Divisions between management and some shareholders in
failed diatomite fertiliser manufacturing company Featherston
Resources were made apparent in a Supreme Court of New South
Wales judgement last week.
Featherston spent about $15 million in shareholder funds to
start a $1 million diatomite manufacturing plant near Mosgiel
in April 2011, but the company is in administration, owing
creditors millions of dollars and faces a bail-out takeover
by Australian investment company Plaman Group, which offers
little or no cash to shareholders for their stake.
The private Featherston Resources is a New Zealand
incorporated company, but registered a foreign company here,
with its primary corporate office in New South Wales.
Last week, 11 Featherston shareholders went to the Supreme
Court, in Sydney, seeking an injunction to stop Featherston's
administrators Rodgers Reidy having a creditors meeting in
Auckland, in order to vote on accepting Plaman's $A4.8
The injunction application was unsuccessful and the creditors
meeting went ahead, voting to accept the Plaman deal.
That cash will be used to pay a $A1.72 million debt of
Featherston, to a company called FRCN Pty Ltd, which gained a
charge over all Featherston's assets, in return for the loan.
Details on the Plaman Group offer, and debt held by FRCN Pty
Ltd, were not specifically part of proceedings, but are
closely linked to Featherston's administration, and future.
In a separate summary of the Supreme Court judgement,
obtained by the ODT
, solicitor for the 11 shareholders
Peter Ashcroft said there was shareholder ''apprehension'' that
to accept the $4.8 million Plaman Group offer ''would frustrate
their efforts to have a loan with FRCN [Pty Ltd] set aside on
the basis of breaches of directors' duties by Simon Kember,
Timothy Goodacre and the former executive Emma Watson''.
Justice Black's judgement said: ''The proposed proceedings
relate to the circumstances in which Featherston Resources
issued convertible notes to another entity, FRCN Pty Ltd
which is apparently associated with two of Featherston
Resources directors [Simon Kember, Timothy Goodacre] and with
a former executive, Ms Weston''.
He said ''More widely, the plaintiffs [shareholders] contend
that Featherston Resources should not be in administration
and that the administration is an artifice to transfer
Featherston Resources' assets to persons associated with its
The administrators would have been expected to investigate
earlier court judgements which referred to the ''alleged
dealings between FRCN, Featherston, their officers and
advisers which may have contributed to Featherston's
insolvency'', Justice Black said.
He said had similar matters arisen in an administrator's
report under an Australian administration, an Australian
court could ''potentially'' have set aside the creditors vote
to accept the Plaman offer.
He declined the injunction because remedies in the New
Zealand courts were ''amply sufficient to protect their
[shareholders] position'', and they had not established that
their rights were defeated, if the creditors' accepted the
Mr Ashcroft said in his summary: ''The [Supreme] Court is
firmly of the opinion that there are serious questions to be
tried and that the allegations of breaches of directors'
duties made by the shareholders require answers, if that is