St. Elias dissidents complain to court about AGM

2013-02-08 18:40 ET - Street Wire

by Mike Caswell

St. Elias Mines Ltd. is facing a petition in the Supreme Court of British Columbia from dissident shareholder Gilby Hastman seeking to overturn the results of the company's recent AGM. He complains that St. Elias chairman Lori McClenahan unfairly rejected dissident proxies, which represented 90 per cent of the shares voted at the meeting. He is asking for a declaration that the dissident nominees were elected or, alternatively, for a new AGM with an independent chair.

The petition comes about one month after the company's AGM, at which the dissident group proposed replacing the board with a slate led by Mr. Hastman. The dissidents said that management had taken significant stock-based compensation while the stock dropped to 11 cents from $2.

The meeting did not go well for the dissidents, however. The group claimed to have support from over half of St. Elias's shareholders, representing 64,649,933 shares, but Ms. McClenahan disallowed all of the dissident proxies. She and the other incumbent directors were then re-elected based on proxies representing just 6,727,536 shares.

THE GRINDSTONE

Lori McClenahan

The petition, filed at the Vancouver courthouse on Thursday, Feb. 7, complains that the AGM was conducted in a manner "oppressive and unfairly prejudicial" to the company's shareholders. During the meeting, Ms. McClenahan voided all of the dissident proxies on the basis of "material mispresentations" by the dissident group. (The petition does not expand on this, but in a news release issued prior to the meeting Ms. McClenahan accused the dissidents of failing to disclose regulatory trouble with one of their nominees, James Rainbird. The release said he had received a fine from the Mutual Fund Dealers Association of Canada for selling unsuitable securities. The company also questioned whether another nominee, Ted Rutherglen, had actually graduated from Harvard University as the dissidents' circular stated.)

Mr. Hastman says that he and the other dissidents expected that the chair of the meeting would act independently, in a fair and non-prejudicial manner. They also expected that their votes would be counted and not subject to "arbitrary treatment or acts beyond the knowledge, expertise or authority of the chair."

The petition further complains about events that took place prior to the AGM. According to Mr. Hastman, the company never made it entirely clear how many directors were up for election at the meeting. St. Elias has a five-member board, but some directors had terms that exceeded one year. The company only made it clear that all five positions would be up for election just weeks before the AGM. By that time, two of the dissident nominees had missed the deadline to file their paperwork to serve as directors. (The dissidents still put those two nominees forward for election, although they acknowledged in a news release that they could still achieve their goals by controlling three of the five seats.)

The dissidents also say they only learned the full voting results after the AGM, when they asked the company's lawyer for a copy of the scrutineers' report. The report showed that 6,727,536 shares voted for management, which represented about 10 per cent of all the shares voted at the AGM. Of the five management nominees, Ms. McClenahan and another director, Tina Whyte, received the fewest votes.

In addition to seeking court orders that would effectively overturn the AGM, the petition is asking for court costs.

Vancouver lawyer James Schmidt of Fraser Milner Casgrain LLP filed the petition on behalf of Mr. Hastman. St. Elias has not yet filed a response.

The petition marks the second time that the dissidents have taken St. Elias to court over the AGM. Prior to the meeting, the dissidents filed a petition in which they complained that the company had not given them sufficient time to prepare two of their five nominees. They asked the courts to delay the meeting or, alternatively to order the company to allow all five nominees. A judge dismissed that petition on Dec. 18.

St. Elias closed at 10.5 cents Friday, down a cent.

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