Auzex Resources Ltd (No 2) [2012] QSC 101 (27 March 2012)

[1] The applicant, Auzex Resources Limited ("Auzex"), applies for certain orders at this the "second court hearing".

[2] The background to this matter is set out in a judgment which I gave following the first court hearing.[1] At that first court hearing I made an order for the conduct of a meeting. The meeting was held and there was an overwhelming vote in favour of the scheme: 99.8 percent of the votes cast in favour of it and 97.7 percent of the persons present were in favour of it.

[3] No shareholder or other person has indicated they wish to appear at today's hearing. The matter was called, and there was no appearance from any other party. That is notwithstanding the affected persons being informed of this hearing.

[4] As the authorities such as Re Seven Network Ltd (No 3)[2] indicate, the Court is not bound to simply approve a scheme because it obtained the statutory majorities. The Court has to make a final determination. It has to consider whether the members have voted in good faith, and for a proper purpose, and whether the proposal at least is fair and reasonable, so that an intelligent and honest person who is a member of the relevant class, properly informed and acting alone, might approve it.

[5] The Court has a discretion which it has to carefully exercise. It is not for the Court to substitute its view of what is in the interests of members for their view. It is important that there has been a disclosure of all relevant information, and I am satisfied that that has been done.

[6] The Court has before it, as it did on the first hearing, an independent expert's report indicating that the proposed merger is in the best interests of shareholders. There is no evidence to the contrary. There is no criticism by any shareholder, by ASIC or by anyone else of the extent of disclosure. There is nothing to suggest that the shareholders voted other than in good faith, and cast their votes for a proper purpose.

[7] I have been taken through material which indicates the manner in which there was service of the scheme booklet on members, lodgement of necessary documents on ASIC, the proper convening and conduct of the meeting and other matters that established the procedural integrity of the meeting.

[8] ASIC has provided a statement that satisfies the requirements of s 411(17) Corporations Act 2001 (Cth) ("the Act"). It has not appeared, but I have had regard to its letter which is exhibited to the material.

[9] Since the last hearing and on 15 March 2012, the High Court of Justice in England approved the GGG Resources Plc scheme ("the GGG Scheme"). The effect of that scheme was to "top hat" GGG with the new holding company, Bullabulling Gold Ltd ("BBG"). The GGG Scheme was subsequently implemented, and trading in BBG shares commenced last Friday, 23 March 2012. The Auzex shareholders received BBG shares as the Scheme consideration.

[10] The affidavit material also indicates the process by which the Scheme consideration has been calculated. Scheme shareholders will receive 0.909 BBG shares for each Auzex share and there was appropriate notice given to members of this consideration.

[11] There were some very slight differences to the scheme booklet that was approved at the first court hearing. There were no matters of substance that I need to address.

[12] At the first court hearing it was disclosed that reliance was intended to be placed upon the exemption from registration requirements of the United States Securities Act of 1933. I have had regard to this legislation, and have been taken on previous occasions to a line of authority in this country concerning the approach to dealing with that exemption.

[13] Those cases have been again cited in submissions, and reference could also be made to the further decision of Jacobson J in Re Professional Investment Holdings Ltd (No 2).[3]

[14] As has been observed in other cases, the court in a proceeding such as this does not act as a valuer. It is appropriate that I should state in these reasons some matters that are relevant to the claim for exemption.

[15] As I have previously noted, the Scheme contemplates receiving BBG shares as consideration for the transfer of the Auzex shares. The Court was advised at the first hearing of the reliance upon the relevant exemption. The Court has been fully informed of the value of Auzex shares, and the value of shares to be received as consideration for the transfer of the Auzex shares. That valuation was prepared by an independent expert, and is a sworn valuation. I have taken that evidence into account in determining whether the scheme is fair, and should be approved.

[16] In deciding whether to approve the scheme, I have been required by statute to consider its fairness and reasonableness. The hearing has been open to the public, and each Auzex shareholder to whom BBG shares are to be issued has standing to appear. As I have noted, there was no appearance at today's hearing, and no one appeared to argue that the merger is not fair and reasonable.

[17] I should note that at the meeting that occurred on 22 March 2012 there were no questions or comments from the floor in relation to any such matter. Shareholders had received notice of the hearing in various forms.

[18] The material indicates that the voter turn out was in the order of 42.3 percent of votes, and 9.75 percent by way of a head count. Although those percentages may not appear large, they are higher than the record of attendances at annual general meetings of Auzex, and there were more votes cast at this meeting than at the demerger scheme meeting.

[19] The extent of voter turn out is another factor I take into account in approving the scheme.

[20] An application is made under s 411 of the Act for minor alterations to the scheme. The alterations are indeed minor. They are to accommodate some small matters that were missed in the course of proof reading. One was the omission of the date "14" in the definition of scheme deed poll. It was referred to as "[ ] February 2012". The correct date is 14 February 2012. On another page there were square brackets around the number of shares or options referred to. That is on page 4 of the Scheme, that forms part of the booklet.

[21] My attention has been directed to the authority of Re Investorinfo Limited,[4] in which Gyles J stated certain propositions concerning the authorities in relation to section 411(6) of the Act. In addition, certain additional propositions that have emerged from later authorities have been drawn to my attention. I accept those principles.

[22] It seems clear that the discretion under section 411(6) is a broad one. The first proposition discussed by Gyles J is that if the alteration is of a minor kind, which does not really affect the details of the scheme, then the Court has power to approve the scheme as amended.

[23] I will also apply the proposition that the discretion may be exercised where the amendment improves the smooth working of the scheme without affecting its substance.

[24] There is no suggestion that the amendments are contrary to the interests of any party, and do not involve any novel or substantial variation of the scheme that was not in the contemplation of the shareholders at the time that they agreed to it.

[25] The alterations have been advised to ASIC which did not seek to comment in relation to them, let alone object to the alterations.

[26] The form of order reflects the form of order that has been made in other cases, and conforms with existing practice.

[27] I have had regard to the form of order which appropriately identifies the excluded shareholder. The approach adopted by Barrett J in Count Financial Limited[5] on 28 November 2011, and in Souls Private Equity Ltd[6] on 19 December 2011, fall to be applied. In this case it involves a simple matter of identifying the fact that the excluded shares are held by GGG.

[28] The evidence discloses that the only shareholder that is in this class is GGG and accordingly it is appropriate to name it in the order.

[29] The form of order is otherwise in accordance with settled practices. The scheme as approved is the one which is exhibited to the affidavit of Mr Kerr described as his third affidavit.

[30] For these reasons, I have made an order in terms of the draft order which I initial and place with the papers.

[1] Re Auzex Resources Limited [2012] QSC 40.

[2] (2010) 267 ALR 583; [2010] FCA 400.

[3] [2010] FCA 1336.

[4] (2006) 24 ACLC 44; [2005] FCA 1848.

[5] Supreme Court of New South Wales, case number 2011/00318870.

[6] Supreme Court of New South Wales, case number 2011/003422152.