Coalspur Mines Limited, in the matter of Coalspur Mines Limited (No 2) [2015] FCA 591

REASONS FOR JUDGMENT 1 This is the second hearing of an application by the plaintiff, Coalspur Mines Limited, to approve a scheme of arrangement between the company and its members. Pursuant to the scheme, the company will become a wholly owned subsidiary of a company called KC Euroholdings S.à.r.l (KCE). 2 I made orders on 17 March 2015 for the convening of a meeting of the company's members to consider, and it thought fit, to pass the resolution which would approve the proposed scheme of arrangement. 3 At the second hearing in relation to the approval of a scheme of arrangement, the Court will have regard to whether the requirements of the Corporations Act 2001 (Cth) have been complied with, the scheme has been proposed in good faith and not for some illegitimate purpose and whether the scheme is at least so fair and reasonable that an intelligent and honest person acting independently might approve the scheme. But, of course, in exercising that judgment, the Court places considerable weight upon the fact that the persons who are best able to make that assessment are the members of the company themselves. 4 In relation to the question of whether the statutory requirements have been met, there is evidence before the Court as to the number of members who voted, the number of shares on issue and the proportion of shares on issue that were voted. Counsel took me to some authorities which dealt with the question of low voter turnout. In my view, the fact that 46.16% of the shares on issue were voted represents a reasonable turnout - so I do not consider that low voter turnout is a factor which would preclude the Court from approving the proposed scheme of arrangement. 5 The evidence also shows that the statutory majorities in s 411(4) of the Corporations Act were obtained. There were 91.43% of the votes cast in favour of approving the scheme of arrangement; and 84.5% of the members who voted were in favour of the scheme of arrangement. 6 One of the issues which arose in relation to this case was the position of Borrowdale Park S.A. (Borrowdale) which was both a creditor and member of the company. As a consequence of some concerns as to whether there was a collateral benefit which might flow to Borrowdale from the scheme, the Australian Securities and Investments Commission (ASIC) required the votes of Borrowdale cast in favour of the scheme to be tagged. The evidence before the Court shows that even if one were to exclude the votes cast by Borrowdale, then, the statutory majorities are still maintained. 7 There is also an issue in relation to the dispatch of the scheme booklet and the notice of the meeting. It appears that the wrong date was used in relation to determining who should receive notice of the meeting and the scheme booklet. What happened was that the notice of the meeting and the scheme documents were dispatched to the members on the Australian register as at 16 March 2015, rather than those on the register as at 20 March 2015. There is evidence that six members of the company were affected by this error and that the notice and scheme booklet was subsequently dispatched to each of those persons. The consequence was that those six persons received only 26 days instead of the 28 days notice of the scheme meeting. 8 Counsel has submitted that this irregularity in giving notice would fall within the ambit of s 1322(2) of the Corporations Act, which essentially provides that a proceeding is not invalidated because of a procedural irregularity, unless the Court otherwise declares. There is no basis upon which the Court would otherwise declare and, therefore, by the operation of s 1322(2), the irregularity would not invalidate the scheme meeting (Clough Limited, in the matter of Clough Limited (No 2) [2013] FCA 1346). There is also evidence before the Court that the conditions precedent to the operation of the scheme have been fulfilled. 9 The hearing today is an adjourned second hearing for the approval of the scheme. There is evidence before the Court that this adjourned hearing with the correct time and place, has been advertised in the Australian and the West Australian newspapers. I record that no person gave notice intending to oppose the approval of the scheme and no one has appeared today in order to oppose the making of the final orders. 10 There is also before the Court an affidavit of Mr Ng which annexes a letter from ASIC to the effect that ASIC has no objection to the proposed scheme and that the letter was given, pursuant to s 411(17)(b) of the Corporations Act. There is also no reason why the Court should exercise its residual discretion against the approval of the scheme. 11 In relation to the question of whether the scheme is fair and reasonable, I have already mentioned the fact that the Court generally takes the view that the members themselves are the best arbiters of this question. There is also evidence before the Court that Mr Sherif Andrawes of BDO Corporate Finance (WA) Pty Ltd, the independent expert, remains of the view that the scheme of arrangement is fair and reasonable and in the best interests of the members. Accordingly, in my view, that requirement has been satisfied. 12 In addition, the plaintiff also seeks an order under s 411(12) of the Corporations Act that the company be dispensed from complying with s 411(11) which requires that a copy of the Court's orders be annexed to every copy of the company's constitution issued after these orders have been made. In light of the fact that this company will now be a wholly owned subsidiary of KCE, I am content to make that order. 13 I will make orders in terms of 1, 2 and 4 of the minute of proposed orders. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.