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[2013] FCA 622
Federal Court of Australia
2013-06-19
Barker J
Original judgment source is linked above.
overview 1 On 19 June 2013, I approved a scheme of arrangement in relation to the plaintiff (Bathurst). These are the reasons for so doing.
second hearing 2 This is the second hearing of Bathurst's application for orders approving a scheme of arrangement between it (Bathurst) and its members (shareholders) pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act) (scheme), and exempting Bathurst pursuant to s 411(12) of the Act from compliance with the requirements of s 411(11). 3 The primary question that arises is whether approval should be granted for the scheme whereby all of the ordinary shares in Bathurst will be transferred to Bathurst Resources (New Zealand) Limited (Bathurst NZ), and in return each Bathurst shareholder (other than certain overseas shareholders) will receive one ordinary share in Bathurst NZ for every Bathurst share that they hold. 4 On 10 May 2013, at the first hearing of the application, orders were made for the convening of a meeting of shareholders (scheme meeting) and the Court also approved the scheme booklet (which contained an explanatory statement required by s 412(1)(a) to accompany notices of the meeting): see Bathurst Resources Limited, in the matter of Bathurst Resources Limited [2013] FCA 517. 5 Section 411(4) primarily controls the process by which a scheme of arrangement may become binding, and so the matters to be considered at the second hearing, in the following terms: (4) A compromise or arrangement is binding on the creditors, or on a class of creditors, or on the members, or on a class of members, as the case may be, of the body and on the body or, if the body is in the course of being wound up, on the liquidator and contributories of the body, if, and only if: (a) at a meeting convened in accordance with an order of the Court under subsection (1) or (1A): (i) in the case of a compromise or arrangement between a body and its creditors or a class of creditors - the compromise or arrangement is agreed to by a majority in number of the creditors, or of the creditors included in that class of creditors, present and voting, either in person or by proxy, being a majority whose debts or claims against the company amount in the aggregate to at least 75% of the total amount of the debts and claims of the creditors present and voting in person or by proxy, or of the creditors included in that class present and voting in person or by proxy, as the case may be; and (ii) in the case of a compromise or arrangement between a body and its members or a class of members - a resolution in favour of the compromise or arrangement is: (A) unless the Court orders otherwise - passed by a majority in number of the members, or members in that class, present and voting (either in person or by proxy); and (B) if the body has a share capital - passed by 75% of the votes cast on the resolution; and (b) it is approved by order of the Court. It is understood that the Court has a broad discretion to approve a scheme under s 411(4)(b).
procedural requirements 6 The first question is whether there has been a meeting convened in accordance with the orders made by the Court at the first hearing and whether other matters required by the orders have been attended to. 7 In this regard all procedural matters have been satisfied. An office copy of the orders made by the Court was lodged with the Australian Securities and Investments Commission (ASIC) and the scheme booklet approved by the Court has also been registered with ASIC. Further, the scheme booklet and proxy appointment forms in the form approved by the Court were dispatched to shareholders on 14 May 2013. 8 The scheme meeting was then convened and held in accordance with the constitution of Bathurst, the Act and the orders of the Court, and statutory majorities were obtained at the meeting. Further, proxies received were collated and at the scheme meeting the votes cast were recorded. 9 Finally, notice of the second hearing of the application was published in "The Australian" and "The West Australian" newspapers on 14 June 2013, in accordance with the orders of the Court.
court's discretion 10 So far as the Court's discretion is concerned, I am satisfied that the scheme has been advanced in good faith and is fair and reasonable in that it will yield commercial benefits for the shareholders and is of a kind that is fair and reasonable from the viewpoint of an intelligent and honest person: Re Central Pacific Minerals NL [2002] FCA 239 at [14]. Moreover, an independent expert has concluded that the scheme is, on balance, in the best interests of the shareholders. 11 There is also no person who has indicated an intention to appear at this second hearing or otherwise intends to object to the approval of the scheme. 12 Finally, the conditions precedent to the scheme have been satisfied, save for the approval of the scheme by order of the Court.
section 411(17) conditions 13 The Court's ultimate approval of the scheme is dependent upon the fulfilment of one of the two alternative conditions set out in s 411(17) of the Act: (17) The Court must not approve a compromise or arrangement under this section unless: (a) it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6; or (b) there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement; but the Court need not approve a compromise or arrangement merely because a statement by ASIC stating that ASIC has no objection to the compromise or arrangement has been produced to the Court as mentioned in paragraph (b). 14 First, ASIC has provided a written statement to the effect that it has no objection to the scheme. 15 Secondly, with respect to the condition in s 411(17)(a), I note the comments of O'Loughlin J in Re ACM Gold Limited; Re Mt Leyshon Gold Mines Limited (1992) 34 FCR 530 at 542-543, that s 411(17)(a): …requires the court to have regard to that which has been proposed - not to that which might have been proposed. If there are two ways of achieving the same object and one of them entails the use of Ch 6, the adoption of the second does not mean, without more, that the second was proposed for the purpose of enabling some person to avoid the operation of any of the provisions of Ch 6 … If [the] transaction carries the hallmarks of a commercial enterprise - if there is no issue present that points to a contrivance or to an element that is unreal or unnecessary - one is entitled to assess the transaction at face value. 16 In my view, the scheme carries the hallmarks of a commercial enterprise. There is nothing to suggest that it has been proposed for the purpose of avoiding the operation of Ch 6 of the Act. 17 Therefore, both of the conditions in s 411(17) are satisfied, even though satisfaction of only one is necessary.
section 411(11) exemption 18 The Court is also asked to make an exemption order under s 411(12) of the Act, which will exempt Bathurst from the s 411(11) obligation requiring a copy of every order of the Court made for the purposes of s 411(4)(b) to be annexed to every copy of the company's constitution issued after the order was made. In circumstances where Bathurst will, from implementation of the scheme, become a wholly owned subsidiary of Bathurst NZ, the s 411(11) requirement will serve no useful purpose. The Court will therefore make an order to that effect.
conclusion and orderS 19 In those circumstances the Court approves the scheme in the terms proposed by Bathurst and grants it an exemption from compliance with s 411(11). I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.