Barrick Mining Company (Australia) Pty Ltd v Barrick Administration Company Pty Ltd, in the matter of Barrick Mining Company

Federal Court of Australia|2018-12-04|Before: Mr AJ, Colvin J

Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between the plaintiff and its sole shareholder, in the form set out in the affidavit of Zachary Sharp sworn 23 October 2018 at Annexure ZS-6, being at pages 110-121, be approved (Scheme of Arrangement).
Pursuant to s 411(12) of the Act, the plaintiff be exempted from compliance with the requirements of s 411(11) of the Act in relation to the Scheme of Arrangement.
Pursuant to s 413(1) of the Act (and using the definitions in the Scheme of Arrangement) each of the following transactions will occur in the following order, from the Effective Time, as set out below: (a) first, all Assets of the plaintiff will be transferred to and vested in the defendant without the need for any further act or deed; (b) secondly, all Liabilities of the plaintiff will be transferred to and become Liabilities of the defendant without the need for any further act or deed; (c) thirdly, any legal proceedings pending by or against the plaintiff will be continued by or against the defendant without the need for any further act or deed, other than an amendment of the record of the relevant court or tribunal; and (d) fourthly, the plaintiff will be deregistered by ASIC without winding up pursuant to s 413(1)(d) of the Act.
Pursuant to s 413(1)(g) of the Act, as and from the Effective Time (as defined in the Scheme of Arrangement), the defendant or any director or authorised employee of the defendant from time to time may sign all documents and do all things required to be done by the plaintiff, to complete or perfect the transfer of Assets and Liabilities of the plaintiff provided for in these orders, whether by lodgement, registration, notification or otherwise.
Pursuant to s 413(1)(g) of the Act, from the Effective Time, the defendant may use, disclose and otherwise handle all information transferred and vested in it by the plaintiff provided always that the defendant shall receive the information upon the same terms as the plaintiff held the information and subject to the Liabilities of the plaintiff in respect of that information.

COLVIN J: 1 Barrick Administration Company Pty Ltd (Barrick Admin) is the sole shareholder of Barrick Mining Company (Australia) Pty Limited (Barrick Mining). On 29 October 2018 I made orders for the calling of a meeting of Barrick Mining to consider a proposed scheme of arrangement. The scheme meeting was held on 5 November 2018. The scheme was approved. On 4 December 2018 I made orders approving the scheme. These are my reasons for my orders made on 29 October and 4 December 2018. 2 For a scheme of arrangement to be binding on members and creditors it must be approved by the requisite majority at a meeting convened in accordance with orders made by the Court and then approved by the Court: s 411(4) of the Corporations Act 2001 (Cth) and CSR Limited, in the matter of CSR Limited [2010] FCAFC 34; (2010) 183 FCR 358 at [7].

Reasons for scheme of arrangement 3 On the application to approve the calling of a meeting of Barrick Mining to consider a proposed scheme of arrangement, the evidence was to the effect that Barrick Mining is not a trading entity. It has no known liabilities. The undertaking of Barrick Mining is confined to enjoying rights as the holder of certain royalty interests. It became the holder of the royalty interests as part of the implementation of earlier schemes approved by the Court: Barrick (Lawlers) Pty Ltd v Barrick Mining Company (Australia) Pty Ltd, in the matter of Barrick (Lawlers) Pty Ltd [2015] FCA 1510 and Barrick (Lawlers) Pty Ltd v Barrick Mining Company (Australia) Pty Ltd, in the matter of Barrick (Lawlers) Pty Ltd (No 2) [2016] FCA 110. 4 The scheme (as then proposed) would collapse the assets and liabilities into Barrick Admin, the sole shareholder of Barrick Mining. Thereafter, Barrick Mining would be deregistered. 5 The financial statements presented to support the application were unaudited, but were verified by those who were familiar with the relevant accounts. Having regard to the nature of the application and the position of Barrick Admin as the sole shareholder of Barrick Mining there was no need to require audited accounts in order for information relevant to the proposed scheme to be reasonably and fairly presented to Barrick Admin as the sole shareholder. 6 The stated purpose of the scheme was to consolidate the corporate structure of the group of companies of which Barrick Mining and Barrick Admin form a part thereby saving unnecessary expense associated with the administration of Barrick Mining. It is a purpose of a kind that sensible business people might consider to be of benefit to Barrick Admin as shareholder.

Reasons for approving the convening of a meeting to approve the scheme 7 Generally, leave will not be given to convene a meeting to approve a scheme unless the proposed arrangement is of a kind that falls within the legislative provisions, is fit for consideration by shareholders and is likely to obtain Court approval if passed by the requisite majority and is unopposed when approval is sought: Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 504. 8 In considering whether to approve the convening of a meeting of shareholders to consider a particular scheme, the Court exercises a discretion. The evident purpose of the requirement for an approval from the Court is to supervise the circumstances in which shareholders may be invited to consider a scheme and thereby afford some protection for shareholders. The approach to be adopted was described in the following way by Emmett J in Central Pacific Minerals NL [2002] FCA 239 at [9]-[11] (accepted in CSR Limited at [12]): In exercising its discretion whether to convene a meeting, the Court will have regard to such matters as the acceptability of the documentation of the proposed arrangement, the commercial viability and morality of the arrangement, the likely acceptability of the arrangement, the bona fides of the proposals, whether the proposals could be achieved by another method and any objections or submissions by the Commission. It is always the practice of the Court, at the first stage, to go through the proposed arrangement, to raise matters as to the drafting of the documentation, to ascertain whether the arrangement complies with the substantive requirements of the law and to ensure that the arrangement, if given effect, will not involve any unfair or oppressive result. In considering whether to convene a meeting, the Court will take into account questions of public policy as well as commercial morality. The Court will have regard to the interests of parties who will be bound by the arrangement and who might be careless of their own best interests. While security holders of a company may be considered to be better judges than the Court could be of what is to their commercial advantage, that does not extend to the technical or mechanical aspects of an arrangement. Security holders are likely to be influenced largely by their understanding of the broad economic consequences of an arrangement. However, they are entitled to rely on the Court's approval as a sufficient safeguard against defects at the technical or mechanical level. Accordingly, for the purposes of protecting the interests of security holders who have not agreed to an arrangement and yet will be bound by it, the Court will ordinarily seek to ensure that the terms of the arrangement would be enforceable by all persons bound by it against those who are seeking to implement it or obtain benefits from it. The Court will also seek to ensure that the arrangement does not, without sufficient reason, include provisions that may create inroads upon or modify the benefits that a security holder bound by it might legitimately expect to obtain under it. The mere fact that the Court has convened a meeting does not, however, necessarily mean that the Court will approve the arrangement, even if the arrangement is unopposed at the third stage. 9 The role of the Court in considering whether to approve the convening of a meeting is supervisory. It is concerned with the legal effectiveness of the proposed arrangement if approved, the form of disclosure to be given to shareholders and whether the scheme is within the bounds of that which might be approved if unopposed by shareholders. Within those confines, the assessment of the commerciality of the proposal is a matter for shareholders. 10 However, in discharging the statutory role entrusted by s 411, the Court is dependent upon the discharge by counsel for the moving party of the obligation to make disclosure and to draw matters of significance to the attention of the Court. 11 The matters to be considered were summarised recently by Vaughan J in Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [2018] WASC 308 at [60]-[63]. I deal with those matters below. 12 Barrick Mining is a Part 5.1 body. As there is only one shareholder of Barrick Mining no issue arises as to separate classes of shareholders. 13 The proposed scheme is an arrangement between Barrick Mining and Barrick Admin as its sole shareholder. It will afford some benefit to shareholders in the form of efficiency gains in circumstances where the undertaking of Barrick Mining is confined to being a holder of the royalty interests. All of the undertaking of Barrick Mining as the holder of the royalty interests will be transferred to Barrick Admin which will carry on that undertaking. The ultimate shareholders of the two companies are the same. 14 The Australian Securities and Investments Commission (ASIC) was notified of the proposed scheme and given the required opportunity to consider the terms of the scheme and the explanatory statement and to make submissions to the Court. It did not seek to appear and make submissions. 15 There was a waiver of the need for an independent expert's report. 16 The explanatory statement provided a proper disclosure of the proposed scheme which was accurately summarised in written submissions provided in support of the application. The key information as to the assets and liabilities of Barrick Mining and the financial circumstances of Barrick Admin was verified by affidavit by those familiar with the financial circumstances of the companies. A checklist was provided which confirmed that the statement contained the information prescribed by Part 3 of Schedule 8 to the Corporations Regulations 2001 (Cth). 17 Having regard to the stated purpose of the scheme which I have described, it was bona fide and properly proposed. No oppression issue could arise. There was nothing to suggest that it was advanced to defeat the interests of creditors. Any unknown creditors would be able to proceed against an entity which holds the same assets to which there may be resort to meet a liability. Further Barrick Admin has other financial resources of about $2,500,000 and is currently supported by a cross guarantee. Also, there were benefits to creditors being able to proceed against Barrick Admin rather than have to seek to reinstate Barrick Mining and proceed in that way if arrangements were made for the voluntary liquidation of Barrick Mining. 18 No issue arose as to whether the purpose of the scheme was to avoid the application of Chapter 6 of the Corporations Act. 19 The procedural requirements concerning a chairperson and alternative chairperson for the meeting of shareholders were met. Although updated company searches were not provided with the application, they were provided before the hearing of the application for approval to convene the meeting. 20 There is no prohibition in the constitution of Barrick Mining that would prevent the scheme. 21 In all the circumstances, the scheme was one which, if it was approved, would be likely to be approved by the Court in the absence of any opposition. 22 In those circumstances, I concluded that it was appropriate to approve the convening of the meeting to approve the scheme.

Meeting 23 The meeting was convened and the scheme was approved by Barrick Admin on 5 November 2018.

Approval of Scheme 24 The Court has a discretion whether to approve a scheme which is usually exercised by considering the matters identified in Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited (No 3) [2010] FCA 400 at [35]-[43], namely: (1) whether the shareholders have voted in good faith and not for an improper purpose; (2) whether the proposal is fair and reasonable so that an intelligent and honest man or woman who was a member of the relevant class, properly informed and acting alone, might approve it; (3) 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; (4) whether there has been full and fair disclosure of all information material to the decision; (5) whether minority shareholders would be oppressed by the scheme; and (6) whether the scheme offends public policy. 25 In addition, consideration should be given to: (1) whether orders convening the scheme meeting were complied with; (2) whether the requisite majority supported the scheme; (3) any matters raised by ASIC; and (4) whether there is any indication that the obligation upon the moving party to make full disclosure has not been met. 26 Counsel provided written submissions for the application. No matters were disclosed for consideration by the Court. There was no opposition. ASIC did not seek to raise any matters. It was established that the meeting was duly convened, the scheme was supported by Barrick Admin as the sole shareholder and the resolution approving the scheme was duly passed. The scheme hearing was duly advertised. There are no conditions as to operation of the scheme which fall for consideration. 27 For reasons I have given in relation to the approval of the convening of the meeting the proposal is fair and reasonable and no issue of oppression or public policy arises. 28 In the circumstances I have described and having regard to the nature of the application, I was satisfied that the scheme should be approved and I made orders accordingly.

Additional orders 29 Orders were sought under s 413(1) to give effect to the scheme as approved. They were to provide for the transfer of assets and liabilities, the conduct of any litigation and then for Barrick Mining to be deregistered. They facilitated the execution of documents if required and made clear that information received by Barrick Admin was to be subject to the same obligations associated with the information as applied when it was in the hands of Barrick Mining. 30 It was drawn to my attention that not all the orders sought under s 413(1) were advertised. I note that s 413 provides for orders to be made to give effect to a scheme as part of the approval or at a later time. In my view, the orders sought need not be separately advertised as part of the notification of the scheme. It may be that in an appropriate case, the Court may require a separate notification before making orders of the kind sought under s 413 by reason of the subject matter. However where, as here, the orders are to give effect to the clear and notified terms of the scheme then no such notification is required. It is to be expected that any party with an interest or concern about such matters would have sought to be heard on whether the scheme should be approved. 31 I am satisfied that the additional orders were appropriate having regard to the nature of the scheme. 32 I also granted liberty to apply. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Colvin.

Corporations Act 2001(Cth)ss 411, 413

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