ANNOUNCEMENT – MEC Resources Limited (MMR)-Requisitioned meeting of shareholders by Grandbridge Ltd

MEC Resources Limited (MMR)-Requisitioned meeting of shareholders by Grandbridge Ltd

Grandbridge Limited (ASX:GBA) (Grandbridge) is seeking the removal of Mr Goh Hock, Mrs Deborah Ambrosini, Mr KO Yap and Mr Heng Yu (MEC Directors) from the board of MEC Resources Limited (MEC) as we believe the MEC Directors are not fit to act as company directors and may have breached their Director duties. This announcement contains information on:

Potential breaches of directors duties

Invalid proxy

Use of company funds

Omissions from disclosure rules

Disclosures on ASX

Grandbridge Limited together with its major shareholder, Trandcorp Pty Ltd and Mr David Breeze (Managing Director), has requisitioned a meeting of MEC shareholders. At this meeting, MEC shareholders will be asked to appoint three nominees as new directors:

  • Mr. Thomas Fontaine
  • Mr. Anthony Huston
  • Mr. Gregory Gilbert

The meeting for the new appointments has been convened for Thursday 16 February 2017, although the requisition also included resolutions to remove the MEC Directors. This was deemed invalid by the MEC Directors. The basis on which the requisition to remove the MEC Directors was deemed invalid was technical and, given the circumstances below and in the opinion of Grandbridge, it was clearly rejected to protect the position of the MEC Directors from their inevitable removal. Grandbridge has lodged a further requisition for MEC to call a meeting of shareholders to move resolutions to remove the MEC Directors. This meeting will now be held on 9 March 2017.

Grandbridge sought an undertaking from the MEC Directors that if the new appointments are made, then the MEC Directors should simply resign. The MEC Directors also rejected this request. The only view that can be formed is that they were not willing to put themselves to a vote of all MEC shareholders and sought to delay every request to do so.

In the event the MEC Directors do not resign at or before this meeting, the further meeting will consider these resolutions. In the view of Grandbridge this should have been decided at the meeting on 16 February 2017 to save company funds.

Grandbridge considers its actions to be necessary to protect its investment in MEC and shareholder funds. We believe each of the Directors are not fit and proper to act in the position as Directors of a public company.

The following matters outline the serious nature of the actions by these persons and the potential breaches of their Director duties.

Invalid Proxy

Mr. Hock Goh and Mr. KO Yap were seeking re-election to their positions as Directors of MEC at the 2016 AGM. Prior to this AGM, Mrs. Deborah Ambrosini and Mr. Kevin Hollingsworth, Mr Breeze’s then fellow Directors on the board of Grandbridge, signed a proxy in the name of Grandbridge to vote in favour of the election of both Mr. Goh and Mr. Yap. This proxy was signed without the required board meeting approval and without the knowledge of Mr Breeze as a Director and 32% major shareholder of Grandbridge (via Trandcorp). This proxy was invalid and was obtained without authority, in circumstances where Mrs Ambrosini and Mr Hollingsworth knowingly breached their duties as Directors of Grandbridge.

Mrs Ambrosini undertook the signing of the proxy with the full knowledge and support of Mr Goh, with the intention of ensuring Mr. Goh and Mr. Yap would be re-elected as Directors of MEC. There are various emails between Mrs. Ambrosini and Mr. Goh which confirm these events, and these have been provided to the relevant authorities for investigating.

Mr. Breeze as the major shareholder of Grandbridge did not and still does not support the election of Mr. Goh and Mr. Yap. When finally made aware of the invalid proxy he revoked the proxy and provided written notice of revocation to MEC. A copy of the notice of revocation is attached as this was provided to the Board before the meeting. The validity of the proxy was questioned at the AGM by Mr. Breeze and Mr. Goh chose to accept the proxy as valid, with full knowledge of the fact it had been revoked by the attached letter of revocation as provided to him personally as Chairman and the circumstances in which it had been obtained.

If the vote of Grandbridge was accepted as being against their appointments (as voted at the meeting by Mr Breeze as the representative of Grandbridge), Mr. Goh and Mr. Yap would not have been re-elected as Directors.

If the invalid proxy had not been accepted and the vote against the appointments accepted by the Chairman, the votes should have been recorded as:

1. Re-election of Director KO Yap – Against 29,489,720 For 21,126,931
2. Re-election of Mr Hock Goh – Against 29,489,720 For 25,981,621

After the meeting, the Board, including Mr. Goh and Mr. Yap, who would not have been re-elected, sought to terminate Mr Breeze as the Managing Director and sought to “terminate” Mr. Breeze as a current Director. These actions could not have been taken if Mr. Goh and Mr. Yap had not been re-elected.

Mr. Goh has since assumed the role of Managing Director, in circumstances where he should no longer be a Director. He also has a clear conflict of interest in that he is currently a director on the board of Santos Ltd (ASX:STO).

Use of Company Funds

Mrs. Ambrosini and Mr. Goh sought advice from MEC’s then legal counsel on voting at the meeting and the relevant percentages for passing of the vote on the re-election of Mr Goh and Mr Yap. Grandbridge has genuine concerns that the seeking of that advice was relevant to their personal positions as Directors and not for the benefit of MEC as a whole. This use of company funds has been referred to the relevant authorities for investigation.

Removal of Company Property

Mrs. Ambrosini was terminated for cause as the CFO of Grandbridge as a result of her misconduct. Despite repeated demands to return Grandbridge property in her possession, she has chosen not to return this property. This matter has been reported to the appropriate authorities.

Disclosures on ASX

The existing Directors have circulated a number of disclosures to the ASX that Grandbridge considers could be considered misleading or are intended to mislead. Some examples are as follows:

• Statement 1 by Mr. Goh on 28 November 2016

Extract from ASX Announcement on 28 November 2016:

You will be aware that the services agreement between MEC Resources Ltd, Trandcorp Pty Ltd and Mr David Breeze for Managing Director services was terminated last week in accordance with the provisions of this contract. In accordance with this contract Mr David Breeze was also terminated as a director of MEC Resources Ltd.

• Further statement by Mr. Goh on 28 November 2016

Mr. Goh lodged an ASX Final Interest Notice with ASX and claimed “Mr David Breeze who is no longer a Director of MEC Resources Limited”

• Further statement by Mr. Goh on 24 November 2016

Mr Goh stated inter alia that Mr Breeze “…is contractually bound to resign”

A Director can only resign from his office, be removed by a vote of shareholders or when seeking re-election, is not re-elected by shareholders. The contract on which MEC relies to have “terminated” the directorship of Mr .Breeze was never signed and accordingly Mr. Breeze has not resigned, been removed or not been re-elected as a Director.

• Further statement by Mr. Goh on 24 November 2016

Following is an extract from the ASX announcement

“The company will comply with, and will discharge its obligations under the Consultancy Agreement, including the termination payment to Trandcorp of approximately $32,500″

No payment has been received by Trandcorp

• Statement by Mrs. Ambrosini on 24 November 2016

Mrs Ambrosini caused to be published the results from the 2016 Annual General Meeting knowing that the results were obtained in circumstances where the proxy from Grandbridge Limited was invalidly obtained, with the knowledge of Mrs. Ambrosini, Mr. Goh as Chairman, Mr. Yap and Mr Yu.

Lodgement of returns to ASIC

On 26 November 2016, Mrs. Ambrosini as company secretary lodged a “Change of Company Details Form 484” with ASIC and claimed that Mr. Breeze had ceased as a Director.

On 27 November 2016 Mrs. Ambrosini lodged a “Change of Company Details Form 484” with ASIC and claimed that Mr. Breeze had ceased as a Director of Advent Energy Ltd (Advent Energy).

Mr Breeze has not resigned, been removed or not been re-elected as a Director of MEC or Advent Energy.

Omissions from Disclosure Rules

Grandbridge Limited has sent two letters of demand to MEC and Advent Energy. Trandcorp has forwarded a separate letter of demand to MEC.

These letters request:

• The sum of $212,052 payable to Grandbridge by MEC for services provided.
• The sum of $107,249.76 payable to Trandcorp by MEC for services provided.
• The sum of $128,640 payable to Grandbridge by Advent Energy for services provided.

These letters were sent on 7 December 2016, requiring payment within 21 days. All amounts are still outstanding.

Relevantly:

(a) MEC has not made an announcement to the ASX or shareholders in respect of the claims, which total circa $450,000;

(b) No response nor payment has been received by either Grandbridge or Trandcorp in respect of the claims; and

(c) The current cash position of MEC as at 30 June 2016 was reported as $877,018, which amount will have since been depleted.

Grandbridge considers the amount claimed to be material in the context of MEC’s financial position.

Grandbridge will continue to pursue the MEC Directors and will take all action that is necessary to protect its investment in MEC. Further information will be provided closer to the meeting in response to matters raised by MEC.

END