Court rejects Mesa shareholder claims

A major shareholder in failed manganese company Mesa Minerals has lost its bid to have administrators replaced after the Supreme Court ruled there was no evidence of bias between Pitcher Partners and Mesa’s largest stakeholder, Mineral Resources.

Mighty River International, a 13.5 per cent shareholder in Mesa, alleged that the failed Perth-based company’s decision to appoint Bryan Hughes and Daniel Bredenkamp of Pitcher Partners as administrators was made under biased circumstances and in a pre-emptive manner.

Its argument was that conversations had begun between Pitcher and Mesa directors - including non-executive director Chris Ellison, who is also managing director of Mineral Resources, which in turn is a 59.4 per cent shareholder in Mesa – several months before Mesa entered into voluntary administration in July last year.

Following that, Pitcher executed a deed of company arrangement on November 3, setting a sunset date of six months (May 3) to conduct further detailed investigations into Mesa to form an opinion on its future; whether it should be wound up or if it can be recapitalised and restructured.

Mighty River was concerned that the pre-emptive discussions would favour MinRes, which claims to be owed about $8 million by Mesa. Mighty is also a creditor of Mesa with about $69,000 owed.

Mighty River also alleged that, through the administrator’s conversations with Mesa, they were forming a bias by also effectively talking to and advising MinRes as the two companies share common directors (namely Mr Ellison).

But Master Sanderson rejected Mighty’s claims today, declaring that while the situation presented some difficulties to any administrator or liquidator, “there was not much an administrator or liquidator could do”.

“At the conclusion of counsel for Mighty’s submissions, I indicated to the parties I was not satisfied Mr Hughes had demonstrated any bias or that there could be any apprehension of bias,” Master Sanderson said.

“Nor was I satisfied there were any other circumstances which could justify the removal of the administrators and the termination of the holding deed of company arrangement or indeed the removal of the administrators to be replaced by other administrators.

“In this case there was no doubt in my mind Mr Hughes did everything possible to ensure independence. He did not advise MinRes and whatever was passed on by the board of Mesa to MinRes was entirely beyond his control.

“For these reasons, I would dismiss Mighty’s claim.”

The administrators will have until early May to decide the future of Mesa.

Mesa fell into administration following a depressed manganese market, with the company unable to develop its manganese deposits and generate positive cashflow without further financial assistance primarily from MinRes, which was already owed $8 million.

MinRes shares were 3.1 per cent higher to $10.83 each at the close of trade.