Court rules in Lotus Resources project dispute

A Supreme Court judge has criticised Lotus Resources director Grant Davey's credibility as a witness during legal proceedings over a stake in the Kayelekera uranium project.

Former stockbroker Tim Kestell launched legal action against Mr Davey, Kayelekera Resources Pty Ltd, Davey Holdings (Aus) Pty Ltd and Davey Management (Aus) Pty Ltd, claiming he was entitled to a stake in the Kayelekera project under oral agreements the men made in 2018 and 2019.

Lotus Resources acquired the Malawi-based Kayelekera uranium mine project from Paladin Energy in 2020.

Mr Davey pleaded that these agreements claimed by Mr Kestell were so vague and uncertain that they could not be deemed binding contracts.

Supreme Court of Western Australia Justice Jennifer Smith today found Mr Kestell had entered into an enforceable agreement with Mr Davey and was entitled to 4.5 per cent of shares Paladin Energy's interest in the Kayelekera project.

Mr Kestell's court-declared interest in Paladin Energy now equates to 50,954,438 shares in Lotus Resources, roughly valued at $10.1 million based on today's trading price.

In her judgment, Justice Smith said Mr Kestell and Mr Davey did not enter into an enforceable agreement in their conversations made in 2018, but they did so in correspondence exchanged in February and June 2019.

Justice Smith said it was clear Mr Davey repudiated the agreement made with Mr Kestell by trying to add conditions to the latter’s entitlement to a 4.5 per cent share of Paladin Energy’s interest in the Kayelekara project.

“Although Mr Kestell at times gave answers to questions in cross-examination that were non-responsive, it is to be noted that Mr Davey also gave many answers to questions in cross-examination that were non-responsive,” she said in her judgment.

“I found Mr Kestell to be a truthful and credible witness whose evidence in general was reliable.

“In general, I did not find Mr Davey to be a credible witness.

“Throughout his testimony Mr Davey attempted to tailor his evidence about what he had agreed with Mr Kestell, by claiming that nothing had been agreed about what interest Mr Kestell would receive until the acquisition of the Kayelekera project by Lotus Resources Ltd was complete, which claim was at least in part contrary to the defendants' pleaded case.”

In her judgment, Justice Smith said Mr Davey’s recollection appeared to be generally poor and parts of his evidence inadmissible.

“I did not find Mr Davey's evidence that on 26 June 2019 he reached an agreement with Mr Kestell that Mr Kestell's interest would be increased by 1 per cent in return for the members of Mr Davey's team being entitled to performance shares, convincing, nor credible,” she said.

“Nor do I accept his evidence that he had met with Mr Kestell on 24 June 2019 convincing, nor truthful.”

Justice Smith declared that Mr Kestell or his nominee is entitled to call for a transfer of the 50,954,438 ordinary shares of Lotus Resources Ltd held on trust by Kayelekera Resources Pty Ltd.

Mr Kestell was a director of Lotus Resources, then called Hylea Metals Ltd, from September 2017 to May 2020.

Shares in Lotus Resources were down 4.65 per cent to trade at 20 cents a share, at 2.57pm AEST today.