Australian Securities Commission v Marlborough Gold Mines Limited

Affidavit evidence

1. BLY relies on the affidavit dated 10 September 2021 of Ms Nora Pincus, who is a company secretary of BLY and a director of several associated companies and had also given evidence in the first Court hearing in respect of the scheme. Ms Pincus referred to the process by which the notice of meeting for an extraordinary general meeting ("EGM") of BLY shareholders had been dispatched and also addressed the conduct of that meeting, which took place as a virtual meeting rather than a hybrid meeting by reason of restrictions arising from the COVID-19 pandemic. Ms Pincus referred to the passage of each recapitalisation resolution and of the selective buy-back resolution by the requisite majorities at the EGM. She also gave evidence of the satisfaction of relevant conditions precedent to the creditors' schemes including as to the exit financing facility. She referred to a change in the name of the New BLY Parent (as defined) from Boart Longyear Ltd to Boart Longyear Group Ltd and to a change in the debt holdings of members of the Ad Hoc Group of Creditors, where affiliates of one creditor had sold their holdings of SSN Indenture Notes to affiliates of another. She also referred to the execution of Deeds Poll relating to released individuals under each of the secured creditors' scheme and unsecured creditors' scheme.
2. By a second affidavit dated 15 September 2021, Ms Pincus addressed the satisfaction of additional conditions precedent in respect of the creditors' scheme, including in respect of the Foreign Acquisitions and Takeovers Act 1975 (Cth), director nominations and the position as to the exit financing facility and regulatory approvals, and exhibited certificates signed by her that conditions precedent to the creditors' schemes (other than specified conditions) had been satisfied. She also referred to the correspondence between BLY management and a BLY shareholder who was disappointed with the outcome of her investment in BLY.
3. BLY also relied on an affidavit dated 11 September 2021 of Mr James Daloia, who is the Director of Global Corporate Actions at Prime Clerk LLC, which attended to aspects of service of materials relating to the creditors' schemes on the scheme creditors in the United States. Mr Daloia also gave evidence of the collation of voting forms in respect of the scheme and the tabulation of votes and the outcome of the scheme meetings.
4. By his affidavit dated 13 September 2021, Mr Jason Ireland, who is a partner of McGrathNicol and a non-executive director of BLY, gave evidence of the convening and results of the creditors' scheme meetings, at which the creditors' scheme resolutions were passed unanimously by secured scheme creditors and unsecured scheme creditors. He referred to an issue which arose in respect of voting by one creditor, which did not affect the outcome of the vote, and also addressed the results on the poll at the EGM at which each resolution was passed by substantial majorities.
5. By an affidavit dated 9 September 2021, Mr Kyle McLachlan, who is a solicitor employed at the firm of solicitors acting for BLY in the proceedings, referred to the registration of the orders made at the first Court hearing and to subsequent correspondence with ASIC in respect of the schemes. By his affidavit also dated 15 September 2021, Mr Simon Parmeter, who is a solicitor at the same firm, addressed the publication of an advertisement of the second Court hearing and gave evidence that no notices of appearance had been received in respect of that hearing. No creditors appeared at the second Court hearing in order to oppose the scheme.

The applicable principles and submissions

1. Mr Jackman, with whom Ms Ng appears for the BLY Group, points out that the Court makes its determination whether to approve a scheme of arrangement under s 411 of the Corporations Act at the second Court hearing: Australian Securities Commission v Marlborough Gold Mines Limited (1993) 177 CLR 485 at 504-505; (1993) 10 ACSR 230; [1993] HCA 15. He points out that, at that hearing, the Court must be satisfied that the relevant procedural requirements of the orders convening the scheme meeting(s) have been satisfied; and if so, the Court must then exercise its discretion whether to approve the scheme: Re Central Pacific Minerals NL [2002] FCA 239 at [12]; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 at [21]; Re Redcape Property Fund and Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 at [7]; Re Aveo Group Ltd and Aveo Funds Management Ltd [2019] NSWSC 1679 at [15]. Mr Jackman rightly recognises that the Court is not bound to approve a scheme merely because it has previously made orders for the convening of meetings and the statutory majorities have been achieved, but will have regard to members' or creditors' assessment of their interests as manifested in the voting at the meeting to consider the scheme and will generally take the view that they are the best judges of whether an arrangement is to their commercial advantage: Re NRMA Ltd (No 2) (2000) 156 FLR 412; (2000) 34 ACSR 261; [2000] NSWSC 408 at [22]; Re Central Pacific Minerals NL above at [13]; Re Seven Network Ltd (No 3) (2010) 267 ALR 583; 77 ACSR 701; [2010] FCA 400 at [31]; Re Atlas Iron Ltd (No 2) [2016] FCA 481 at [5]; Re Ellerston Global Investments Ltd [2020] NSWSC 1108 at [10].
2. Mr Jackman also recognises that, in the exercise of its discretion, the Court will generally consider whether any statutory or regulatory requirements for the scheme have been met; whether all conditions precedent to the scheme have been met or waived, other than as to Court approval and lodgement of the Court's orders with ASIC; whether the scheme is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it; whether there was full and fair disclosure to members and creditors of all information material to the decision whether to vote for or against the applicable scheme; whether the scheme involves oppression of any minority; whether any third parties will be disproportionately adversely affected by the operation of the scheme; whether the scheme offends against any aspect of public policy; and whether the plaintiff has brought to the attention of the court all matters that could be considered relevant to the exercise of the Court's discretion: Re Seven Network (No 3) above at [35]-[40]; Re Aveo Group Ltd and Aveo Funds Management Ltd above at [15]; Re Ellerston Global Investments Ltd above at [11]-[12].
3. Mr Jackman points out that the evidence establishes that the statutory majorities in favour of each of the creditors' schemes have been obtained. Relevant statutory requirements including as to the lodgement of the orders made at the first Court hearing with ASIC have been satisfied and those orders were also served on the scheme administrators. There is no reason to think that the creditors' schemes have not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Ch 6 of the Corporations Act and, by letter tendered at the second Court hearing, ASIC confirmed that it had no objection to either of the creditors' schemes for the purposes of s 411(17)(b) of the Corporations Act. The order made by the Court as to the dispatch of the Secured Creditors' Scheme Meeting Materials and the Unsecured Creditors' Scheme Meeting Materials (as defined) were complied with; electronic copies of the Secured Creditors' Scheme Meeting Materials and the Unsecured Creditors' Scheme Meeting Materials was published and made available to download on the Information Agent's website; and a notice informing secured and unsecured creditors that the scheme meetings would be held virtually was published on BLY's website on 27 August 2021. The Information Agent collected and collated the creditor voting forms it received by email from Account Holders, TLA Purchasers and TLB Purchasers (as defined) and the evidence addresses the processing and calculation of creditor votes in respect of the schemes.
4. Mr Jackman points out that the creditors' schemes are conditional on the satisfaction or waiver of a number of conditions precedent and the evidence establishes that all relevant conditions precedent have been satisfied. So far as the scheme was conditional on the passage of shareholder resolutions at the EGM on 8 September 2021, the seven resolutions to give effect to the recapitalisation of the BLY Group were passed by the requisite majorities of BLY shareholders at that meeting. Ms Pincus' affidavit evidence is that all conditions precedent to the creditors' schemes are satisfied subject only to the Court approving the creditors' schemes at the second Court Hearing (clause 3.1(l)) and each creditors' scheme becoming effective (clauses 3.1(m) and (n)) (Sixth Pincus Affidavit [35]). There is also no reason to think that the creditors' schemes involve any oppression of a minority, where there is overwhelming support from creditors for each of the creditors' schemes; are part of a wider recapitalisation of the BLY group and there is also overwhelming support from shareholders for that recapitalisation; and the independent expert's report of Mr Hill of FTI Consulting expressed the view that, if the proposed creditors' schemes were not implemented, and no alternate restructuring plan was reasonably certain of being advanced, then the BLY Group would likely be unable to pay its debts as and when they fall due, and the directors of each of the plaintiffs would likely immediately seek to appoint voluntary administrators or make another insolvency appointment.
5. There is also no reason to think that any third parties are disproportionately adversely affected by the schemes, where KPMG's report expressed the view that the Primary Recapitalisation Transaction (by which scheme creditors received an equity entitlement of BLY shares in exchange for their secured or unsecured claims and SUN Noteholders received New Warrants (as defined)) was fair to those shareholders who were not scheme creditors. I noted above correspondence from a BLY shareholder, who is disappointed with her investment in the BLY Group, but there is no indication that she is treated unfairly by the schemes.
6. Mr Jackman submits and I am satisfied that the creditors' schemes do not offend public policy, where, as I noted above, they form part of a broader series of transactions to deleverage BLY and the BLY group, lower interest rate costs and simplify the BLY Group's capital structure by converting approximately US$795,000,000 of debt into shares in BLY by way of the creditors' schemes.

Section 3(a)(10) of the Securities Act 1933 (US)

1. As Mr Jackman had foreshadowed at the first Court hearing and as I noted above, the Plaintiffs will rely on the Court's approval of the creditors' schemes to qualify for an exemption from the registration requirements of the Securities Act 1933 (US) under s 3(a)(10) of that Act. The operation of that exemption has been noted in earlier Australian cases including Re Central Pacific Minerals NL above at [28]-[34]; Re Simeon Wines Ltd (2002) 42 ACSR 454; [2002] SASC 204 at [21]-[26]; and Re Solution 6 Holdings Ltd above at [37]-[45].
2. As the Plaintiffs requested, the orders made included a notation that notice was given to this Court regarding the Plaintiffs' reliance on this exemption of a kind made in earlier cases including Re Boart Longyear Ltd (No 2) (2017) 122 ACSR 437; [2017] NSWSC 1105. As the Plaintiffs requested, I also summarise several aspects of the creditors' schemes for this purpose, including matters to which I have referred above, as follows: (a) The proposed secured creditors' scheme contemplates the issue of securities (being shares in BLY to be issued by BLY) to Secured Scheme Creditors as consideration for their relevant secured claim against the plaintiffs; (b) The proposed unsecured creditors' scheme contemplates the issue of securities (being shares in BLY to be issued by BLY and to SUN Noteholders only, New Warrants) to unsecured scheme creditors (and not subordinate claim holders) as consideration for their relevant unsecured claim against the plaintiffs; (c) Notice of the proposed reliance on the exemption under s 3(a)(10) of the Securities Act 1933 (US) was given to this Court prior to the commencement of the second Court hearing; (d) An independent expert report prepared by Mr Hill of FTI Consulting concludes that the creditors' schemes are in the best interests of the secured scheme creditors and unsecured scheme creditors; (e) The Court has held this hearing to consider the fairness and reasonableness of each of the proposed creditors' schemes; (f) The second Court hearing was conducted in open court and any creditor subject to the creditors' schemes had standing to appear in opposition. Notice of the second Court hearing was given to creditors the subject of the creditors' schemes by way of the creditors' scheme Booklets and by an advertisement in a national newspaper; and (g) No creditor the subject of the creditors' schemes indicated an intention to appear to oppose the creditors' schemes or has opposed the approval of the creditors' schemes.

Orders

1. For these reasons, I made the orders sought by the Plaintiffs at the conclusion of the second Court hearing.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 October 2021