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

BANKS-SMITH J: 1 At a first scheme court hearing on 20 February 2024, I made orders approving the convening of a Scheme Meeting of shareholders of 92 Energy Limited for the purpose of considering a Scheme of arrangement and approving the distribution of a Scheme Booklet. 2 As explained in the reasons relating to those orders (92 Energy Limited, in the matter of 92 Energy Limited [2024] FCA 114), the Scheme forms part of a broader transaction by which 92 Energy is to become a wholly owned subsidiary of Atha Energy Corp. In addition to the Scheme, Atha has entered into an agreement with Latitude Uranium Inc. under which Atha proposes to acquire all of the issued and outstanding common shares of Latitude that it does not already own by way of a court-approved plan of arrangement in accordance with the Business Corporations Act (Ontario). 3 The Scheme Meeting was held on 25 March 2024. 92 Energy shareholders approved the Scheme by the requisite statutory majorities. 4 Section 411(4) of the Corporations Act 2001 (Cth) relevantly provides that an arrangement is binding on the members of a company and the company if, at a meeting convened in accordance with an order of the Court, a resolution in favour of the arrangement is passed by the given statutory majorities, and the arrangement is approved by order of the Court. 5 At the second court hearing on 27 March 2024, 92 Energy sought approval of the Scheme. Having regard to the evidence before me, and having heard submissions from senior counsel, I was satisfied that it was appropriate to approve the Scheme in accordance with the orders made that day. 6 These are my reasons for doing so.

Evidence for the second court hearing 7 In addition to the affidavits on which it relied at the first court hearing, 92 Energy sought to rely on an affidavit of Steven Wood, the company secretary of 92 Energy, who deposed on information and belief to compliance with court orders and statutory requirements, in accordance with the Court's Schemes of Arrangement Practice Note GPN-SOA. 8 Relevantly, Mr Wood addressed the registration of the Scheme Booklet with ASIC; the dispatch of materials to 92 Energy Shareholders in accordance with the Court's orders; publication of an ASX Announcement giving notice of the second Court hearing; and the holding of the Scheme Meeting and the passing of the Scheme Resolution, including a copy of the poll report. 9 I also received a letter from ASIC confirming that it has no objection to the Scheme, evidencing satisfaction of the requirements of s 411(17) of the Corporations Act, and condition precedent certificates as to the satisfaction of the conditions precedent to the Scheme. 10 A supplementary affidavit sworn by Hendrik van Aswegen, solicitor for 92 Energy, deposed to voter turnout at the Scheme Meeting.

Principles 11 The Court has a discretion whether to approve a scheme under s 411(4), and is not bound to approve it merely because the statutory majorities have been achieved: Re NRMA Ltd (No 2) [2000] NSWSC 408 at [21] (Santow J). 12 The matters the Court must take into account in deciding whether to approve a scheme have been summarised in many cases: see, for example, Chevron (TAPL) Pty Ltd v Chevron Australia Pty Ltd, in the matter of Chevron (TAPL) Pty Ltd (No 2) [2022] FCA 381 at [9], citing Seven Network Limited, in the matter of Seven Network Limited (No 3) [2010] FCA 400 at [31]-[44] (Jacobson J). They include whether: (a) the orders of the Court convening the scheme meeting were complied with; (b) the resolution to approve the scheme was passed by the requisite majority, and whether other statutory requirements have been satisfied; (c) all conditions to which the scheme is subject (other than court approval and lodgement of the Court's orders with ASIC) have been met or waived; (d) the scheme is fair and reasonable so that an intelligent and honest shareholder, properly informed and acting alone, might approve it; (e) there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme; (f) the company has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion; and (g) the Court is satisfied under s 411(17) that the scheme has not been proposed to avoid Chapter 6 of the Corporations Act or is satisfied that the company has a statement from ASIC that it has no objection to the scheme. 13 However, the Court is not to substitute its commercial judgment for that of the body of members: Seven Network at [33]. 14 Further as to the reference to what is 'fair and reasonable', Beach J said the following in Amcor Limited, in the matter of Amcor Limited (No 2) [2019] FCA 842 at [11]: Now as I have said, my task is to consider whether the Scheme is fair and reasonable with the test of fairness and reasonableness including a consideration of whether 'an intelligent and honest [shareholder], properly informed, acting alone, might approve [the scheme]' (Fowler v Lindholm (2009) 178 FCR 563 at [79] per Emmett, Gordon and Jagot JJ). But the Scheme shareholders' vote in favour of the Scheme is evidence of its inherent fairness. Put another way, if a majority of the Scheme shareholders have approved the Scheme, it is unlikely that the Scheme would be unreasonable. Further, I do not have to be satisfied that no better Scheme could have been devised.

Formal matters 15 I was satisfied on the evidence that all formal matters had been complied with regarding the dispatch of the Scheme Booklet, the advertising of the second Court hearing, the conduct of the Scheme meeting and the requisite voting majorities. 16 92 Energy shareholders approved the Scheme by the requisite statutory majorities. Approximately 99.65% of shares by value and approximately 94.62% of 92 Energy shareholders by number present and voting at the Scheme Meeting, voted in favour of the Scheme (of those voted for and against). 17 To the extent evidence was initially lacking as to voter turnout percentages, it was provided by Mr van Aswegen's affidavit. 18 I was also satisfied that the Scheme booklet was registered with ASIC and that the version lodged with ASIC was substantially in the form of the documents approved by the Court on 20 February 2024. I was also informed that although not required by the court orders, the Scheme Booklet was provided to 92 Energy shareholders who became shareholders after 20 February 2024.

Good faith and proper purpose 19 I had no reason to doubt that 92 Energy's shareholders voted in good faith and not for an improper purpose. I took into account that the independent expert, BDO Corporate Finance (WA) Pty Ltd, opined that in the absence of a superior offer and considering the implications of the transaction as a whole, the Scheme is fair and reasonable for shareholders. Further, neither ASIC nor any shareholder appeared at the second court hearing to object to its approval.

Fair and reasonable scheme 20 As observed in Amcor Limited, approval by the requisite majorities is prima facie evidence that it is fair. The expert's opinion provided further support. No superior proposal had emerged. The Scheme contemplates measures to protect 92 Energy shareholders against performance risk (as addressed in the previous reasons).

Full and fair disclosure 21 I was satisfied to the necessary level on the evidence before me at the first court hearing that there would be full and fair disclosure to 92 Energy shareholders regarding the Scheme, having regard to the content of the Scheme Booklet. There was nothing new before the Court that changed that view.

Satisfaction of s 411(17) 22 As noted, the Court received a copy of ASIC's 'no objection' statement before the hearing, satisfying the requirements of s 411(17) of the Corporations Act. It is otherwise well established that the Court should not refuse approval of a scheme of arrangement merely because it could have been effected under Chapter 6 of the Corporations Act.

Public policy and oppression of minorities 23 There is no evidence before the Court that any minority 92 Energy shareholders have been oppressed or that the Scheme offends any aspect of public policy.

Other 24 This was, for all intents and purposes, a conventional all-scrip acquisition scheme. There is only one other matter to raise. 25 92 Energy disclosed at the first hearing that Atha intends to rely on this Court's approval for the purpose of qualifying for the exemption under s 3(a)(10) of the Securities Act of 1933 (USA) from US registration requirements in connection with the issue and exchange of scheme consideration under the Scheme. It also seeks to rely on this Court's approval for the purpose of qualifying for the exemption from the prospectus requirements of s 2.11 of the harmonised Canadian National Instrument 45-106 in connection with the implementation of, and provision of consideration under, the Scheme. 26 I addressed such issues recently in Allkem Limited, in the matter of Allkem Limited (No 2) [2023] FCA 1657 (Allkem (No 2)). For convenience I extract those reasons: [34] In summary, in the case of an Australian scheme of arrangement in which the bidder is proposing to issue securities as consideration, including to target members in or who are citizens or residents of the US, the bidder may be able to avoid the need to comply with the US registration/prospectus requirements if the scheme of arrangement satisfies the conditions for the exemption from registration afforded by s 3(a)(10) of the Securities Act of 1933: see generally Amcor Limited at [33]. [35] The exemption stipulated in s 3(a)(10) of the Securities Act of 1933 is in the following terms: (10) Except with respect to a security exchanged in a case under title 11 [of the United States Code], any security which is issued in exchange for one or more bona fide outstanding securities, claims or property interests, or partly in such exchange and partly for cash, where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court, or by any official or agency of the United States, or by any State or Territorial banking or insurance commission or other governmental authority expressly authorized by law to grant such approval. [36] There are many examples of second court hearings for schemes where this issue has arisen. In short, the courts have proceeded on the basis that the exemption would be available if the court in question holds a hearing to determine whether the proposed terms and condition are fair to all those who receive securities. I have set out above the approach to whether a scheme is considered fair and reasonable (at [10]-[11]). It is to be noted, however, that it is not for the court to express any view as to whether its procedures or processes are sufficient to satisfy the requirements of the exemption: Aston Resources Limited, in the matter of Aston Resources Limited (No 2) [2012] FCA 401 at [8] (Jacobson J), citing Central Pacific Minerals NL [2002] FCA 239 (Emmett J). Further, the court does not act as the valuer of shares, but is assisted by expert opinion on that matter: Aston Resources at [11], citing Permanent Trustee Company [2002] NSWSC 1177 (Barrett J). [37] However, as a line of authorities indicates, a standard approach has been adopted in relation to the exemption, noting particular matters: Atlantic Gold NL, in the matter of Atlantic Gold NL (No 2) [2014] FCA 869 at [8] (Jacobson J); In the matter of Ardent Leisure Limited trading as Ardent Leisure Limited; Ardent Leisure Management Limited in its capacity as the responsible entity of the Ardent Leisure Trust (No 2) [2018] NSWSC 1990 at [19] (Black J); Amcor Limited at [37]-[38]; Tronox Limited, in the matter of Tronox Limited (No 2) [2019] FCA 681 at [51] (O'Callaghan J); Re Ellerston Global Investments Ltd [2020] NSWSC 1108 at [18] (Black J); and Ex Parte Saracen Mineral Holdings Ltd [No 2] [2021] WASC 32 at [63] (Hill J). 27 I note for completion that the relevant paragraph of the Canadian National Instrument 45-106 provides that: 2.11 The dealer registration requirement does not apply in respect of a trade in a security in connection with (a) an amalgamation, merger, reorganization or arrangement that is under a statutory procedure … 28 I will follow the approach referred to in Allkem (No 2). Therefore, I note that: (a) I was advised before the commencement of the hearing to approve the Scheme that reliance would be placed on the s 3(a)(10) exemption of the Securities Act of 1933 and the exemption provided under the Canadian National Instrument 45-106 on the basis of my approval of the Scheme; (b) I have been informed that Atha shares are to be offered as scheme consideration, and an independent expert report concluded that the proposal is in the best interests of shareholders of 92 Energy; (c) I held a hearing in open court on 27 March 2024 to consider the fairness and reasonableness of the proposed Scheme, and it was open to any member of the public, including any member of 92 Energy, to attend; (d) notice of the date of the approval hearing was included in the Scheme Booklet provided to all shareholders of 92 Energy prior to the proposal being considered by the Scheme Meeting and was advertised on the ASX, so that those to whom the securities are to be issued had the opportunity to oppose or otherwise raise any objection to the Scheme; and (e) no 92 Energy shareholder gave notice of any intention to appear at the second court hearing to oppose the approval of the Scheme, and none in fact opposed it.

Conclusion 29 Having regard to the above matters, including the support of the Scheme shareholders, the opinion of the independent expert, the absence of opposition to the Scheme by any shareholder and the comprehensive disclosure in the Scheme Booklet, I exercised my discretion to approve the Scheme. 30 I also granted the exemption from the requirements of s 411(11) - I accepted 92 Energy's submission that there is no utility in having the Court's orders annexed to its constitution, as those orders do not effect a change to the constitution. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Banks-Smith.