Avocet Resources Limited, in the matter of Avocet Resources Limited (No 2) [2013] FCA 721

Federal Court of Australia|2013-07-24|Before: McKerracher J

INTRODUCTION 1 These are brief reasons for orders made at the second hearing concerning the scheme of arrangement (the Scheme) the subject of Avocet Resources Limited, in the matter of Avocet Resources Limited [2013] FCA 496 (Avocet No 1). At the second hearing I made orders pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (CA) approving the Scheme and exempting the Plaintiff (Avocet) from compliance with s 411(11) CA in relation to the Scheme.

THE PRINCIPLES 2 The principles in relation to approving a proposed scheme of arrangement at a second court hearing are well established. I needed to be satisfied that: there had been compliance with the Court's previous orders made following the first hearing and procedural requirements imposed by the CA, the Federal Court (Corporations) Rules 2000 (Cth) (the Rules) and Avocet's Constitution; the majority of Avocet shareholders had acted in good faith and not in pursuit of some illegitimate purpose in approving the Scheme; and the Scheme was properly proposed and sufficiently fair and reasonable for an intelligent, honest person, able to do so, to approve it.

THE EVIDENCE 3 In support of its application at the second hearing, Avocet read the following affidavits: an affidavit of Mr Timothy Dudley Scott, sworn 27 May 2013; an affidavit of Mr Lachlan Kenneth Smith, sworn 28 May 2013; an affidavit Ms Alana Rose Farrow, sworn 28 May 2013; an affidavit of Ms Samantha Louise Williams, sworn 28 May 2013; a second affidavit of Mr Philip Andrew Lucas, sworn 28 May 2013; an affidavit of Mr David Maxwell McArthur, sworn 29 May 2013; a third affidavit of Mr Simon Gerard Cunningham Rear, sworn 30 May 2013; and a fourth affidavit of Mr Simon Gerard Cunningham Rear, sworn 31 May 2013. 4 Avocet also provided two helpful outlines of submissions, dated 30 May 2013 and 31 May 2013 respectively, which annexed a convenient second court hearing checklist.

PROCEDURAL REQUIREMENTS 5 Based on the affidavit evidence I was satisfied that the following procedural requirements had been met: The Scheme booklet was duly registered with ASIC on 19 April 2013. The Scheme booklet, which included the notice of Scheme meeting and proxy form, was dispatched to each Avocet shareholder on 26 May 2013. Mr Lucas chaired the Scheme meeting, as required by Order 4 of my Orders of 19 April 2013. At the meeting, Avocet shareholders voted overwhelmingly in favour of the Scheme. Some 99.61% of Avocet shareholders voting on the resolution, holding 99.63% of shares voted on, cast a vote in favour of the scheme, clearly meeting the statutory majorities required by s 411(4)(a)(ii) CA. By letter dated 31 May 2013, ASIC confirmed that it had no objection to the Scheme. That letter was exhibited to the third affidavit of Mr Rear sworn on 30 May 2013. This letter is sufficient to meet the requirement in s 411(17)(b) that the Court must be satisfied that the Scheme has not been proposed for the purpose of avoiding the provisions contained in Chapter 6 of the CA. Notice of the second hearing was advertised in The Australian and The West Australian newspapers on 24 May 2013 as required by Order 11 of the Orders of 19 April 2013 and reg 3.4 of the Rules. Both Avocet and Lion One certified that all conditions precedent to the Scheme (other than the Court's approval) had been met. Those conditions precedent certificates were exhibited to the fourth affidavit of Mr Rear sworn on 31 May 2013.

CONSIDERATION 6 In Avocet No 1, I noted (at [23]) that the independent expert, RSM Bird Cameron, had concluded that in the absence of a superior proposal, the proposed Scheme was fair and reasonable and in the best interests of Avocet shareholders, offering a premium of 13.9% on the close price of Avocet shares on 16 April 2013. 7 Additionally, all directors of Avocet were in favour of the Scheme and an overwhelming majority of shareholders also voted in favour of it. The Scheme was clearly fair and reasonable because it provides a commercial benefit for shareholders. 8 I was also satisfied that there was proper disclosure of all relevant matters by Avocet. 9 There was no evidence before me to suggest that shareholders did not vote in good faith or for an improper purpose. No party appeared at the second hearing to oppose approval of the Scheme. 10 I also accepted that it was appropriate for Avocet to be granted an exemption under s 411(12) CA from compliance with s 411(11). Given that the implementation of the Scheme would result in Avocet becoming a wholly owned subsidiary of Lion One, there was no apparent utility in annexing the orders approving the Scheme to Avocet's Constitution.

CONCLUSION 11 For those reasons I was satisfied that the legislative requirements were met and that I should exercise my discretion to approve the Scheme. Accordingly I made orders in terms of Avocet's minute of proposed orders dated 30 May 2013. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.

CA, the Federal Court (Corporations) Rules 2000(Cth)

Corporations Act 2001(Cth)ss 411(4)(b), 411(11), 411(12), 411(17)(b)

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