Aitken Mount Capital Partners Pty Ltd v Minemet Recycling Group Pty Ltd

1. [1]

   By Summons filed on 20 August 2024, the applicant, Aitken Mount Capital Partners Pty Ltd (“Aitken”) seeks orders for preliminary discovery against the prospective defendant, Minemet Recycling Group Pty Ltd (“Minemet”) under rule 5.3(1) of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”).

2. [2]

   Minemet neither consents nor opposes the relief sought by the Summons and is content for the Court to consider the merits of the application on the basis of the material filed by Aitken.

3. [3]

   There is no dispute about the relevant background. It is described in the submissions of Mr Furlan, who appeared for Aitken. What follows, as to that background, is drawn with gratitude from those submissions.

Background

1. [4]

   Aitken conducts an investment advisory business. Minemet conducts a metals recycling business.

2. [5]

   In October 2022, Minemet engaged Aitken as lead manager in connection with a proposed Initial Public Offering, shareholder sell-down, and equity capital raising to raise approximately $27.5m at an issue price of $1.00 (the “Offer”).

3. [6]

   The engagement was the subject of a written agreement dated 10 October 2022 which incorporated a set of “Standard Mandate Terms” (the “Agreement”).

4. [7]

   The 10 October 2022 Agreement may have been replaced by a 31 October 2022 agreement, but nothing turns on that for the purposes of this application.

5. [8]

   The specific services to be performed by Aitken were specified in the Agreement.

6. [9]

   The fees to be paid to Aitken for those services were set out in clause 5 of the Agreement, relevantly:

7. [10]

   The Agreement commenced on 10 October 2022, [1] and was to continue until the earlier of “completion of the Offer” or 24 months, unless it was terminated earlier in accordance with clause 15.3 or by mutual agreement.

8. [11]

   No IPO took place and, in May 2023, Mr Hugh McKee, Minemet’s Managing Director, made statements to Aitken, including:

9. [12]

   On 4 August 2023, Mr McKee stated that he would be “selling down around 60%, so still retaining around 40%” and was going to “move to exclusive DD with a different firm, their offer was just too good to pass up”.

10. [13]

    On 14 August 2023, Mr McKee sent an email to Mr Jamie Campbell, an Associate Partner at Aitken, stating “I am cancelling the mandate effective immediately”.

11. [14]

    On the same day, Mr Campbell responded to Mr McKee’s email, in which he stated that the offer to acquire 60% of Minemet had the effect of cancelling the IPO and triggering Minemet’s obligation, under clause 5 of the Agreement, to pay Aitken 2% of the “transaction value”.

12. [15]

    On 14 November 2023, Mr Campbell emailed Mr McKee in relation to a change in the directors of Minemet and asked whether an acquisition by a third party had occurred, and, if one had occurred, requested a copy of the terms of that transaction.

13. [16]

    On 16 November 2023, Mr McKee responded by email in which he said, amongst other things, “I did a share sale”. He did not provide the terms of that sale, or any other details.

14. [17]

    On 13 March 2024, Aitken’s solicitors wrote to Minemet requesting documents in order to determine the amount Minemet owed to Aitken, indicating that Aitken would seek preliminary discovery if the request was not complied with.

15. [18]

    On 27 March 2024, Minemet’s solicitors sent a letter in response, in which they said:

    1. (1)

       In or about March 2023, Minemet and Aitken agreed not to further pursue any potential investors or the IPO;

    2. (2)

       “[M]uch later in 2023”, Mr McKee “in his personal capacity entered into discussions with a third party [Infragreen Group Pty Ltd (“Infragreen”)] … about the sale of some of Mr McKee’s own shares in Minemet”;

    3. (3)

       Minemet disputed Aitken’s claim for payment under clause 5 of the Agreement, describing it as “misconceived”; and

    4. (4)

       Minemet was not willing to provide a copy of “the share sale agreement and associated documents” and would not be able to, in any event, in the absence of a court order due to “confidentiality provisions in the relevant agreement”.

16. [19]

    On 26 May 2024, Aitken’s solicitors wrote to Minemet’s solicitors repeating Aitken’s request for documents and offering to give undertakings not to use documents produced other than for the purposes of considering whether to commence proceedings against Minemet.

17. [20]

    On 4 June 2024, Minemet’s solicitors responded by asserting that Aitken’s claim was “doomed to fail” and, for that reason, Minemet would not seek the consent of Infragreen to provide copies of the transaction documents to Aitken and declined to address the confidentiality regime proposed by Aitken’s solicitors in their letter of 26 May 2024.

18. [21]

    The documents sought by Aitken are, in substance, offers and transaction documents concerning any sale of shares in Minemet to Infragreen.

Principles

1. [22]

   Rule 5.3(1) of the UCPR provides:

2. [23]

   To order preliminary discovery against a prospective defendant, all five of the circumstances set out in UCPR r 5.3(1) must exist, that is: [2]

3. [24]

   The threshold set by UCPR r 5.3(1) is low. [3]

4. [25]

   I was satisfied that the requirements of UCPR r 5.3(1) were satisfied here and, on 29 October 2024, made the orders sought by Aitken.

5. [26]

   I was satisfied that Aitken had established that:

   1. (1)

      it has a prima facie case for relief against Minemet;

   2. (2)

      it has made reasonable enquiries;

   3. (3)

      having made those inquiries, it is unable to obtain sufficient information to enable it to decide whether to commence proceedings against Minemet;

   4. (4)

      it has established that Minemet has possession of documents that can assist it to make that decision; and

   5. (5)

      inspection will assist it to decide whether to bring proceedings.

6. [27]

   For these reasons, on 29 October 2024, I made the orders for preliminary discovery sought in the Summons filed on 20 August 2024.