Clean Seas Seafood Limited, in the matter of Clean Seas Seafood Limited [2025] FCA 502 (12 May 2025)

1. The Court notes the letter from ASIC to the plaintiff dated 12 May 2025 was produced at the hearing.

1. Pursuant to rule 2.13(1) of the Federal Court (Corporations) Rules 2000 (Cth) (Rules), Yumbah Aquaculture Limited ACN 082 219 636 (Yumbah) has leave to be heard in the proceeding without becoming a party to it.
2. Pursuant to subsection 411(1) and section 1319 of the Corporations Act 2001 (Cth) (Act), the plaintiff, Clean Seas Seafood Limited ACN 094 380 435 (Clean Seas) convene and hold a meeting of its members (Scheme Meeting):

(a) for the purpose of considering and, if thought fit, agreeing (with or without modification) to the scheme of arrangement (Scheme) proposed to be made between Clean Seas and its members (Clean Seas Members), the terms of which are set out in Annexure A to these orders; and

(b) to be held on 23 June 2025 commencing at 11:00am (Adelaide time) in-person at the Level 3, 170 Frome Street, Adelaide SA 5000.

1. Pursuant to subsection 411(1) and section 1319 of the Act, the Scheme Meeting be convened by sending on or before 23 May 2025:

(a) in the case of each Clean Seas Member for whom Clean Seas has an email address on record or who have elected to receive email communications (Email Member) an email containing hyperlinks which:

(i) enable the Email Member to access, view and download an electronic copy of a document substantially in the form of the document which is Annexure RJG9 of Affidavit of Robert John Gratton affirmed on 9 May 2025 filed in this proceeding (Scheme Booklet); and

(ii) provide access to an online portal or website which enables the Email Member to lodge a proxy and voting instructions for the Scheme Meeting online.

(b) in the case of each Clean Seas Member who is not an Email Member and have elected to receive hard copy communications (Hardcopy Members):

(i) an access letter setting out URL addresses from which the Hardcopy Member can:

1. view and download an electronic copy of the Scheme Booklet;
2. view, download and lodge online a proxy for the Scheme Meeting and voting instructions,

(ii) a hardcopy of the Scheme Booklet; and

(iii) a hardcopy proxy form and a reply-paid envelope to lodge the proxy form and voting instructions for the Scheme Meeting.

1. If Clean Seas receives (through it share register provider, Boardroom), a notification that the email sent to the Email Member was not delivered, Clean Seas is to send those Email Members the Notice and Access Letter in hard copy by prepaid post (for Email Members whose address on the Register is in Australia) or prepaid airmail (for Email Members whose address on the Register is outside Australia) within a reasonable time thereafter and, in any event, no later than 28 days prior to the Scheme Meeting.
2. The documents referred to in order 3(b) be sent by prepaid ordinary post to the Clean Seas Member's address recorded in Clean Seas's register of members.
3. Subject to these Orders, the Scheme Meeting be convened, held and conducted in accordance with the provisions of:

(a) Part 2G.2 of the Act that apply to a meeting of the Clean Seas Members; and

(b) Clean Seas' constitution that apply in relation to meetings of members and that are not inconsistent with Part 2G.2 of the Act.

1. Pursuant to s 1319 of the Act:

(a) Ms Katelyn Adams or, failing her, Mr Marcus Stehr be chairperson of the Scheme Meeting.

(b) The chairperson of the Scheme Meeting shall have the power to adjourn the Scheme Meeting in their absolute discretion to such time, date and place as they consider appropriate.

(c) At the Scheme Meeting, a Clean Seas Member, present and entitled to vote, in person or by proxy or by an attorney under power or by corporate representative, shall constitute a quorum.

(d) A proxy in respect of the Scheme Meeting will be valid and effective if, and only if, it is completed and delivered in accordance with its terms or a proxy is lodged online in accordance with the instructions on the online portal or website referred to in orders 3(a)(ii)and 3(b)(i)(B) and received by Clean Seas at 11:00am (Adelaide time) on 20 June 2025.

(e) Clean Seas may provide access to the Scheme Meeting for such other persons as it considers appropriate.

(f) A poll must be taken to decide the resolutions put to the vote at the Scheme Meeting and any provision in the constitution of Clean Seas requiring voting to be by show of hands will be disregarded for this purpose.

1. The votes cast at the poll by Invia Custodian Pty Ltd, Research Corporation Pty Ltd and Melbourne Securities Corporation Ltd as trustee for the Agfood Opportunities Fund (the Hall Entities) are to be marked and recorded by Clean Seas so as to enable the subsequent ascertainment of the total votes cast by each of the Hall Entities.
2. On or before 13 May 2025, Clean Seas is to give notice of the hearing of its application pursuant to s.411(4) of the Act by publishing an announcement via Clean Seas' Australian Securities Exchange announcements platform and its website which sets out the details for the second Court hearing and the process for any person wishing to appear at that hearing to oppose the approval of the Scheme, together with an address for service of Clean Seas.
3. Pursuant to rule 1.3 of the Rules, compliance with the following provisions of the Rules be dispensed with:

(a) rule 2.4(1) to the extent that the rule requires the affidavit filed with the Originating Process to state all the facts in support of the Originating Process;

(b) rule 2.15; and

(c) rule 3.4 and Form 6.

1. The further hearing of the Originating Process is adjourned to the Honourable Justice O'Sullivan at 10:00am (AEDT) on 4 July 2025 or as soon thereafter as the business of the Court allows.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANNEXURE A

Scheme of Arrangement

[The Order entered is available on the Commonwealth Courts Portal, which attaches the Scheme of Arrangement.]

1. Clean Seas Seafood Ltd ACN 094 380 435 is a company limited by shares, registered in South Australia, and listed on the Australian Securities Exchange (ASX) with a secondary listing on Euronext Growth Osle (OSE). It applies for orders pursuant to s 411(1) of the Corporations Act 2001 (Cth) to convene and hold a meeting of its Shareholders for the purposes of considering a proposed Scheme of Arrangement under Part 5.1 of the Act.
2. Clean Seas business is full cycle breeding, farming, processing and marketing of Yellowtail Kingfish. It is one of the largest producers of aquaculture Yellowtail Kingfish outside of Japan.
3. The proposed Scheme involves Yumbah Aquaculture Ltd acquiring all the Clean Seas Member Shares.
4. Yumbah is an unlisted public company whose business is shellfish aquaculture.
5. The application was heard on 12 May 2025 for orders pursuant to s 411(1) of the Act at which time I made the orders sought and indicated that I would publish reasons for doing so. These are those reasons.

(a) Jonathan Alan Kramersh affirmed 3 April 2025 (first Kramersh affidavit) and 9 May 2025 (second Kramersh affidavit) together with the annexures to both affidavits; and

(b) Robert John Gratton affirmed 9 May 2025 together with the annexures thereto (Gratton affidavit).

1. Yumbah applied for, and was granted, leave to appear on the application as an interested person pursuant to r 2.13 of the Federal Court (Corporation) Rules 2000 (Cth). It reads the affidavit of David Wood sworn 9 May 2025 together with the annexures thereto (Wood affidavit).
2. Yumbah tendered on the application an updated circulating resolution of the Directors of Yumbah which was received in evidence on the application as Exhibit IP-1.
3. Senior Counsel for Clean Seas provided a detailed outline of submissions. These reasons are substantially based upon that outline.

1. Yumbah first approached Clean Seas in December 2024 with a non-binding indicative and incomplete expression of interest to acquire all of Clean Seas' shares. That approach followed the announcement by Clean Seas in November and December 2024 of a reduced harvest for its Kingfish in its Year Class 24 cohort.
2. The effect of the reduced harvest is that Clean Seas must either engage in a capital raising, which will have a diluting effect on the current share price or, alternatively, renegotiate current debt facilities with the Commonwealth Bank of Australia which matures on 31 July 2025, but with no guarantee that those facilities will be renewed or extended.
3. After the initial proposal, Clean Seas established an Independent Board Committee to evaluate and negotiate that proposal.
4. A further non-binding indicative proposal was made to Clean Seas on 31 January 2025 which the IBC resolved should be taken to the Shareholders.
5. A Scheme Implementation Deed was entered into between the parties on 31 March 2025, amended on 15 April 2025.
6. An Independent expert, BDO Corporate Finance Limited, has prepared a draft report dated 13 May 2025. That date is the day after this hearing - being 12 May 2025, however it has that date because in the event the Court makes orders, Clean Seas intends for BDO's report to be finalised and formally signed on that day. BDO's opinion is that the Scheme is fair and reasonable and in the interests of the Shareholders in the absence of a superior proposal.
7. In reaching the conclusion that the proposed Scheme is fair and reasonable, BDO sets out a graphical comparison of its valuation of a Clean Seas share prior to the proposed transaction on a controlling interest basis and the default cash consideration offered to the Shareholders under the proposed transaction. It reveals a value for a Clean Seas share as between $0.124 and $0.176. The default cash consideration offered to the Shareholders is $0.14.
8. The IBC is unanimous in their recommendation that Clean Seas shareholders vote in favour of the Scheme, subject to there being no superior proposals and BDO not changing its opinion.

1. A Scheme Booklet is annexed to the Gratton affidavit as annexure RJG-9. Mr Gratton is the Chief Executive Officer of Clean Seas.
2. In the event the Court makes the order sought, Clean Seas intends to send the Scheme Booklet to Shareholders.
3. The Scheme Booklet contains a detailed description of the proposed transaction and its advantages and disadvantages. Annexures to the Scheme Booklet includes a structure diagram of the Yumbah Group, BDO's draft report, and the proposed Scheme.
4. The Scheme Booklet contains the explanatory statement and the IBC's recommendation that Shareholders vote in favour of the Scheme in the absence of a superior proposal and subject to BDO continuing to conclude that the Scheme is in the best interests of Clean Seas shareholders.

1. There are a number of conditions precedent in both the Scheme and the SID which are set out in cl 11.6 of the Scheme Booklet. That clause summarises the conditions precedent in the SID. Included within the conditions precedent are the Clean Seas Shareholder's vote in favour of the Scheme and the Court approving the Scheme at a second Court hearing, currently listed for 4 July 2025.
2. The Scheme Meeting is proposed to be held at 11.00am on 23 June 2025. In the event the conditions precedent are satisfied, the Scheme becomes effective upon lodgement of a copy of the Court's approval orders with ASIC.

1. The principles that apply upon an application to convene a scheme meeting are well-known: Carbon Revolution Ltd, in the matter of Carbon Revolution Ltd (ACN 128 274 653) [2023] FCA 1081 Moshinsky J, [21]-[23] and the authorities cited therein.
2. In Cytopia Ltd [2009] VSC 560 at [3], Davies J said:

The authorities make it clear that the Court's role at this stage is not to express a view on whether the proposed scheme should be approved. It is also clear that it is not the Court's role to usurp the shareholders' decision, by attempting to intrude its own commercial judgment. The Court is to be concerned with whether there is adequate disclosure to the shareholders in the Scheme Booklet (or explanatory memorandum), whether the legal requirements otherwise have been complied with and whether the scheme, on its face, is one that is sufficiently "fair and reasonable" to be capable of being put to shareholders for their approval or rejection.

1. The task that confronts the Court at the first hearing is to ensure the statutory prerequisites have been met and if so, whether it is appropriate for the Court to exercise its discretion to make orders for the convening of a meeting for the purposes of putting the Scheme to the shareholders.
2. On the question of the discretion, subject to one matter, it is not the Court's role to opine on whether shareholders should accept the proposed Scheme. The Court is concerned to ensure that shareholders have an opportunity to consider the matter and that they have sufficient information and time to consider their decision.
3. The one matter to which I refer, is that it is appropriate to consider the merits or fairness of the proposed Scheme at the first hearing if, "... the issue is such as would unquestionably lead to a refusal to approve a proposed Scheme at the approval hearing, that is, the proposed Scheme appears now to be on its face 'so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further'": Re Amcor Ltd [2019] FCA 346 at [47] (Beach J) citing Re Foundation Healthcare Ltd [2002] FCA 742; (2002) 42 ACSR 252 at [44] (French J) (emphasis in original).
4. That qualification apart, if a proposed Scheme appears to be appropriate for consideration by the Shareholders and is likely to gain the Court's approval at the second Court hearing, orders should be made to convene the meeting.

1. Clean Seas submit that the requirements of s 411(1) of the Act have been satisfied in that:

(a) The application was made by originating process filed on 4 April 2025;

(b) Clean Seas is a "Part 5.1 body" as defined in s 9 of the Act; and

(c) The proposed Scheme is an "arrangement" within the meaning of s 411(1).

1. ASIC has been given 14 days' notice of the first Court hearing and a reasonable opportunity to examine the terms of the proposed Scheme, the explanatory statement, and to make submissions to the Court: ss 411(2)(a) and (b).
2. The originating process was supported by the first Kramersh affidavit which identified the nature of the proposed Scheme and has been supplemented by the Gratton affidavit: r 2.4(1). In satisfaction of r 2.4(2), a company extract recording the results of a search of ASIC's records in relation to Clean Seas is annexed to the first Kramersh affidavit as annexure JAK-1.
3. Mr Gratton deposes (on an "information and belief" basis) as to the willingness of Ms Katelyn Adams as the nominated person to act as chairperson of the Scheme Meeting with Mr Marcus Stehr as the alternate chairperson: rr 3.2(a) and (b)(i).
4. Each of Ms Adams and Mr Stehr are Directors of Clean Seas, members of the IBC, and own shares in Clean Seas. In accordance with r 3.2(b)(ii) and (iii), Mr Gratton has deposed in his affidavit that each of Ms Adams and Mr Stehr:

(a) Has had no previous relationship or dealing with Yumbah, or any other person interested in the proposed compromise or arrangement, except as disclosed in the affidavit; and

(b) Has no interest or obligation that may give rise to a conflict of interest or duty if the person were to act as chairperson of the meeting, except as disclosed in the affidavit.

1. The proposed orders annex a copy of the Scheme, thus satisfying r 3.3(1).
2. Section 412 of the Act and reg 5.1.01 and Schedule 8 (Pt 3) to the Corporations Regulations 2001 (Cth) sets out the information to be provided to shareholders for the purposes of their consideration of the Scheme.
3. Section 412(1) sets out three requirements for the explanatory statement:

(a) First, it must explain the effect of the compromise or arrangement, and in particular state any material interests of the directors, and the effect on those interests of the compromise or arrangement in so far as that effect is different from the effect on the like interests of other persons: s 412(1)(a)(i).

The effect of the Scheme is addressed in section 4.2 of the Scheme Booklet, and the required information in relation to the material interests of directors is addressed in sections 11.1 to 11.5 of the Scheme Booklet;

(b) Second, the explanatory statement must set out the prescribed information, being the information set out in reg 5.1.01 and Schedule 8 (Pt 3) to the Regulations. Mr Gratton deposes as to matters required by Schedule 8 (Pt 3), including the verification of the Scheme Booklet at [52]-[69] of his affidavit. I am satisfied there has been a thorough due diligence and verification process as described in the Gratton affidavit and the Wood affidavit such that these requirements have been fulfilled; and

(c) Third, the explanatory statement must set out any other information that is material to the making of a decision whether or not to agree to the compromise or arrangement. Clean Seas submits, and I accept, that the Scheme Booklet is clear and comprehensive and together with the BDO Report contains a detailed evaluation of the Scheme presented in a way that enables a Shareholder to form their own view of the merits of the Scheme.

1. I am satisfied that the information contained in the Scheme Booklet, which contains the explanatory statement, is such that the statutory disclosure requirements in s 412 (1) of the Act and Schedule 8 (Pt 3) to the Regulations have been met.

1. There are two questions. First, whether the Scheme is fit for consideration by the Shareholders; and second, whether the Shareholders are to be properly informed as to the nature of the Scheme.

1. Clean Seas submits the Scheme is fit for consideration in that:

(a) The Scheme is of such a nature and cast in such terms that, if agreed to at the Scheme Meeting, the Court would be likely to approve the Scheme at the second Court hearing;

(b) There is no issue arising from the Scheme which would unquestionably lead to a refusal by the Court to approve the Scheme at the approval hearing; and

(c) It cannot be said that the Scheme is on its face: "so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further": Foundation Healthcare at [44].

1. Clean Seas points to the following particulars of the Scheme:

(a) The report by BDO;

(b) The shareholding in Clean Seas by entities related to Anthony Hall (who is, indirectly, Yumbah's largest shareholder);

(c) The performance rights on issue;

(d) Performance risk;

(e) Shareholder engagement; and

(f) Break fee and exclusivity provisions,

submitting that none of these matters gives rise to a concern that the Scheme is not fit for consideration by the members. I deal with each of these matters below.

1. BDO's report has been prepared against the guidance provided in Regulatory Guide 111 issued by ASIC.
2. BDO's opinion is that the Scheme is fair and reasonable and is in the best interests of the Shareholders in the absence of a superior proposal emerging. In particular, the cash offer under the proposed Scheme falls at about the midpoint of the range of value set by the expert.

(a) Yumbah's largest shareholder with an indirect (approximately) 67.92% interest; and

(b) Clean Seas' largest shareholder with a current indirect ownership of (approximately) 22.59% via Research Corporation Pty Ltd, Invia Custodian Pty Ltd and Melbourne Securities Corporation Limited as trustee for the AgFood Opportunities Fund (collectively, the Hall Related Entities).

1. Mr Hall's intention is to vote or procure the voting of his Clean Seas shares in favour of the Scheme at the Scheme Meeting (subject to the receipt of a superior proposal and to BDO's continuing opinion that the Scheme is in the best interests of Clean Seas Shareholders). This has been disclosed in sections 1.4(a) and 11.3(a) of the Scheme Booklet.
2. The Court is informed that the Hall Related Entities will not vote as a separate class.
3. The proposed Scheme offers the Shareholders the choice of a cash payment of $0.14 per share or shares in Yumbah. Clean Seas submit, and I accept, that the Hall Related Entities are in the same position as other shareholders in the sense that they have the option of choosing one option or the other.
4. In any event, Clean Seas submits that given the indirect shareholding of Mr Hall, the votes of the Hall Related Entities should be tagged so that their impact, if any, can be considered at the second Court hearing. I accept that submission.

1. Clean Seas has an equity incentive plan pursuant to which an incentive toward, and reward for, performance is offered to what is described as "key management personnel". Those personnel comprise Mr Gratton, the Chief Financial Officer, the Chief Commercial Officer, the General Manager - Operations and the General Manager - People, Safety of Process. The total number of performance rights on issue is 8,229,532, which gives the right to be allocated 8,229,532 shares. The shares do not vest until such time as an "Event" occurs which, relevantly for this matter, includes a Court convening a meeting of Shareholders to be held to vote on a proposed scheme of arrangement. By reason of the orders made, that has now occurred.
2. The shares vested form part of the general class of shares held by shareholders eligible to vote at the Scheme Meeting.

1. Clauses 4 and 5 of the terms of the proposed Scheme of Arrangement set out the timing of the payment of consideration in the event the Shareholders and the Court approve the Scheme.
2. As I have noted above, consideration takes one of two forms: either a payment to shareholders at $0.14 per share or alternatively, those shareholders with a minimum of 3570 Clean Seas shares will be entitled to receive one new Yumbah share for every 3.1428 Clean Seas shares that they hold as at the Scheme Record Date (defined as 7.00pm (ACST) on the second business day after the effective date (defined as the date on which the Scheme becomes effective) or as otherwise agreed in writing between Clean Seas and Yumbah.

1. Mr Gratton, in his role as CEO and Joint Company Secretary, has been designated the nominated contact for investor relations. Mr Gratton has conducted phone, videoconference or face-to-face meetings with a number of larger Clean Seas Shareholders, however the communications were general and did not go beyond information based on public information contained in the ASX announcements made on 19 February and 31 March 2025. Mr Gratton has also been contacted by other retail shareholders, and again, contact has been general and did not go beyond the information based on the public information contained in the ASX announcements.
2. Clean Seas has engaged a financial adviser, Candour Advisory Pty Ltd. Its Executive Director, Mr George Stavrou, was present during the discussions with some of the major Clean Seas Shareholders. Mr Stavrou has also been contacted by two other retail shareholders via email, however once again the communications were general and the content did not go beyond the public information in the ASX announcements.

1. Each of Clean Seas and Yumbah are entitled to a break fee of $300,000, depending on the circumstances. That amounts to approximately 1% of the equity value of Clean Seas calculated by BDO which is in accordance with Guidance Note 7 - Lock Up Devices issued by the Australian Takeovers Panel.
2. Clauses 12.2, 12.6, 13.2 and 13.5 of the SID between Clean Seas and Yumbah deals with the break fee for Clean Seas and Yumbah respectively. Clean Seas submit that the triggers for the break fee are not of an unusual or uncommercial nature.
3. Clause 11 of the SID contains a number of exclusivity provisions including "no shop", "no-talk" and "no due diligence" clauses which are the result of commercial negotiations between the legal and financial advisors to both Clean Seas and Yumbah.
4. The exclusivity provisions and the break fees are subject to clauses 11.4, 12.6 and 13.5 of the SID. Each of those clauses provide that the respective clauses impose obligations on Clean Seas and Yumbah only to the extent that the performance of all or part of those obligations do not constitute unacceptable circumstances as declared by the Australian Takeovers Panel, do not require any Board member to take any action that would reasonably be likely to constitute a breach of their fiduciary or statutory duties, or is determined by a Court to be unlawful.
5. Having considered each of these matters and with the benefit of Clean Seas written and oral submissions, as well as the material read on the application, I consider that none of these matters gives rise to a concern that the Scheme is not fit for consideration by its Members.

The adequacy of information to be provided to shareholders

1. As to the second consideration regarding the information to be provided to Shareholders, Clean Seas submits that its Shareholders will be presented with an appropriately detailed and clear explanation of the Scheme in the Scheme Booklet and will have the benefit of BDO's report as well as a recommendation of the IBC. I accept that submission.
2. Clean Seas submits further that the Scheme is of such a nature and cast in such terms that, if it achieves the statutory majorities at the Scheme Meeting, the Court would be likely to approve it. I accept that submission.

1. Clean Seas provided draft orders directed to the convening of the Scheme Meeting and the manner in which it is to be convened, including how each Clean Seas Member is to be informed of the meeting and provided with the Scheme Booklet. In the event a Member is sent an email, the draft orders address how Clean Seas is to provide information to Members if it receives a notification that the email sent to the Member was not delivered.
2. The draft orders also provide that the Scheme Meeting be convened, held and conducted in accordance with those parts of Part 2G.2 of the Act (Meetings of members of companies) that apply to a meeting of Clean Seas Members, as well as the parts of Clean Seas' Constitution that apply to meetings of Members and which are not inconsistent with Part 2G.2 of the Act.
3. The draft orders also deal with the chairperson of the Scheme Meeting, proxies and the taking of a poll, notwithstanding any provision of Clean Seas' Constitution calling for a vote to be taken by a show of hands.
4. The votes cast at the Scheme Meeting by the Hall Related Entities are to be marked and recorded so as to enable the subsequent ascertainment of the total votes cast by each of those entities.
5. Rule 3.4 provides that, unless the Court otherwise orders, the plaintiff must publish a notice of the hearing of the second Court hearing (that is, the application for approval of the Scheme) in a newspaper at least five days before the date of the hearing, and the notice must be in accordance with Form 6.
6. Clean Seas seeks a dispensation of the requirement in r 3.4 noting that in a number of cases, advertising by newspaper has not been considered necessary given that effective electronic notice options now exist. In lieu of a newspaper advertisement, Clean Seas seeks an order permitting it to publish the notice of the second Court hearing of an application under s 411(4) of the Act for an order approving the Scheme on Clean Seas' website and on its ASX announcements platform.
7. I note this is now common practice and I am prepared to dispense with compliance with r 3.4 and Form 6.
8. Clean Seas also seeks a dispensation from the requirements of r 2.15 (application of Division 75 of the Insolvency Practice Schedule (Corporations) and Division 75 of the Insolvency Practice Rules (Corporations) 2016 and r 2.4(1). I am prepared to dispense with compliance with these rules.

1. It is for these reasons that I consider it appropriate to exercise the Court's discretion and make the orders convening the Scheme Meeting.

I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Sullivan.