Australian Securities Commission v Marlborough Gold Mines Ltd

Australian Securities Commission v Marlborough Gold Mines Ltd - [2019] FCA 1944 - FCA 2019 case summary — Zoe

Pursuant to ss 411(1) and 1319 of the Corporations Act 2001 (Cth): (a) the plaintiff convene a meeting (scheme meeting) of the holders of ordinary shares in the plaintiff (scheme shareholders), for the purpose of considering and if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (scheme) between the plaintiff and the scheme shareholders, the terms of which scheme of arrangement are set out in Annexure E of the document which has been tendered and marked Exhibit 1 (scheme booklet); (b) the scheme meeting be held on 8 November 2019 at the offices of Baker McKenzie, Tower One - International Towers Sydney, Level 46, 100 Barangaroo Avenue, Sydney NSW 2000 commencing at 10.00 am (Sydney time); (c) the chairperson of the scheme meeting be Michael Hannell, or failing him, Neville Martin; (d) the chairperson appointed to the scheme meeting has the power to adjourn or postpone the scheme meeting in her or his absolute discretion for such time and to such date as she or he considers appropriate; (e) at the scheme meeting, the resolution to approve the scheme be decided by way of a poll; (f) the explanatory statement substantially in the form of the scheme booklet be approved for distribution to scheme shareholders.
Pursuant to s 1319 of the Corporations Act, there be despatched to: (a) each scheme shareholder who holds less than 50,000 shares in the plaintiff (small shareholder) and who has nominated an electronic address for the purpose of receiving notices of meeting and proxy forms from the plaintiff: (i) at such an address, an email substantially in the form of the document which has been tendered and marked Exhibit 2; and (ii) a letter substantially in the form of the document which has been tendered and marked Exhibit 3 and a sale election form substantially in the form of the document which has been tendered and marked Exhibit 4 (election form): (A) by hand at, or by ordinary pre-paid post or courier to the address of that scheme shareholder set out in the register of members of the plaintiff; or (B) in the case of a scheme shareholder whose registered address is outside Australia, by airmail or facsimile to the address of that scheme shareholder as set out in the register of members of the plaintiff. (iii) if requested in writing by the scheme shareholder: (A) by hand at, or by ordinary pre-paid post or courier to the address of that scheme shareholder set out in the register of members of the plaintiff; or (B) in the case of a scheme shareholder whose registered address is outside Australia, by airmail or facsimile to the address of that scheme shareholder as set out in the register of members of the plaintiff, a copy of the scheme booklet, a proxy form, a reply envelope addressed to the plaintiff c/- Computershare and an election form, and (b) each scheme shareholder who holds 50,000 or more shares in the plaintiff and who has nominated an electronic address for the purpose of receiving notices of meeting and proxy forms from the plaintiff: (i) at such an address, an email substantially in the form of the document which has been tendered and marked Exhibit 5; (ii) if requested in writing by the scheme shareholder: (A) by hand at, or by ordinary pre-paid post or courier to the address of that scheme shareholder set out in the register of members of the plaintiff; or (B) in the case of a scheme shareholder whose registered address is outside Australia, by airmail or facsimile to the address of that scheme shareholder as set out in the register of members of the plaintiff, a copy of the scheme booklet, a proxy form and a reply envelope addressed to the plaintiff c/- Computershare, and (c) each other scheme shareholder: (i) by hand at, or by ordinary pre-paid post or courier to the address of that Scheme Shareholder set out in the register of members of the Plaintiff; or (ii) in the case of a scheme shareholder whose registered address is outside Australia, by airmail or facsimile to the address of that scheme shareholder as set out in the register of members of the plaintiff, a copy of the scheme booklet, a proxy form, a reply envelope addressed to the plaintiff c/- Computershare and, if the scheme shareholder is a small shareholder, an election form.
If an email notification of a failure to deliver an email to a scheme shareholder's nominated electronic address pursuant to order 2(a) or 2(b) above is received, there be dispatched by hand at, or by ordinary pre-paid post or courier to, the address of each such scheme shareholder as set out in the register of members of the plaintiff, a copy of the scheme booklet, a proxy form, a reply envelope addressed to the plaintiff c/- Computershare and, if the scheme shareholder is a small shareholder, an election form.
Rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) shall not apply to the scheme meeting.
Notice of the hearing of the application for orders approving the proposed scheme be published once in "The Australian" newspaper, by advertisement substantially in the form of annexure "A" to these orders, such advertisement to be published on or before 7 November 2019 and the plaintiff otherwise be exempted from compliance with r 3.4 of the Federal Court (Corporations) Rules.
The proceeding be stood over to 14 November 2019 at 10.15 am before Justice Farrell for the hearing of any application to approve the scheme.
There be liberty to apply.
These orders be entered forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

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Introduction 1 These are reasons for orders made on 1 October 2019 under s 411(1) and 1319 of the Corporations Act 2001 (Cth) convening a meeting of shareholders of Sundance Energy Australia Limited for the purpose of considering a scheme of arrangement between Sundance and its shareholders (scheme meeting) and approving the despatch of a scheme booklet in the form of exhibit 1. These reasons also relate to the Court's decision made on 14 November 2019 to approve the scheme in the form of annexure E in exhibit 1 under s 411(4)(b) of the Corporations Act following the scheme meeting held on 8 November 2019 at which the scheme was approved by the statutory majorities prescribed by s 411(4)(a) of the Corporations Act. 2 Sundance is registered as a public company in Australia. It is an oil and gas producer in the Gulf Coast Basin of South Texas in the United States of America. While Sundance's registered office is in South Australia, its corporate and operational headquarters are in Denver, Colorado. 3 On 11 September 2019, Sundance announced the proposed re-domiciliation of Sundance to the USA to be effected by way of the scheme. At the time of the announcement, Sundance shares were listed on markets operated by ASX Limited under the symbol SEA. Interests in some Sundance shares were held as American Depository Receipts (ADRs) which were listed for trading on the Nasdaq Stock Exchange under the symbol SNDE. Each ADR represents beneficial ownership of 10 Sundance shares. The ADR Depository has advised Sundance that if the scheme is implemented, the ADR program will be terminated. 4 Under the scheme, Sundance Energy Inc, a newly formed corporation incorporated under the laws of the State of Delaware (Holdco), will acquire all of the Sundance shares. It is intended that Holdco shares will be listed for trading on Nasdaq, subject to satisfaction of Nasdaq's listing requirements. It is not intended that Holdco will maintain a CHESS depository interest listing on the ASX following implementation of the scheme.

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The scheme 5 Under the scheme, each Sundance shareholder other than ineligible foreign shareholders and selling shareholders will receive one share issued by Holdco (Holdco share) for every 100 Sundance shares held at the Scheme Record Date (19 November 2019). The scheme booklet (in the FAQs section) explains that this ratio was selected so that the theoretical per-share market price of Holdco shares will be in line with trading levels on major US stock exchanges and therefore more attractive to potential investors. Recognising that share prices can fall, the ratio was selected having regard to Nasdaq's continuing requirement that shares trade at a minimum price of US$1.00. 6 An ineligible foreign shareholder is a shareholder with an address as shown on Sundance's share register as at the Scheme Record Date which is a place outside Australia and its external territories, Cayman Islands, France, Germany, Hong Kong, Lithuania, New Zealand, Singapore, Thailand, the United Kingdom or the United States unless Sundance and Holdco determine that (a) it is lawful and not unduly onerous or impracticable to issue that shareholder with Holdco shares if the scheme becomes effective or (b) it is lawful for that shareholder to participate in the scheme by the law of the relevant place. 7 A selling shareholder is a shareholder who holds less than 50,000 Sundance shares at the Scheme Record Date who makes a valid Sale Election by lodging a sale election form with the Sundance share registry before 5 pm (Melbourne time) on the Scheme Record Date. A Sale Election must relate to all of the Holdco shares that the shareholder would be entitled to receive under the scheme. 8 Ineligible foreign shareholders and selling shareholders will not directly receive Holdco Shares. Instead, the shares which they would otherwise have been entitled to receive under the scheme will be issued to a sale agent who will sell them through a share sale facility and remit the proceeds after deduction of brokerage fees and other costs of sale. 9 Any fractional entitlement to a Holdco share will not be rounded, but instead will be aggregated with other fractional entitlements and also sold through the share sale facility. 10 ADR holders were entitled to give the ADR Depository instructions on how to vote at the scheme meeting but could not vote directly. 11 The ADR Depositary has informed Sundance, upon implementation of the scheme, it will call for surrender of all outstanding ADRs and will deliver Holdco shares and cash proceeds of the sale of entitlements to fractions of Holdco Shares to ADR holders upon surrenders by them of their ADRs and payment of the ADR Depositary's fee for the surrender of the ADRs. 12 At the time of the first court hearing, Sundance had 13,970,284 restricted share units (RSUs) on issue which had been issued to senior management under Sundance's Long Term Incentive Plan. Each RSU entitles the participant to one Sundance share upon satisfaction of certain vesting conditions. RSUs that vest before the Scheme Record Date will be either exercised or lapse. There was no intention to allow accelerated vesting or material change in the terms of RSUs that vest after the Scheme Record Date. The holders of those RSUs will be asked to agree to amendment of the terms of the Long Term Incentive Plan such that they may be satisfied with Holdco shares. That is disclosed in the scheme booklet at sections 4.14 and 6.4(b). 13 After the scheme is implemented (expected to be around 26 November 2019), all of the issued Sundance shares will be transferred to Holdco such that former Sundance shareholders (other than ineligible foreign shareholders and selling shareholders) and former holders of ADRs together with shares held in the share sale facility will hold 100% of the voting shares in Holdco and Sundance will cease to be listed on the ASX. Sundance will then be a wholly owned subsidiary of Holdco. 14 Holdco shares which would otherwise have been issued to ineligible foreign shareholders, selling shareholders and fractional entitlements will then start to be sold through the share sale facility, and sale proceeds (after brokerage and any other sale cost) will be distributed when all of the Holdco shares have been sold, which may take several months. This matter is discussed in the scheme booklet in a number of places including the Chairman's Letter, the "Key Dates" section, FAQs ("What is the Share Sale Facility") and sections 4.9(c) and 5.4. The Court accepted Sundance's submission that a facility of this kind is generally not considered to be class-creating; that is, it does not destroy the ability of shareholders to consult together in their common interest: see Excelsior Gold Limited, in the matter of Excelsior Gold Limited [2018] FCA 2064 at [37]-[42] (McKerracher J); Re Wesfarmers Ltd; ex parte Wesfarmers Ltd [2018] WASC 308 at [96], [98] (Vaughan J); Amcor Limited, in the matter of Amcor Limited (No 2) [2019] FCA 842 (Beach J) (Re Amcor Limited (No 2)).

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Recommendations 15 Sundance's directors unanimously recommended that shareholders vote for the scheme and all who held Sundance shares or controlled the right to vote indicated their intention to vote in favour of the scheme. There is a discussion of what the directors considered to be advantages of the implementation of the scheme in the scheme booklet in the Chairman's letter and in section 1. They concluded that the re-domiciliation: may attract increased attention from the broader US investor pool and lead to Holdco being more fully valued by investors over time as the US market is generally better informed regarding unconventional E&P companies operating in the US due to its greater number of market participants and investors; may have increased access to lower-cost debt or equity capital in the US markets, which are larger and more diverse than Australian capital markets. Thus, this increased access to US capital markets may enable future growth to be financed at a lower cost; would simplify the structuring of potential future merger, sale or acquisition transactions, which may increase Holdco's attractiveness to potential merger partners, sellers or acquirers; and will allow Holdco to streamline its business operations as the corporate structure would be aligned with the core of its business operations. Currently, substantially all of Sundance's assets and management are in the US. 16 There is a discussion of what directors believe the potential disadvantages and risks of the scheme may be in the scheme booklet in the Chairman's Letter and in section 2: there may be a loss of demand for Holdco shares from Australian investors without an offsetting demand for Holdco shares from US investors; there will be differences in Sundance shareholders' rights as shareholders of Holdco, a Delaware corporation, as compared to Sundance shareholders' existing rights, in particular in relation to regulation of takeovers; there will be increased exposure to US law and a more litigious environment; there may be US federal income and Australian taxation consequences for Sundance shareholders if the Scheme is implemented as a result of the implementation or holding Holdco shares, as discussed in section 10 of the scheme booklet; and Sundance shareholders may disagree with the recommendation of the Sundance board and the independent expert's conclusion. 17 KPMG Financial Advisory Services (Australia) Pty Ltd provided an independent expert's report in relation to the scheme. KPMG concluded that, on balance, the scheme is in the best interests of Sundance shareholders as a whole. 18 KPMG concluded that the advantages of scheme are: Primary listing in the US may result in a rerating of Sundance through providing it with greater access to a large equity market where investors are more familiar with the onshore US oil and gas sector compared to Australian equity markets. Primary listing in the US may result in improved trading liquidity and ease of capital raising. US domicile and Nasdaq listing enhances transactional potential because it would be expected to result in a better alignment of Sundance's corporate structure with its peers. A better alignment of the corporate structure with key business stakeholders. Some, though possibly not material, reduction in operating and administrative costs through relocation of the head office to the US. 19 As for the disadvantages of the scheme, KPMG concluded that: Shareholder rights and protections in the US are different to the protections applicable to existing Sundance shares, such as reduced takeover protections. Future shareholder returns may be subject to increased foreign exchange risks because such risks can currently be mitigated through hedging by the current corporate structure. Shares to which ineligible foreign shareholders and fractional entitlements will be realised which will incur brokerage and may have tax implications. Increase in short term volatility in the share price due to some Australian investors and fund managers may wish to or be required to dispose of their Holdco shares under their investment criteria in addition to the sale of shares under the share sale facility. 20 KPMG also noted some issues which may be neither advantages nor disadvantages being: Taxation implications for shareholders. Holdco will have different reporting obligations. Holdco will report under US GAAP reporting standards. One-off costs are expected to total $2.1 million comprising legal, audit, tax advisory, expert and other professional fees. Flexibility of board composition due to Delaware law which does not have residency requirements for board members. The treatment of restricted share units held by employees. The scheme may be implemented even though individual shareholders vote against it.

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Role of the Court at the first Court hearing 21 Sundance relied on the summary of the role of the Court at the first Court hearing which I discussed in Capilano Honey Limited, in the matter of Capilano Honey Limited [2018] FCA 1568; 31 ACSR 9 at [32]-[34]; see also Dulux Group Ltd, in the matter of Dulux Group Ltd [2019] FCA 961 at [14]-[16] (O'Bryan J). 22 Upon an application by a company made under s 411(1) of the Corporations Act, the Court will order that a scheme meeting be convened and approve a draft explanatory statement to be sent to shareholders if it is satisfied that: (1) The plaintiff is a Part 5.1 body as defined in s 9 of the Corporations Act: see s 411(1). (2) The proposed scheme is a compromise or (relevantly) an "arrangement" within the meaning of s 411(1). (3) The scheme booklet will provide proper disclosure to shareholders; s 412; (4) The scheme is bona fide and properly proposed; (5) The Australian Securities & Investments Commission (ASIC) has had a reasonable opportunity to examine the terms of the scheme and the explanatory statement contained in the scheme booklet and make submissions to the Court and it has had at least 14 days' notice of the proposed hearing date: s 411(2). (6) The applicable procedural requirements under s 412, r 5.1.01 and Sch 8 to the Corporations Regulations 2001 (Cth) and Federal Court (Corporations) Rules 2000 (Cth) have been met; and (7) The scheme is of such a nature and cast in such terms that, if it receives a statutory majority at the meeting, the Court would be likely to approve it on the hearing of a petition which is unopposed. 23 The application for leave to convene a scheme meeting is in the nature of an interlocutory proceeding and is a preliminary to the final determination which is to be made when the matter comes back to the Court for approval after the holding of the meetings which have been directed: Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; 177 CLR 485 at 504-505. By granting leave, the Court does not give its imprimatur to the proposed scheme. At the stage of ordering a scheme meeting, the Court does not ordinarily go very far into the question of whether the arrangement is one that warrants the approval of the Court; that question is to be answered when the scheme returns to the Court for final approval. That is not to exclude the possibility that a scheme may appear on its face so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further: see In the Matter of Foundation Healthcare Limited [2002] FCA 742; 42 ACSR 252 at [36] and [44] (French J), cited with approval in CSR Limited, in the matter of CSR Limited [2010] FCAFC 34; 183 FCR 358 at [58] (Keane CJ and Jacobson J). Chief Justice Keane and Jacobson J went on to say (at [59] and [61]) that the adverb "blatantly" and the term "contrary to public policy" emphasise that the enquiry under s 411(1) is not intended to resolve difficult questions on which reasonable minds may differ, although it has long been recognised that a clear want of utility in putting in train the process of s 411(1) is a good reason to decline to order the convening of the first meeting.

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Evidence 24 The following evidence was read at the first court hearing. 25 First, the affidavit of Heather Lindsay Sandell, an employed solicitor at Baker McKenzie, sworn 17 September 2019. Baker McKenzie is Sundance's legal representative in relation to the scheme proposal. Ms Sandell's affidavit is in support of originating process. Annexure "HLS-1" is an historical extract from ASIC's register relating to Sundance and demonstrates that it is a Part 5.1 company. 26 Second, the affidavit of Michael Damer Hannell affirmed 27 September 2019. Mr Hannell is Sundance's chairman of the board. Mr Hannell gives evidence that he is a director of Sundance and a director of Holdco. He deposes to the identity of the directors of Sundance and their relevant interests in Sundance shares, the reasons for the proposed scheme, the number of issued Sundance shares, the number of Sundance shareholders and the number of shareholders who have elected to receive electronic communications, notifications to ASX concerning substantial holdings, the manner in which the Sundance board proposes to deal with RSUs; the incorporation of Holdco; the sale facility, and conditions precedent under the Scheme Implementation Agreement (SIA). He consents to act as chairman of the scheme meeting. In the last regard, Mr Hannell discloses to his interests in Sundance shares and declares that he has no relationship of conflict. The following annexures are included with his affidavit: (1) Annexure "MH-1" is Sundance's constitution; (2) Annexure "MH-2" is an historical company extract from ASIC's records in relation to Sundance which provides proof that Sundance is a Part 5.1 company; (3) Annexure "MH-3" is an ASX Announcement by Sundance dated 11 September 2019 attaching the SIA. The SIA provides prima facie evidence that Sundance has committed itself to propounding the scheme and that accordingly the scheme is bona fide and has been properly proposed: Viralytics Limited, in the matter of Viralytics Limited [2018] FCA 637 at [22] (Gleeson J) (Re Viralytics); and (4) Annexure "MH-4" which contains the Long Term Incentive Plan pursuant to which the RSUs are offered. 27 Third, the affidavit of Neville Martin affirmed 27 September 2019 on the basis of which the Court was satisfied that Mr Martin is a director of Sundance and consents to act as chairman of the scheme meeting if Mr Hannell is unable to act as chairman. It also contains disclosure as to his relevant interests in Sundance shares and his lack of conflicting interests. 28 Fourth, the affidavit of Jason Harvey Hughes sworn 27 September 2019 and annexures "JH-1" (Mr Hughes' curriculum vitae) and "JH-2" (draft independent expert's report). Mr Harvey is a partner of KPMG and an authorised representative of KPMG Financial Advisory Services (Australia) Pty Ltd. Mr Hughes is one of the co-authors of the independent expert's report and he verifies the opinions in the report. 29 Fifth, the affidavit of Guy James Villiers Sanderson affirmed 30 September 2019 and annexures "GS-1" to "GS-9", being a chain of email communications with ASIC. Mr Sanderson is a partner of Baker McKenzie and he deposes to the communications with ASIC commencing on 11 September 2019 in relation to the proposed scheme. He also gives evidence in relation to the proposed manner of despatch of the scheme booklet. 30 Sixth, the affidavit of Cathy Anderson affirmed 27 September 2019 and annexures "CA-1 to CA-3". Ms Anderson is Sundance's chief financial officer. She gives evidence in relation to the incorporation of Holdco and the authority given by Holdco's board of directors to enter into the SIA. Ms Anderson also gives evidence concerning the due diligence and steps undertaken for verification of information in the scheme booklet concerning Sundance and Holdco designed to ensure that the information is correct and not misleading or deceptive in all material respects, there is no material omission and there is a reasonable basis for making future statements. "CA-1" is a unanimous written consent of the board of directors of Holdco dated 6 September 2019 in relation to the organisation of Holdco; "CA-2" is a written resolution of the directors of Sundance dated 10 September 2019 in relation to the scheme; and "CA-3" is a letter from Holdco to Sundance dated 10 September 2019 consenting to be named in the scheme booklet. 31 The proposed scheme of arrangement is set out in annexure E to the scheme booklet. The proposed scheme is an acquisition scheme and therefore within the concept of an "arrangement" which has often been approved by Australian courts. 32 Exhibit 2 in the proceedings is a letter from ASIC dated 30 September 2019. It is ASIC's "usual letter" to the directors of Sundance confirming that (having regard to s 411(2)(a) of the Corporations Act), it is satisfied that it has had a reasonable opportunity to consider the draft explanatory statement comprised in the scheme booklet and that it has no intention to appear at the first court hearing to make submissions or to intervene to oppose the scheme.

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Role of the Court at the second Court hearing 35 Sundance provided written submissions in relation to the second court hearing. The Court accepts Sundance's submissions at [6] and [7] on the role of the Court at the second court hearing as follows: The general principles which guide the court's discretion to approve a scheme at the second court hearing are well established. The Court has a discretion to approve a scheme, and is not bound to approve it merely because it has made orders for the convening of meetings or because the statutory majorities have been achieved: Re Seven Network Ltd (No 3) [2010] FCA 400; (2010) 267 ALR 583 at [31] (Jacobson J); Re Staging Connections Group Ltd (No 2) [2015] FCA 1102 at [12] (Gleeson J). The court will usually approach the task on the basis that members are better judges of what is in their own commercial interest than the court: cf Re Seven Network at [33]; Re Staging Connections at [13]. The matters the court must take into account in approving a scheme at the second court hearing include: a. whether the orders of the court convening the scheme meeting were complied with; b. whether the resolution to approve the scheme was passed by the requisite majority and whether other statutory requirements have been satisfied; c. whether all conditions to which the scheme is subject (other than court approval and lodgement of the court's orders with ASIC) have been met or waived; d. whether the scheme is fair and reasonable so that an intelligent and honest member of the relevant class, properly informed and acting alone, might approve it; e. 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; and f. whether there was full and fair disclosure to members of all information material to the decision whether to vote for or against the scheme. See Re David Jones Ltd (No 3) [2014] FCA 753, (2014) 32 ACLC 14-037 at [3] (Farrell J); Re Sierra Mining Ltd [2014] FCA 694 at [29] - [33] (Gilmour J); Capilano Honey Limited, in the matter of Capilano Honey Limited (No 2) [2018] FCA 1925; 132 ACSR 332 at [5] - [6].

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38 Second, the affidavit of Jake van der Hoek affirmed on 12 November 2019 with annexures "JH-1" to "JH-3". Mr van der Hoek is a relationship manager at Computershare Investor Services Pty Ltd. He gives evidence in relation to the fact that Computershare maintains Sundance's register of members. It provided services in relation to the printing and despatch of the scheme booklets (and related documents, such as proxy and election forms), receipt of proxies and conduct of the poll at the scheme meeting. 39 Third, the affidavit of Maria Dzopalic sworn on 11 November 2019 with annexure "MD-1". Ms Dzopalic is a senior relationship manager at Computershare. Ms Dzopalic gives evidence in relation to the registration of attendees at the scheme meeting and the poll procedure undertaken at the scheme meeting. "MD-1" is a copy of the poll report from the meeting. 40 Fourth, the affidavit of Mr Sanderson affirmed on 12 November 2019 with annexures "GS-10" to "GS-12". Mr Sanderson gives evidence in relation to: (1) Minor changes to the scheme booklet from the form of exhibit 1, none of which substantially altered the text of exhibit 1; (2) Lodgement of the amended scheme booklet, the Court's orders made on 1 October 2019 and other required material with ASIC on 1 October 2019; (3) Approval of documents for printing and despatch; and (4) Voter turn-out at the annual and extraordinary general meetings of Sundance as follows: (a) AGM held on 31 May 2019 - 321 of 6,861 shareholders, 4.68% of shareholders; (b) AGM held on 31 May 2018 - 268 of 6,739, 3.98% of shareholders, 3.98% of shareholders; and (c) EGM held on 31 May 2019 - 215 of 6,016 shareholders, 3.57% 41 Fifth, the affidavit of Heath Trisdale affirmed on 11 November 2019 with annexures "HT-1" (curriculum vitae), "HT-2" (the Deed Poll between Sundance and Holdco) and "HT-3" (opinion). Mr Trisdale is a partner of the Houston office of Baker McKenzie. His opinion indicates that Holdco is validly existing and in good standing under the laws of the State of Delaware; Holdco has the requisite corporate power to execute, deliver and perform its obligations under the Deed Poll; execution and delivery of the Deed Poll has been duly authorised by necessary corporate action on Holdco's behalf; that action does not violate its certificate of incorporation or any judgment, decree or order of any court or government agency; and no approval of any governmental authority is required in connection with the execution and delivery of the Deed Poll. 42 Sixth, a further affidavit of Mr Trisdale affirmed on 12 November 2019 with annexures "HT-4" (dealing with mailings by the ADR Depository to ADR holders and responses in relation to voting instructions) and "HT-5" (in relation to communications between Mr Trisdale and an officer of NASDAQ). Mr Trisdale's evidence addressed the condition precedent to the scheme becoming effective that, by 8 am on the day of the second court hearing, Holdco shares have been authorised for listing on Nasdaq, subject to official notice of issuance following the implementation of the scheme (under cl 3.1(g) of the SIA which is incorporated into the scheme by cl 3.1(a) of the scheme). Mr Trisdale expressed his opinion, based on his experience and familiarity with US securities laws and the operations of US markets, that the condition precedent in cl 3.1(g) of the SIA had been satisfied. 43 Seventh, the affidavit of Maria Coffill O'Brien affirmed on 14 November 2019 with annexure "MFO-1". Ms O'Brien is a partner of Baker McKenzie. She gave evidence concerning the advertising of the second court hearing in The Australian newspaper on 6 November 2019, in accordance with the Court's order made on 1 October 2019. That advertisement directed anyone who wished to appear at the second court hearing to oppose the scheme to direct notice of their intention to Baker McKenzie. No such notice was received. The Court also notes that no one attended the second court hearing to oppose the scheme being approved. 44 At the second court hearing, senior counsel for Sundance tendered: (1) A letter dated 13 November 2019 from ASIC to the directors of Sundance advising that, for the purposes of s 411(17)(b) of the Corporations Act), ASIC has no objection to the proposed scheme. That letter was marked as exhibit 8. (2) A certificate dated 14 November 2019, signed in counterparts by Sundance and Holdco, advising that conditions precedent set out in cll 3.1(a) and (b) of the SIA had been satisfied and conditions precedent set out in cll 3.1(c) and (d) of the SIA had been either waived or satisfied. The certificate was marked as exhibit 9.

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Issues drawn to the Court's attention at the second court hearing 45 Sundance noted the following matters. 46 By the Deed Poll, Holdco covenanted to perform all of the actions attributed to it under the scheme. Mr Trisdale's opinion relates to due execution of the Deed Poll. As the Deed Poll is governed by the laws of New South Wales and Holdco irrevocably and unconditionally submits to the exclusive jurisdiction of the courts of that State, the opinion does not separately address whether the Deed Poll would be enforceable under the laws of Delaware. The Court was satisfied that this adequately addressed the issues which arise where a Deed Poll is executed by a foreign entity. 47 The voter turn-out at the scheme meeting represented 48.08% of the shares on issue (330,565,896 of 687,567,322) and 466 out of a 6,345 Sundance shareholders. 48 In TriAusMin Limited, in the matter of TriAusMin Limited (No 2) [2014] FCA 833 (Re TriAusMin Limited (No 2)) at [10]-[11], I noted that it is the usual practice of the Court at the second court hearing to consider the number of shareholders who attended the scheme meeting in person or by proxy because low shareholder turnout may be an indication that some procedural irregularity occurred and the Court retains a discretion to withhold its approval in that case. Nonetheless, it is inappropriate to assume (in the absence of complaint) that shareholders who did not vote either did not have notice of the meeting or were silent in protest of the scheme: Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited (No 3) [2010] FCA 400; 267 ALR 583 at [61] (Jacobson J) (Re Seven Network Limited (No 3)); apathy should not be presumed to be antagonism: Re Matine Limited (1998) 28 ACSR 268 at 295 (Santow J). 49 Sundance submitted that a vote representing 48.08% of shares was in line with other cases. While a turn-out of 7.2% of shareholders was relatively low, Sundance submitted that that should not prevent the scheme being approved. The Court has approved schemes where the number of shareholders attending and voting at the meeting was similarly low: see Re TriAusMin Limited (No 2) where the turn-out was 10.94% of shareholders, Decimal Software Limited, in the matter of Decimal Software Limited (No 2) [2018] FCA 2040 (Banks-Smith J) where the turn-out was 5.21% of shareholders and Re Amcor where the turn-out was 6.7% of shareholders. 50 The Court was satisfied that the low voter turn-out in this case was not a reason to withhold approval of the scheme where it was approved by significant margins over the required statutory majorities of 75% of votes cast by at least 50% of shareholders attending and voting at the scheme meeting, there is no evidence of procedural irregularity and the voter turn-out at the scheme meeting was higher than at recent annual and extraordinary general meetings, having regard to Mr Sanderson's evidence (see [40(4)] above).

[20]

Securities Act of 1933 exemption 51 Sundance advised the Court that to be able to rely on the exemption set out in s 3(a)(10) of the Securities Act of 1933 the following conditions must be met: (1) Securities must be issued in exchange for securities, claims or property interests; (2) A Court or an authorised government entity must approve the fairness of the terms and conditions of exchange; (3) The Court or authorised government entity must find that the terms and conditions of the exchange are fair to those to whom the securities will be issued and be advised prior to the hearing that the issuer will rely on the exemption based on the Court's or authorised government entity's approval of the transaction; (4) The Court or authorised government entity must hold a hearing before approving the fairness of the terms and conditions of the transaction; (5) The fairness hearing must be open to everyone to whom securities will be issued in the proposed exchange; (6) Adequate notice must be given to all those persons; and (7) There must not be any improper impediment to the appearance by such persons at the hearing. 52 It should be apparent from these reasons that: (1) The scheme contemplates the issue of securities (being Holdco shares) in exchange for Sundance shares; (2) The Court has been advised, before the commencement of the second court hearing, that Sundance and Holdco intend to rely on the exemption under s 3(a)(10) of the Securities Act of 1933. The Court made a notation to the orders made on 14 November 2019 to that effect in accordance with a practice adopted in similar matters: see Re Seven Network Limited (No 3) at [64]; Simavita Holdings Limited, in the matter of Simavita Holdings Limited [2013] FCA 1274 at [50]-[52] (Farrell J); Re Amcor Limited at [32]-[38]; (3) The Court has been informed of the securities to be offered in exchange for Sundance shares and an independent expert report has concluded that, on balance, the proposal is in the best interests of Sundance shareholders as a whole; (4) The Court has held a hearing to consider the fairness and reasonableness of the proposed scheme. The hearing was open to the public and each shareholder to whom Holdco shares are to be issued had standing to appear. Notice of the date of the hearing has been included in the scheme booklet sent to all shareholders of Sundance prior to the proposal being considered by the scheme meeting, and was advertised in a daily newspaper circulating throughout the country. There was no appearance by any shareholder.

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