BETWEEN : INTERNATIONAL GOLDFIELDS LTD (ABN 89 091 744 437)

Scheme of arrangement under s 411 Corporations Act 2001 (Cth) - Approval of Court required - Order made

Corporations Act 2001 (Cth), s 249HA, s 249J, s 411, s 412, s 611, s 1322

Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485

Re ACM Gold Ltd [1992] FCA 89; (1992) 7 ACSR 231

Re International Goldfields Ltd [2003] WASC 86

Re NRMA Ltd (No 1) [2000] NSWSC 82; (2000) 156 FLR 349

Re Stockbridge Ltd (1993) 9 ACSR 637

1 On 12 May 2003, I made an order under s 411 of the Corporations Act 2001 (Cth) granting the applicant approval to convene a meeting of holders of fully paid ordinary shares in the capital of the applicant to consider a scheme of arrangement proposed between the applicant and its shareholders. The purpose of the scheme was to implement a merger between the applicant and Hamill Resources Ltd (ABN 71 095 047 920). Reasons for the order approving the convening of that meeting were duly published: Re International Goldfields Ltd [2003] WASC 86.

2 Subject to a matter mentioned below, the order approving the convening of the meeting was acted upon. On 26 June 2003, I made orders that the scheme of arrangement between the applicant and its members, being appendix 2 to the scheme booklet (which incorporated the explanatory statement, which was included in annexure "KMH -9" to the affidavit of Kent Michael Hunter sworn 4 April 2003), and agreed to by a resolution of the members of the applicant at the meeting of those members held on 13 June 2003, as altered by this order, be approved and that, in accordance with s 411(12) of the Corporations Act 2001, the applicant be exempt from compliance with s 411(11) of that Act. I also then ordered that the time within which the applicant had to despatch the scheme booklet under O 6 of the orders made on 12 May 2003 be extended from 12 to 13 May 2003.

3 I indicated when I made these orders on 26 June 2003 that I would subsequently publish reasons for the making of these orders. These are those reasons, briefly stated.

4 As noted in the reasons published in making the order granting approval for the convening of a meeting of members to consider the scheme of arrangement, the relevant legal principles concerning the Court's supervisory role in relation to a scheme of arrangement under s 411 of the Act involves a two-stage approval process, which is appropriately summarised in Re NRMA Ltd (No 1) [2000] NSWSC 82; (2000) 156 FLR 349, at 351 and 354 - 361 per Santow J.

5 The Court's role at the approval stage is to determine:

(1) whether all the conditions required by s 411 have been satisfied by the applicant;

(2) whether the majority of members have acted in good faith and not in pursuit of some illegitimate purpose; and

(3) whether the proposal is so far fair and reasonable as that an intelligent and honest man may approve: Re NRMA Ltd (No 1) (supra) at 361; Re Stockbridge Ltd (1993) 9 ACSR 637 at 646 - 8.

6 The majority of the requirements of s 411 were dealt with on the hearing of the application for the order to convene the meeting of members: see Re International Goldfields Ltd (supra) at [14] - [32].

7 The remaining requirements of which the Court must be satisfied before it can make an order approving a scheme under s 411(4)(b) are that:

(1) any meeting convened by the applicant was convened and held in accordance with the earlier order made;

(2) the resolution was passed at the meeting by a majority required by s 411(4)(a) of the Act;

(3) the applicant otherwise complied with the orders earlier made; and

(4) ASIC has had a reasonable opportunity to examine the explanatory statement and to make submissions to the Court in relation thereto as required by s 412(7) of the Act.

8 So far as the convening of the meeting is concerned, s 249HA(1) requires at least 28 days' notice to be given of a meeting of a listed company's members. Section 249J(1) requires each member to be given written notice of a meeting. Section 249J(3)(d) allows notice of a meeting to be given to a member by any means that the company's Constitution (if any) permits. The applicant produced its Constitution in evidence.

9 Articles 19.1 and 19.6 of the Constitution allow service of notices on shareholders of the applicant by post to the address shown in the register of shareholders or by airmail where a member's registered address is outside Australia.

10 Article 19.2 deems service by post to be effected, in the case of a notice convening a meeting of members, three days after the date of its posting.

11 By article 9.4, the non-receipt of a notice by a member does not invalidate any resolution passed at a meeting.

12 By article 10.5, a meeting must have three members present, in person, or by proxy, attorney or corporate representative, and entitled to vote in order to establish a quorum.

13 In reckoning time under the Act, the date upon which the meeting was held is counted, but the date upon which notice of the meeting was given or is deemed to have been given is excluded: s 105 Corporations Act.

14 In reckoning time under the Constitution, by article 9.3, for the convening of a general meeting, both the day on which the notice is given, or is deemed to be given, and the date upon which the meeting is held, are excluded. To the extent there is inconsistency between the Act and the Constitution for the purpose of convening the relevant meeting, the provisions of the Act prevail.

15 Section 412(1) of the Act requires an explanatory statement to be sent with every notice convening a meeting under s 411.

16 The notices convening the meeting together with the explanatory statements and proxy forms (the scheme booklet) were posted on 13 May 2003. Order 6 of the earlier orders required the scheme booklets to be posted on 12 May 2003. The applicant sought an order extending the time within which it had to post the scheme booklets to 13 May 2003. In all the circumstances, such an order seemed appropriate and was made by me pursuant to O 3.5 of the Rules of the Supreme Court 1971 (WA).

17 Service of the notices is deemed to have been made on 16 May 2003 and the meeting of the members of the applicant was duly held on 13 June 2003. Accordingly, notice of the meeting was given within at least 28 days prior to the date of the meeting.

18 In order to avoid any doubt concerning compliance with the time limits, the applicant applied for relief under s 1322 of the Act and I acceded to that application.

19 The notice of meeting and explanatory statement were in the same terms as those approved by the earlier order.

20 A meeting of members of the applicant was held on 13 June 2003. At it:

(1) Mr Sage acted as chairperson as required by the orders;

(2) sufficient members attended to obtain a quorum; and

(3) the meeting was otherwise conducted in accordance with the earlier orders.

21 At the meeting, the resolution was passed by the majority as required by s 411(4)(a).

22 An office copy of the orders was also served upon ASIC.

23 Notice was given to ASIC that the applicant intended applying for an order approving the scheme on 17 June 2003.

24 If the evidence shows that, in all the circumstances of the case, ASIC has had a reasonable time to examine the terms of a proposed scheme and make submissions to the Court, then the requirements of s 411(2) may be taken to be satisfied: Re NRMA Ltd (No 1) (supra) at 357.

25 In my view, ASIC has been given a reasonable opportunity to consider the explanatory statement and having considered it, it would appear it does not intend to make any submissions to the Court thereto. See also the reasons in Re International Goldfields Ltd (supra) at [29] - [32].

26 There is, in my view, no evidence to suggest that the scheme of arrangement has been proposed other than in good faith and for a proper purpose. There is nothing in the applicant's Constitution which is contrary to any term of the proposed scheme.

27 In these circumstances, it is appropriate for the Court to find that the scheme has not been proposed for the purpose of avoiding the operation of the provisions of Ch 6 of the Act: see s 411(17)(a); Re Stockbridge Ltd (supra) at 652 and Re International Goldfields Ltd (supra) at [20] - [28].

28 In my view, there is evidence of a legitimate commercial reason for preferring a "takeover" under Ch 5, rather than Ch 6. In these circumstances, the Court may express the requisite degree of satisfaction which obviates a further consideration of s 411(17): see, to similar effect, Re ACM Gold Ltd [1992] FCA 89; (1992) 7 ACSR 231 at 234.

29 There is nothing about the scheme or any provision of it which, on its face, is inconsistent with any express or implied provision of the Act: see Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 502.

30 As noted above, at the time of the first stage of the approval process, I accepted that, at a prima facie level, there was no reason to infer that the scheme was proposed as a means of avoiding the provisions of Ch 6, or for any other improper purpose: Re International Goldfields Ltd (supra) at [28]. There is nothing in the additional information filed in support of this application that causes me to reconsider that finding.

31 Whilst the "takeover" may have been implemented under Ch 6, the fact that it was proposed under Ch 5 should not be taken to imply that it was proposed for the purpose of avoiding Ch 6. There is no discernible legislative preference for implementing a "takeover" under Ch 6 as opposed to Ch 5. The two chapters appear to be complementary: s 611(17); Re ACM Gold Ltd (supra) 243 - 4 and Re Stockbridge Ltd (supra) at 652 - 3.

32 In this case, I accept there is positive evidence that the scheme was proposed as a means of guaranteeing Hamill Resources Ltd full ownership of the applicant without the delay, cost, expense or uncertainty associated with a takeover under Ch 6. There is, in my view, a legitimate commercial interest in the entire ownership of the applicant being resolved in favour of Hamill Resources Ltd, or not, at the one time: see Re Stockbridge Ltd (supra) at 653.

33 In any event, on the face of it, the level of disclosure given by the applicant in the explanatory statement gives the level of disclosure and information that is required under the provisions of Ch 6. Accordingly, whilst the form of Ch 6 may be avoided by the implementation of the scheme, the substance and the mischief to which Ch 6 is directed arguably will not.

34 In all the circumstances, the only finding reasonably open to the Court on the evidence before it is that the scheme has been proposed in good faith, for proper purposes and has not been proposed for the purpose of avoiding the operation of the provisions of Ch 6.

35 The scheme booklet contains an independent expert's report which concludes that the proposed scheme to effect a merge between the applicant and Hamill Resources Ltd is in the best interests of the applicant's members.

36 The members of the applicant have now voted in favour of the scheme. There is no reason for considering the scheme is not so far as fair and reasonable as that an intelligent and honest man, who is a member of that class, and acting alone in respect of his or her interests as such member, might approve.

37 For these reason, I duly approved the scheme and made the other orders referred to on 26 June 2003.