether court should grant injunctive relief sought by plaintiffs. Category: Consequential orders Parties: Francis Xiao (First Plaintiff) Edward Lee (Second Plaintiff) Jianxiong Ye (Third Plaintiff) BG Resources Pty Ltd (Fourth Plaintiff) BG Iron and Steel Pty Ltd (First Defendant) Stephen Chan (Second Defendant) Yi Ying Choi (Third Defendant) Fung Wa Wong (Fourth Defendant) Yingkin Wong (Fifth Defendant) Nanyang Mining Resources Investment Pty Ltd (Sixth Defendant) Representation: Counsel: J R Clarke SC (Plaintiffs) M A Jones SC (Second to Sixth Defendants) Solicitors: Maddocks (Plaintiffs) Lander & Rogers (Second to Sixth Defendants) File Number(s): 2014/52841 Judgment 1In these proceedings, the Plaintiffs sought a declaration that a resolution purportedly passed at a meeting of directors of BG Iron and Steel Pty Ltd ("BGIS") on 17 February 2014 was passed in breach of a provision of a Cooperation and Investment Agreement ("Cooperation Agreement") between parties including BGIS and also sought other orders. I delivered judgment on 19 September 2014 ([2014] NSWSC 1283) and indicated that I would hear the parties as to whether injunctive relief should be ordered reflecting my finding that one of the directors of BGIS, Mr Lee, could not be removed in the relevant circumstances without the contemporaneous appointment of a nominee of BG Resources Pty Ltd ("BG Resources") to the board of 3E Steel Pty Ltd ("3E") and as to costs. I directed the parties to seek to agree the form of the orders to give effect to the judgment and, if no agreement could be reached, to submit their respective draft orders and short submissions as to any differences between them. 2The Plaintiffs submitted proposed Short Minutes of Order on 3 October 2014. There was no contest between the parties as to the making of a declaration in the form of order 1 and an order as to costs in the form of order 3. The Plaintiffs sought, and the Second to Sixth Defendants resisted, a final injunction that they formulated as follows: "An order that, whilst the Cooperation and Investment Agreement is on foot, each of the First and Sixth Defendant by itself, its servants or agents (including the Second to Fifth Defendants) be restrained from taking any steps or acting in any manner which purports to remove, or facilitate the removal of, Mr Edward Lee as a director of 3E without the contemporaneous appointment of a nominee of BG Resources Pty Limited to the Board of 3E, unless 5 out of 7 of the directors of BGIS pass a valid resolution approving such a removal." 3The terms of that suggested order is consistent with the finding in my judgment that the removal of Mr Lee as a director of 3E, in the relevant circumstances, without the contemporaneous appointment of a replacement director nominated by his appointor, BG Resources, would amount to a "major decision" of BGIS, which must be agreed by 5 out of the 7 members of its board by reason of cl 10 of the Cooperation Agreement. The Plaintiffs point out that the suggested order has been narrowed, from that which they originally sought, to reflect my finding that the relevant decision was a "major decision" because the removal of Mr Lee had been combined with a failure contemporaneously to appoint a nominee of BG Resources, with potentially significant results for the control of 3E. They submit that such an injunction is required where the Defendants have previously sought to act in breach of cl 10 of the Cooperation Agreement and decline to give an undertaking not to take steps that would constitute such a breach. 4The Second to Sixth Defendants resist the grant of the proposed injunction on the basis that the proceedings were directed to the resolutions passed on 17 February 2014, in respect of a specific meeting to be held on 20 February 2014, and that the interlocutory injunction previously granted by the Court had the effect that no steps were taken to give effect to the resolutions and there is no further utility in any restraint directed at them. They submit that the declaration to be made by the first order amounts to final relief that gives effect to the reasons in an appropriate way and quells the extant dispute between the parties. 5The Second to Sixth Defendants also submit that the injunction now sought by the Plaintiffs would have ambulatory operation in respect of future meetings, so long as the Cooperation Agreement remained on foot, and that it is not possible to contemplate every factual circumstance that may exist in future. They point to the possibility, for example, that the Cooperation Agreement could be amended or the constitution of the board of 3E could be altered for other reasons and ask, rhetorically, whether the effect of an injunction was that Mr Lee could never be removed if BG Resources refused to nominate a replacement for him. They also point out that the reasons for judgment are directed to the position that existed at the time of passage of the resolutions and do not have ambulatory operation in respect of other circumstances that were not before the Court. 6The findings in my judgment that the suggested removal of Mr Lee, absent a contemporaneous replacement by an appointee of BG Resources, was a "major decision" were founded in the circumstances addressed in the judgment, which related to the passage of resolutions on 17 February 2014 in respect of a meeting proposed to be held on 20 February 2014. As the Defendants point out, the same result might not follow if the Cooperation Agreement were amended or BG Resources had otherwise obtained a majority of directors on the board of 3E or if BG Resources had breached its obligations in a way that meant, for example, it should no longer be entitled to insist on enforcement of the relevant provisions. For these reasons, it seems to me that the matter is sufficiently determined by the judgment, and a declaration of the kind to which the parties accept should be made, and that an injunction in the form sought by the Plaintiffs should not be made. 7Accordingly, I make orders that: 1 Declare that the resolutions of the Board of BG Iron and Steel Pty Ltd ("BGIS") purportedly passed on 17 February 2014 that Mr Stephen act as the representative of BGIS for the purposes of attending and voting to remove Mr Edward Lee as a director of 3E Steel Pty Ltd ("3E") at the general meeting of 3E on 20 February 2014 were passed in breach of clause 10 of the Cooperation and Investment Agreement dated 2 December 2010. 2 The Second to Sixth Defendants pay the First to Fourth Plaintiffs' costs of these proceedings, including the costs of and occasioned by the application for interlocutory relief heard by the Court on 19 February 2014, as agreed or as assessed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 October 2014