Chevron (TAPL) Pty Ltd v Chevron Australia Pty Ltd, in the matter of Chevron

Federal Court of Australia|2023-12-13|Before: Mr AJ, Jackson J

Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth), the scheme of arrangement between the plaintiff and the holders of fully paid ordinary shares in the capital of the plaintiff, as set out at pages 368-382 of the scheme booklet distributed to shareholders which is Exhibit 1, is approved.
Pursuant to s 411(12) of the Corporations Act, the plaintiff is exempted from compliance with s 411(11) in relation to the scheme.
The plaintiff must lodge an office copy of these orders with the Australian Securities and Investments Commission by 14 December 2023. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

JACKSON J: 1 On 3 November 2023 I made orders convening a meeting of the shareholders of the plaintiff, Talon Energy Ltd (Scheme Meeting), for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement (Scheme): Re Talon Energy Ltd [2023] FCA 1362 (Talon Energy (No 1)). 2 The Scheme provides for Strike Energy Limited to acquire all of the fully paid ordinary shares in Talon. The proposed scheme consideration is 0.4828 fully paid ordinary shares in Strike for every one share in Talon. 3 The Scheme Meeting was held on 7 December 2023. Talon shareholders approved the Scheme by the requisite statutory majorities. 4 On 13 December 2023, the second hearing for approval of the Scheme pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) was held and I made an order approving the Scheme on that date and ancillary orders. These are the reasons for those orders.

Materials relied upon 5 In addition to the evidence already adduced at the first hearing, Talon relied upon the following affidavits: (a) an affidavit of a project coordinator at Computershare Investor Services Pty Limited, Talon's share registry, Danielle Maree Janette Petch, affirmed 1 December 2023; (b) an affidavit of a senior relationship manager at Computershare, Rodney Rex Somes, sworn 7 December 2023; (c) an affidavit of a senior vice president of Alliance Advisors whom Talon engaged to conduct a shareholder engagement campaign, Brendan Patrick Henry, sworn 8 December 2023; (d) a second affidavit of a partner at Steinepreis Paganin, Toby Albert Hicks, sworn 8 December 2023; (e) a fifth affidavit of a senior associate at Steinepreis Paganin, Adrian Nicolas Di Menna sworn 11 December 2023; and (f) a sixth affidavit of Mr Di Menna sworn 13 December 2023.

Requirements for approval of a scheme of arrangement 6 The principles that apply to the role of the Court in approving a scheme of arrangement under s 411(4)(b) of the Corporations Act are well established. 7 A scheme of arrangement is binding on members of a company if, at a meeting convened in accordance with an order of the Court, a resolution in favour of the scheme is passed by a majority in number of members present and voting, and by 75% of the votes cast on the resolution, and the scheme is approved by the Court: Corporations Act s 411(4). 8 The Court has a discretion whether to approve a scheme, and it is not bound to approve it merely because it has previously made orders convening a meeting to approve the scheme: Re Seven Network Limited (No 3) [2010] FCA 400 at [31] (Jacobson J). The fundamental issue informing the exercise of the discretion is whether the proposal is fair and reasonable, in the sense that an intelligent and honest shareholder, who is a member of the relevant class, and acting alone in respect of their interests as shareholder, might approve it. The jurisdiction is supervisory; the Court is concerned to be satisfied that there has been an absence of oppression and that the compromise or arrangement is one that is capable of being accepted: see Re NRMA Limited (No 2) [2000] NSWSC 408 at [22] (Santow J); approved in Fowler v Lindholm [2009] FCAFC 125; (2009) 178 FCR 563 at [79] (Emmett, Gordon and Jagot JJ). 9 It has been said that the shareholders' vote in favour of a scheme is evidence of its inherent fairness; if a majority of the shareholders have approved the scheme, it is unlikely that the scheme would be unreasonable: Re Amcor Limited (No 2) [2019] FCA 842 at [11] (Beach J). 10 The following matters are relevant to the exercise of the statutory discretion (Re Seven Network at [35]-[40], and the cases cited there): (a) whether the shareholders have voted in good faith and not for an improper purpose; (b) whether the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the discretion; (c) whether there has been full and fair disclosure of all information material to the shareholders' decision; (d) whether minority shareholders would be oppressed by the scheme; and (e) whether the scheme offends public policy. 11 Other matters of which the Court must be satisfied when deciding whether to approve a scheme include whether: (a) there has been compliance with the orders of the Court convening the scheme meeting; (b) the resolution to approve the scheme has been passed by the requisite majorities; (c) all conditions to which the scheme is subject (other than Court approval and lodgement of the Court's orders with the Australian Securities and Investments Commission (ASIC)) have been met or waived; (d) all other statutory requirements have been satisfied; and (e) the Court is satisfied under s 411(17) that the scheme has not been proposed to avoid Chapter 6 of the Corporations Act (regarding takeovers), or that the company has a statement from ASIC that it has no objection to the scheme. See Re APN Outdoor Group Limited (No 2) [2018] FCA 1633 at [5] (Markovic J); Chevron (TAPL) Pty Ltd v Chevron Australia Pty Ltd, in the matter of Chevron (TAPL) Pty Ltd (No 2) [2022] FCA 381 at [9] (Banks-Smith J). 12 In general, it is not the Court's function to override the views of the shareholders, but the Court is not a mere rubber stamp and will look at the arrangement to ensure that it is a reasonable one: Re Wesfarmers (No 2) [2018] WASC 357 at [15] (Vaughan J). The Court is heavily reliant on counsel to bring to its attention those features of the scheme that require attention: Re Seven Network at [42].

ASIC lodgement 13 Talon's solicitors registered the Scheme booklet with ASIC in substantially the form approved by the Court and provided ASIC with a sealed copy of the first hearing orders.

Dispatch of the Scheme materials to shareholders 14 Ms Petch's affidavit provides evidence of the dispatch of the Scheme Booklet in accordance with the first hearing orders, which had the effect of truncating (slightly) the notice periods required under the Corporations Act: see Re Essential Metals Limited (No 2) [2023] FCA 1306 at [18]-[22].

The Scheme Meeting 15 Mr Hicks' second affidavit gives evidence of the conduct of the Scheme Meeting, which was held in accordance with the orders, including the taking of a poll on the resolution to approve the Scheme. 16 Mr Somes' affidavit and Mr Hicks' second affidavit contain evidence that the resolution to approve the Scheme was satisfied by the requisite majorities for the purposes of s 411(4)(a)(ii) as follows: (a) 85.57% of shareholders by number (headcount) and 94.89% of votes cast were in favour of approving the Scheme; and (b) 14.43% of shareholders by number (headcount) and 5.11% of votes cast were against the Scheme. 17 Talon released the results of the Scheme Meeting to the Australian Securities Exchange on 7 December 2023. 18 About 39.06% of the total shares on issue were voted at the Scheme Meeting by about 8.76% of eligible shareholders. This is within the range of acceptable participation by the percentage of votes and by headcount: see generally Re Essential Metals at [33]-[37] and cases cited there. There is no reason to think that the turnout was affected by any procedural irregularity, and it compares favourably with the turnout at Talon's most recent annual general meeting.

No objection from ASIC 19 ASIC has provided a letter for the purposes of s 411(17) confirming that it has no objection to the compromise or arrangement.

Conditions precedent 20 Certificates from both Talon and Strike were produced to the Court, verifying that all conditions precedent to the Scheme (other than Court approval) had been satisfied or waived. 21 Talon appropriately drew to my attention a dispute between it and Strike in which Strike alleged, and Talon denied, that Talon had breached a condition precedent to the Scheme Implementation Deed concerning the alleged early payment (into escrow) of financial advisory fees to Royal Bank of Canada. The dispute arose in mid-November of this year. There was evidence that it was subsequently resolved on terms that included (without admission) the waiver by Strike of the relevant condition precedent. It was therefore no obstacle to the approval of the Scheme.

The exercise of the discretion 22 I was satisfied that there was no reason not to approve the Scheme. There was no evidence of any minority oppression, and no suggestion that the Scheme was proposed other than in good faith for a legitimate commercial purpose. I described the potential commercial benefits of the transaction for Talon shareholders in Talon Energy (No 1) and need not repeat them. 23 I have also taken into account the independent expert's conclusion that, in the absence of a superior proposal, the Scheme is fair and reasonable to Talon shareholders and therefore in their best interests. There is no evidence of a superior proposal. Neither ASIC nor any shareholder appeared at the second hearing to object to the approval of the Scheme. The Scheme was a proposal which an intelligent and honest shareholder acting in their own interests could approve. 24 I was satisfied on the evidence before me at the first hearing that there would be full disclosure to shareholders regarding the Scheme. Nothing before me at the second hearing, including evidence of the conduct of shareholder engagement calls by Alliance, changed that view. There was no reason to think that the votes in favour of the Scheme by the requisite majorities of shareholders represented anything other than their properly informed judgment that the Scheme was in their best interests as shareholders. 25 Talon submitted that there was no need for supplementary disclosure or adjournment of the Scheme Meeting due to the issue considered above concerning the alleged breach of a condition precedent. The resolution of the dispute described above happened before shareholders voted at the Scheme Meeting, so I was satisfied that there had been no need for supplementary disclosure to them. 26 There was also no reason to suppose that the Scheme offended public policy.

Other relevant matter - the Gurvantes Transaction 27 At the first hearing, Talon directed the Court's attention to a transaction (the Gurvantes Transaction) which was to be put to Talon shareholders at an extraordinary general meeting (to be held before the Scheme Meeting). The details of the Gurvantes Transaction are described in Talon Energy (No 1) at [19]-[22] and need not be repeated. At the extraordinary general meeting, Talon sought and obtained approval for the Gurvantes Transaction, which has now completed. No shareholders raised any queries or concerns with regard to the Gurvantes Transaction at the extraordinary general meeting.

Scheme approved 28 For those reasons, orders approving the Scheme were made. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.

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