Drillsearch Energy Limited, in the matter of Drillsearch Energy Limited (No 2) [2016] FCA 126

1. Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (the Act), the scheme of arrangement between the plaintiff and the holders of fully paid ordinary shares in the plaintiff other than Beach Energy Limited ACN 007 617 969 (Beach), in the form of Annexure D to the document which is at tab 9 of exhibit CRT2 in the proceedings, be approved, subject to the scheme of arrangement being altered pursuant to s 411(6) of the Act so that the definition of "Excluded Shareholder" be deleted and be replaced with "Excluded Shareholder means Beach".
2. Pursuant to s 411(12) of the Act, the plaintiff be exempted from compliance with the requirement of s 411(11) of the Act.
3. Pursuant to r 30.05 of the Federal Court Rules 2011, Order 3 made on 15 December 2015 be varied by substituting the words "the hearing appointed in Order 5 below" for the words "the Scheme Meeting". Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

YATES J: 1 The plaintiff, Drillsearch Energy Limited, seeks orders pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (the Act) approving a scheme of arrangement in the form of Annexure D to the document at tab 9 of Exhibit CRT2 in the proceeding (the scheme). 2 On 15 December 2015, I made orders pursuant to s 411(1) of the Act providing for the convening of a meeting of members to consider the scheme and, if thought fit, agree to it (the scheme meeting): Drillsearch Energy Limited, in the matter of Drillsearch Energy Limited [2015] FCA 1508 (my earlier reasons). 3 On 27 January 2016, the meeting was held and the scheme was agreed to by majorities that satisfy the requirement of s 411(4)(a)(ii) of the Act. 4 The following affidavits have been read in support of the orders now sought: William John Koeck, affirmed 12 February 2016; William John Koeck, affirmed 17 February 2016; Aaron Lindsay Calder, sworn 12 February 2016; Lucy Geok Hiang Chiu, affirmed 12 February 2016; James David McKerlie, affirmed 12 February 2016; Clifford Reay Tuck, sworn 12 February 2016; Catherine Louise Oster, sworn 12 February 2016; and Nicole Angela Gardner, sworn 18 February 2016. 5 I am satisfied that the explanatory statement, represented by the scheme booklet, was registered with the Australian Securities and Investments Commission (ASIC) on 16 December 2015. 6 Comprehensive evidence has been adduced as to the giving of notice of the scheme meeting and the despatch of the scheme booklet. Order 2 made on 15 December 2015 provided that, on or before 18 December 2015, the following documents be dispatched: to each Scheme Shareholder (as defined) who had nominated an electronic address for the purposes of receiving notices of meeting from the plaintiff, an email (in approved form) which included links to the scheme booklet and a proxy form in respect of the scheme meeting; to each Scheme Shareholder with a registered address outside Australia, a copy of the scheme booklet, a proxy form and a reply-paid envelope addressed to Link Market Services Limited (Link), by prepaid air mail post; and to each other Scheme Shareholder, a copy of the scheme booklet, a proxy form and a reply-paid envelope addressed to Link, by prepaid post. 7 As events transpired, these steps did not take place on or before 18 December 2015. In fact, they took place on 21 December 2015, the following business day. The date for dispatch provided in the orders was a date nominated by the plaintiff. Mr Tuck, the plaintiff's General Counsel and Company Secretary, has deposed that 18 December 2015 was the anticipated date of dispatch, having regard to arrangements which the plaintiff had already put in place with Designate Group Pty Limited (Designate) and Link for the printing, collation and dispatch of the relevant documents. Mr Tuck says that the plaintiff engaged Designate to print the scheme booklet and notice of scheme meeting and that printing of these documents commenced in advance of the first court hearing on 15 December 2015. This was done in order to facilitate dispatch as soon as possible after that hearing. Certain pages of the scheme booklet were subsequently updated to reflect information current at 16 December 2015. The scheme booklet could not be bound until after these replacement pages had been printed and substituted into the booklet. Although copies of the scheme booklet in final form had been printed by 18 December 2015, it was not logistically possible for dispatch to occur on the same day. 8 Pursuant to clause 33.1 of the plaintiff's Constitution, at least 28 days' notice must be given of a general meeting. Pursuant to clause 108 of the Constitution, a notice sent by post is taken to be given three days after it is posted, and a notice sent by electronic means is taken to be given on the business day after it is sent. Dispatch on 21 December 2015 provided 36 clear days before the scheme meeting was held on 27 January 2016. Thus, the dispatch that was made complied with the plaintiff's Constitution, although not the Court's order on 15 December 2015. 9 I should add that the evidence discloses that follow-up emails were sent to members who had nominated an electronic address for the purposes of receiving notices of meeting. The follow-up emails were sent on 14 January 2016 and 21 January 2016 to those members who as of 13 January 2016 and 19 January 2016 respectively, had not lodged a proxy form. The emails urged members to vote on the resolution to be put at the scheme meeting. The evidence shows that the email communications given to members (who elected to receive communications in that form) was effective. 10 At the scheme meeting, 93.79% of the members present and voting (either in person or by proxy) voted in favour of the scheme. Further, 98.88% of the votes were cast in favour of the scheme. 11 A notice of the second court hearing was published in The Australian newspaper on 10 February 2016, in accordance with the intended effect of Order 3 made on 15 December 2015. 12 On 12 November 2015, the Australian Securities Exchange (the ASX) granted a waiver to Beach of ASX Listing Rule 10.1 in respect of its acquisition of scheme shares from a substantial shareholder, Seven Group Holdings Limited (including its subsidiaries). One of the conditions precedent to the scheme was the obtaining of the requisite approval from Beach's shareholders for that acquisition. In light of the waiver that has been given, that condition precedent no longer applies, by operation of clause 3.9 of the Merger Implementation Agreement. There is evidence, in the form of certificates executed pursuant to s 127 of the Act, that all of the presently relevant conditions precedent have been either satisfied or waived. The plaintiff and Beach were separately represented by Senior Counsel at the second court hearing and urged on the Court the acceptance of these certificates as containing representations of fact on which the Court should, in the circumstances, rely. In the circumstances, I am prepared to act on the certificates coupled with the representations made to the Court by the relevant parties to the Merger Implementation Agreement. 13 In my earlier reasons I referred to the position of Ineligible Foreign Shareholders and to the fact that, for these scheme shareholders, the scheme consideration is to be issued to a nominee for sale on-market, the proceeds of which would be distributed proportionally to each Ineligible Foreign Shareholders according to a formula specified in the scheme. On 9 February 2016, Beach entered into a Sale Agency Deed with Macquarie Securities (Australia) Limited (Macquarie) providing for Macquarie to sell the new Beach shares attributable to the Ineligible Foreign Shareholders as scheme consideration. 14 ASIC has provided a statement in writing that it has no objection to the scheme. Accordingly, there is no impediment under s 411(17) of the Act to the Court giving the approval that it sought. 15 I am satisfied that the scheme is fair and reasonable. In this connection, I note that the plaintiff's directors unanimously recommended the scheme to members; the independent expert, Ernst & Young Transaction Advisory Services Limited, has provided an opinion that the scheme is fair and reasonable and in the best interests of members; the scheme has been agreed to by the members, with the majorities to which I have referred; and no person has come forward to oppose the scheme. 16 Other than as mentioned above, there are no matters arising out of the convening of the scheme meeting, the conduct of the scheme meeting, or the approval given by the plaintiff's members that require mention. 17 All necessary procedural requirements have been satisfied for the approval that it now sought from the Court. Although Order 2 made on 15 December 2015 was not complied with, despatch of the relevant documents was made on the next business day and notice of the scheme meeting was, nevertheless, given in accordance with the plaintiff's Constitution. The circumstances resulting in non-compliance have been explained. Other than for that matter, there is no discretionary reason why approval should not be given. In the circumstances, I am satisfied that the scheme should be approved by the Court, subject to the following matter. 18 In its present form, the scheme defines an Excluded Shareholder as: … any Drillsearch Shareholder who is Beach or a Related Body Corporate of Beach. 19 The evidence before me is that Beach is the only shareholder answering this description. The plaintiff seeks an order under s 411(6) of the Act that the scheme be altered by amending the definition of Excluded Shareholder to mean Beach. Such an approach has been adopted in other cases: see, for example, Prime Infrastructure Holdings Ltd [2010] NSWSC 1337 at [6]-[8]; Talent2 International Limited, in the matter of Talent2 International Limited (No 2) [2012] FCA 926 at [16]-[17]; Goodman Fielder Limited, in the matter of Goodman Fielder Limited (No 2) [2015] FCA 259 at [10]; iProperty Group Limited, in the matter of iProperty Group Limited (No 2) [2016] FCA 36 at [16]-[18]. I am satisfied that such an alteration is appropriate in the present case. 20 The plaintiff also seeks exemption from compliance with s 411(11) of the Act. It is appropriate that such an order be made under s 411(12) of the Act. 21 Orders, as sought, should be made. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.