Subiaco-based Summit Resources Ltd has mounted legal action against its former managing director, Alan Eggers, and Newland Resources Ltd over a joint venture agreement signed between the two companies.
Subiaco-based Summit Resources Ltd has mounted legal action against its former managing director, Alan Eggers, and Newland Resources Ltd over a joint venture agreement signed between the two companies.
The action follows a successful takeover of Summit by Paladin Resources Ltd after a long and hard fought battle, with Mr Eggers resigning soon after.
In an announcement to the ASX, Summit alleges that a heads of agreement executed between the Eggers-controlled Summit and Newland during the takeover battle, purported to give Newland, a Perth-based uranium company, the right to be operational controller and manager of the joint venture should control of Summit pass to another entity.
Summit's current board will seek an injuction against Newland taking control of the joint venture, arguing an earlier agreement between the two conferred no such rights on the company.
Summit also attests it did not receive any corporate benefit for the gesture, nor had there been any minuted board discussion or resolution authorising the Heads of Agreement.
Newland Resources chairman Lindsay Colless could not be contacted for this article.
Mr Eggers declined to comment.
The full text of a Summit announcement is pasted below
Summit Resources Limited and Summit Resources (Aust) Pty Ltd (Summit - ASX:SMM) have today commenced proceedings in the Supreme Court of Western Australia against its former managing director, Alan Eggers, and its joint venture partner in the Georgina Basin uranium asset, Newland Resources Limited (Newland).
The legal proceedings seek to confirm Summit's right to be the manager and operational controller of the Georgina Basin joint venture in Queensland for as long as Summit holds a 30% interest in the Georgina Basin joint venture.
The new board of Summit, appointed following the successful majority acquisition of the company by Paladin on June 4 2007, discovered in early June that a Heads of Agreement had been executed between Summit and Newland on April 13, 2007. That agreement includes a provision which purports to give Newland the right to be the manager and operational controller of the Georgina Basin Joint Venture in the event that control of Summit passes to another entity or if Mr Eggers ceases to be Summit's Managing Director.
The Heads of Agreement was executed, apparently without board approval, the day after Paladin increased its offer to Summit and three days before (April 16) the then Summit Board recommended Paladin's revised offer to Summit shareholders.
The Heads of Agreement purports to supplement a letter agreement executed by Summit and Newland on 3 August 2006 (and which was announced to the market at that time).
The letter agreement of 3 August 2006 provided that Summit was to retain the management rights to the Georgina Basin joint venture and would have a casting vote for as long as it held a 30% or greater interest in the Georgina Basin joint venture.
Prior to the purported Heads of Agreement recently coming to light, Summit's management rights in respect of the Georgina Basin joint venture had been confirmed in many unqualified public announcements by both Summit and Newland between August 2006 and April 2007.
Summit's current Board has decided to commence legal proceedings against Newland seeking an injunction permanently restraining Newland from exercising its purported right to take over as manager of the Georgina Basin JV.
Summit believes that its valuable rights to the management of the Georgina Basin joint venture should not have been surrendered, via the Heads of Agreement, in circumstances in which:
- the letter agreement of 3 August 2006 conferred no right on Newland whatsoever to assume management and control of the Georgina Basin joint venture in the event of a change of control of Summit;
- there does not appear to have been any minuted board discussion or resolution authorising the execution of the Heads of Agreement; and
- Summit does not appear to have received any corporate benefit or consideration for having done so.
Summit also alleges that Mr Eggers has breached various directors' duties that he owed to Summit in the purported execution of the Heads of Agreement. In this regard, Summit is claiming compensation from Mr Eggers for the breaches of the directors' duties he owed to Summit and from Newland, as a party involved in those breaches.
