Cobalt One Limited, in the matter of Cobalt One Limited (No 2) [2017] FCA 1407

SIOPIS J: 1 This is the second hearing of an application for the approval of a scheme of arrangement under s 411 of the Corporations Act 2001 (Cth). 2 On 12 October 2017, the Court made orders for the convening of a meeting of the shareholders of the plaintiff, Cobalt One Limited (Cobalt One), to consider and, if thought fit, to approve the scheme of arrangement (Cobalt One Limited, in the matter of Cobalt One Limited [2017] FCA 1228) (Cobalt One (No 1)). 3 The scheme of arrangement provides for the acquisition by First Cobalt Corporation, a Canadian company, of all the shares in Cobalt One in order to create a consolidated company which would concentrate on cobalt exploration and development. 4 After the orders of 12 October 2017 were made, the plaintiff applied to the Court to vary those orders to change the date for the second hearing from 27 November 2017 to today. The Court made that order subject to the plaintiff complying with a number of conditions. These conditions included informing the Australian Securities Exchange and the shareholders of the plaintiff of the revised second Court hearing date. There is evidence before me that those conditions were fulfilled. 5 There is also evidence before the Court that the conditions in relation to the dispatch of the scheme booklet and the conduct of the meeting of shareholders have been complied with. There is a very helpful chart which has been handed to me by counsel which sets out the various requirements that need to be met and the evidence which demonstrates that requirement has been met. 6 Mr Jack Rosagro has deposed that at the meeting of shareholders there were 407,842,839 votes in favour of approving the scheme and 19,263 votes against. This equates to 99.995% of the shareholders present or by proxy having voted in favour of the scheme. It follows that the relevant statutory majorities set out in s 411(4)(a)(ii) of the Corporations Act were obtained, and in fact exceeded by some considerable measure. 7 There is also evidence before the Court in an affidavit of 20 November 2017 by Ms Sarah Turner that the preconditions in the scheme implementation agreement have been complied with or otherwise waived. 8 I might also observe that, as mentioned in [9] of my previous judgment in Cobalt One (No 1), the Australian Securities and Investments Commission (ASIC) asked the plaintiff to tag the votes of several shareholders at the meeting. 9 Mr Rosagro has deposed that those votes were duly tagged and that that information was provided to ASIC. It shows that approximately 102 million votes in favour of the approval of the scheme were cast by persons who ASIC had specified as being persons whose votes should be tagged. 10 Another of the matters to which a court needs to have regard at the second hearing is whether the scheme is fair and reasonable such that an honest and independent shareholder might approve the scheme. The Court will generally approach this question on the basis that the shareholders are the best arbiters of whether the scheme is fair and reasonable and in their best interests. The overwhelming result in favour of the approval of the scheme at the scheme meeting demonstrates the positive view taken by the shareholders of the fairness and reasonableness of the scheme. 11 This was one of the cases where the expert report had opined that the scheme was not fair but was reasonable. I dealt with that circumstance at [15]-[21] of Cobalt One (No 1) where I referred to the following observations of Brereton J in In the matter of CIC Australia Limited [2015] NSWSC 557 at [17]: Ultimately, so long as they are properly appraised that the independent expert considers the scheme not to be fair and why, it is for the scheme shareholders to decide whether it is an offer that they should accept. 12 Those observations are pertinent in this circumstance because the shareholders have seen the expert report and, notwithstanding the views expressed in that report that the scheme was not fair but was reasonable, have determined to vote overwhelmingly in favour of the approval of the scheme. 13 Another issue to which a court must have regard at the second hearing is s 411(17) of the Corporations Act, which provides as follows: (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 Ms Turner's affidavit annexes a letter from ASIC dated 20 November 2017 which states that pursuant to s 411(17)(b) of the Corporations Act it has no objection to the scheme. In those circumstances, s 411(17) does not require the Court to approve the scheme; however, there is no reason why the Court would for discretionary reasons withhold approval of the scheme. 15 The plaintiff has also asked that the Court make an order pursuant to s 411(12) of the Corporations Act which exempts the plaintiff from complying with the requirements of s 411(11) of the Corporations Act. As the plaintiff is now going to become a wholly owned subsidiary of First Cobalt Corporation, I am content to make that order. 16 Accordingly, I am content to make orders in terms of the plaintiff's minute of orders. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.