//
[2021] WASC 376
General information, not legal advice.
Supreme Court of WA
2021-11-22
Strk J
Original judgment source is linked above.
1 By an originating process filed on behalf of Firefly Resources Limited on 16 August 2021, orders were sought that Firefly convene a meeting to consider a proposed scheme of arrangement between Firefly and its shareholders pursuant to s 411(1) of the Corporations Act 2001 (Cth), and for related orders and directions.
2 Firefly is a gold and other metals exploration, mining and production company, and its fully paid ordinary shares (Firefly shares) are quoted on the Australian Securities Exchange (ASX). As at 1 September 2021, Firefly had issued capital of 308,339,530 Firefly shares; 26,699,999 unlisted options (Firefly options); and 34,233,328 unlisted performance rights (Firefly performance rights).[1]
3 Gascoyne Resources Limited is also an Australian public company listed on the official list as conducted by the ASX. Gascoyne is concerned with gold mining and exploration, and holds assets and mining tenements in the Gascoyne and Murchison regions of Western Australia.[2]
4 On 16 June 2021, Firefly announced to the ASX it had entered into a scheme implementation deed with Gascoyne, which set out the terms and conditions on which Firefly and Gascoyne agreed that Gascoyne would acquire by the scheme all of the Firefly shares on issue as at the record date for the scheme (Scheme Record Date).[3] The consideration for the acquisition of the Firefly shares will be 0.34 fully paid Gascoyne shares for each Firefly share held by a Firefly shareholder, subject to certain sales process arrangements for Firefly shareholders who do not have a registered address in Australia or New Zealand (Foreign Ineligible Shareholders).[4] There are mechanisms to deal with Firefly options and Firefly performance rights.[5]
5 Assuming all 6,300,000 'in the money' Firefly options are exercised and converted to Firefly shares, and all Firefly performance rights are converted to Firefly shares, the transaction would value Firefly at approximately:
(a) $51,586,564.41 based on volume weighted average price for the period of five trading days ending on 10 June 2021 of 42.7 cents per Gascoyne shares; or
(b) $37,957,367.95 based on the closing price of Gascoyne shares on 31 August 2021 of 32.0 cents per Gascoyne share.[6]
6 If the scheme is implemented, Firefly will become the wholly owned subsidiary of Gascoyne, and Firefly will be subsequently delisted from the ASX.[7]
7 On 7 July 2021, Firefly, Gascoyne and Firetail Resources Limited and other related companies of Firefly and Gascoyne entered into a demerger implementation deed which provides for the implementation of a proposed demerger of certain lithium and copper-gold assets of Firefly and Gascoyne subsidiaries, which will be transferred to Firetail, a newly incorporated company (the demerger).[8]
8 While it is proposed that the scheme and the demerger will be implemented simultaneously, they are not inter-dependent. The scheme may be implemented if the demerger is not approved, and the demerger may proceed if the scheme is not approved. If the scheme implementation deed is terminated, then the demerger implementation deed will terminate unless otherwise agreed by the parties to the demerger implementation deed.
9 It is also contemplated that if the court orders Firefly to convene the scheme meeting, the general meeting of Firefly shareholders to approve the transactions contemplated by the demerger implementation deed will be held immediately after the scheme meeting. (As the demerger is a separate corporate action, it must be voted in a stand‑alone meeting.[9]) If the demerger is implemented, Firetail will be demerged from Firefly's ownership immediately prior to the implementation of the scheme.
10 Section 411 of the Corporations Act envisages three steps:
(a) the calling of a meeting of, relevantly, members;
(c) a further application to the court for approval of the arrangement.[10]
11 The first court hearing took place on 6 September 2021. Counsel for Gascoyne appeared in support of the application. The Australian Securities and Investments Commission (ASIC) did not seek to be heard.[11]
12 After hearing from counsel for Firefly, I made orders in accordance with s 411(1) of the Corporations Act to convene a meeting of Firefly's shareholders on 21 October 2021 to consider and vote on the proposed scheme. Orders were also made approving for distribution of a scheme booklet comprising the explanatory statement required by s 412(1)(a) of the Corporations Act. Ancillary orders were made as to the convening and conduct of the meeting.
13 On 13 October 2021, Gascoyne announced to the market an 'enhanced business plan' and updated aspects of the financial year 2022 production and cost guidance provided on 4 June 2021.[12] In summary, by the announcement, Gascoyne informed the market that it was updating its business plan by reducing its capital investment in upcoming years by postponing capital works in order to increase cashflow and reduce exposure to higher operating costs. By the same announcement, Gascoyne restated its commitment to the scheme in circumstances where Westgold Resources Limited had made an unsolicited conditional off-market takeover offer for Gascoyne, conditional upon Gascoyne not proceeding with the Firefly scheme.
14 Firefly considered the update to be a material new circumstance and considered it necessary to update Firefly shareholders in relation to the same prior to the scheme meeting.
15 Firefly prepared a draft supplementary scheme booklet intended to be dispatched to Firefly shareholders. Firefly also considered it necessary for the meeting of Firefly shareholders on 21 October 2021 to be postponed, so as to allow adequate time for the supplementary scheme booklet to be received and considered by Firefly shareholders.
16 Firefly made an application to the court for orders regarding the approval and dispatch of the draft supplementary scheme booklet to Firefly shareholders; and for directions with respect to convening, holding and the conduct of the meeting of Firefly's shareholders on a later date. Firefly also sought ancillary and consequential directions. The proposed supplementary disclosure specifically related to the updated business plan of Gascoyne, the Westgold takeover offer, and details of the revised date of the scheme meeting, if approved.
17 After hearing from counsel for Firefly and Gascoyne on 15 October 2021, I made orders pursuant to s 411(1) and s 1319 of the Corporations Act in the terms proposed by Firefly. The scheme meeting that had been scheduled to be held on 21 October 2021 was postponed to 27 October 2021.
18 At the conclusion of each hearing, I said that I would publish written reasons for the orders made in due course. These are my reasons for the orders made at the first court hearing on 6 September 2021 and at the hearing on 15 October 2021.
19 Nine affidavits were filed prior to the first court hearing and all were read in support of the application. They were as follows.
20 First, the affidavit of Grant William Hummel sworn on 16 August 2021, which attached documents marked GWH-1 to GWH-10. Mr Hummel is a partner of the firm HWL Ebsworth Lawyers and acts for Firefly. By his affidavit, Mr Hummel briefly described the scheme, the demerger and the status of Firefly. The attachments to Mr Hummel's affidavit included a copy of the scheme implementation deed; Firefly's announcement of 16 June 2021 to the ASX; the proposed scheme of arrangement; the draft scheme booklet; the proposed scheme deed poll (which deed poll was intended to be made by Gascoyne in favour of the Firefly shareholders covenanting that Gascoyne will perform its obligations under the scheme implementation deed and the scheme of arrangement); and the demerger implementation deed.
21 The second was the affidavit of Simon Irwin Lawson, Chief Executive Officer and Managing Director of Firefly, sworn on 1 September 2021, which attached documents marked SIL-1 to SIL-22. Among other things, Mr Lawson deposed to the securities that Firefly had on issue as at the date of his affidavit; the process undertaken in relation to the drafting and verification of the scheme booklet; the submission of the draft to ASIC; the Board of Firefly's unanimous resolution to enter into the scheme implementation deed on 15 June 2021; the support of Firefly's three largest shareholders of the scheme; the interests of the directors of Firefly in the outcome of the scheme; the basis upon which he considered it appropriate to make a recommendation on the scheme in the scheme booklet; his belief that as at the date of his affidavit, the Board of Firefly unanimously supported the scheme and recommended that all Firefly shareholders vote in favour of it in the absence of a superior proposal; and the steps proposed to be taken by Firefly if the court directed Firefly to convene the scheme meeting. The attachments to Mr Lawson's affidavit included a copy of Firefly's constitution and the verification draft of the scheme booklet.
22 The third was the affidavit of Thomas James Langdon affirmed on 1 September 2021, which attached documents marked TJL-1 to TJL-9. Mr Langdon is a solicitor employed by HWL Ebsworths Lawyers and acts for Firefly. By his affidavit, Mr Langdon deposed to service on ASIC of the draft scheme booklet, the originating process and Mr Hummel's affidavit. The attachments to Mr Langdon's affidavit included various documents exchanged with ASIC including communications sent to ASIC in response to ASIC's queries. Mr Langdon also annexed to his affidavit the deed poll dated 1 September 2021 executed by Gascoyne.
23 On 31 August 2021, Gascoyne filed a notice of appearance as a party interested in this proceeding. The fourth affidavit was that of David Allan Thomas Coyne, Chief Financial Officer and Company Secretary of Gascoyne, sworn on 2 September 2021, which attached documents marked DATC-1 to DATC-7. Mr Coyne's affidavit was sworn on behalf of Gascoyne in support of Firefly's application made pursuant to s 411(1) of the Corporations Act.
24 Among other things, Mr Coyne deposed to the process undertaken in relation to the drafting and verification of the scheme booklet; his belief that the directors of Gascoyne have no direct or indirect interest in Firefly shares; and the basis for his belief that the 'Gascoyne Information' (as that term is defined in the scheme implementation deed), in the form and context it appears in the draft scheme booklet is correct in all material respects.
25 The fifth affidavit was made by Shaun Andrew Hardcastle and sworn on 2 September 2021. Mr Hardcastle is a partner of HWL Ebsworth Lawyers and acts for Firefly. Mr Hardcastle deposed to having been nominated as Chairperson for the proposed scheme meeting, and to having had no previous relationship or dealing with Firefly or any other person interested in the proposed arrangement, except as disclosed in his affidavit.
26 The sixth affidavit was made by Deanna Jayne Carpenter affirmed on 2 September 2021. Ms Carpenter is also a partner of HWL Ebsworths Lawyers and acts for Firefly. Ms Carpenter deposed to having been nominated as Alternate Chairperson for the proposed scheme meeting, and to having had no previous relationship or dealing with Firefly or any other person interested in the proposed arrangement, except as disclosed in her affidavit.
27 Both Mr Hardcastle and Ms Carpenter deposed to their agreement to report the results of the scheme meeting to the court, if either chaired the scheme meeting.
28 The seventh affidavit was the second affidavit of Mr Lawson sworn on 2 September 2021, which attached documents marked SIL-23 to SIL-30. In Mr Lawson's first affidavit, he deposed to the basis upon which he considered it appropriate to make a recommendation on the scheme in the scheme booklet; and his belief that, as at the date of that affidavit, the Board of Firefly unanimously supported the scheme and recommended that all Firefly shareholders vote in favour of it in the absence of a superior proposal. By his second affidavit, among other things, Mr Lawson attached email communications that he had received from other directors of Firefly, outlining their reasons for considering it appropriate for them to make a recommendation on the scheme in the scheme booklet.
29 The eighth affidavit was the second affidavit of Mr Langdon affirmed on 3 September 2021, which attached documents marked TJL‑10 to TJL-16. Among other things, Mr Langdon deposed to there having been further conferral with ASIC in relation to the scheme and the final version of the scheme booklet; receipt of further comments on the draft scheme booklet from ASIC; receipt of an email communication from an officer of ASIC that stated that ASIC did not propose to intervene at the first court hearing;[13] and service of additional documents on ASIC. The attachments to Mr Langdon's affidavit included a fully collated clean version of the scheme booklet with all annexures; and the proposed letter addressed to Firefly's shareholders that contained a link to a website from which Firefly shareholders could download the scheme booklet and lodge a proxy form.
30 The ninth affidavit was the third affidavit of Mr Langdon affirmed on 6 September 2021, which attached documents marked TJL-17 and TJL‑18. Mr Langdon deposed to receipt of a letter from ASIC on 3 September 2021, confirming that ASIC did not then currently propose to appear at the first court hearing to make submissions, or to intervene in the proposed scheme. Mr Langdon further deposed to receipt of ASIC Instrument 21-0768 from ASIC, being an exemption and declaration under s 741(1) of the Corporations Act, in relation to the proposed in‑specie distribution of ordinary shares in Firetail to Firefly shareholders for the purposes of effecting the proposed demerger. A copy of ASIC's written indication of intention for the purpose of s 411(17)(b) was annexed to Mr Landon's third affidavit, together with a copy of ASIC Instrument 21-0768.
31 At the first court hearing, counsel also tendered a letter dated 6 September 2021 signed by Mr Sherif Andrawes, a director of BDO Corporate Finance (WA) Pty Ltd. Mr Andrawes with Adam Myers, another director of BDO Corporate Finance (WA) Pty Ltd, had produced an independent expert report dated 13 August 2021 for Firefly in relation to the scheme, with the analysis being current as at that date.[14]
32 In his letter of 6 September 2021, Mr Andrawes stated that he had considered the share price movements of both Firefly and Gascoyne from 13 August 2021. In short, Mr Andrawes confirmed that as at the date of the first court hearing, his opinion remained that in the absence of a superior proposal, the scheme was fair and reasonable to shareholders; and therefore, in the absence of a superior proposal, the scheme was in the best interests of shareholders.
33 Firefly also relied upon the written outline of submissions filed on 2 September 2021, and the minute of proposed orders filed on 6 September 2021.
35 The stated purpose of the scheme is to consolidate two existing gold companies with complementary assets in close proximity, leveraging Gascoyne's existing infrastructure to benefit Firefly's existing and prospective projects.[17]
36 As noted above, if the scheme is implemented, Gascoyne will acquire all of the Firefly shares on issue as at the Scheme Record Date. Firefly's shareholders will receive 0.34 fully paid ordinary Gascoyne shares for each Firefly share as consideration for the acquisition of their Firefly shares under the scheme.[18] In simple terms, if the scheme is implemented, the shares held in Firefly by Firefly shareholders will be transferred to Gascoyne and Firefly will become a wholly owned subsidiary of Gascoyne.
37 Foreign Ineligible Shareholders will not be issued with Gascoyne shares. Instead, the Gascoyne shares that would otherwise have been issued to them will be issued to the Sale Agent (as that term is defined in the scheme booklet in s 14), on their behalf and they will be sold on the ASX. The proceeds of the sale of these Gascoyne shares less brokerage and other costs, taxes and charges will then be paid to the Ineligible Foreign Shareholders following implementation of the scheme.[19]
38 As at 12 August 2021, there were 11 Foreign Ineligible Shareholders. The total number of shares in Firefly by the Foreign Ineligible Shareholders was 26,051,283 shares, comprising approximately 8.45% of the total Firefly shares on issue.[20]
40 Firefly and Gascoyne intend to enter into Option Cancellation Deeds (as that term is defined in the scheme booklet at s 14), with any holders of Firefly options who do not exercise their Firefly options before the scheme meeting. Under the Option Cancellation Deeds, the Firefly options will be cancelled. In return Gascoyne will issue Gascoyne shares to the holders of Firefly options, as a ratio of the value of the relevant Firefly options calculated (based on the implied deal value as at the scheme implementation deed) as:
(a) the Black-Scholes value equivalent for out-of-the money Firefly options; or
(b) the intrinsic value of the in-the-money Firefly options,
the ratio being consistent with the allocation of Scheme Consideration (as that term is defined in the scheme booklet at s 14) to Firefly shareholders.[23]
41 Firefly performance rights will also be dealt with outside of the scheme. Firefly proposes to convert the 34,2333,328 Firefly performance rights on issue to Firefly shares prior to the Implementation Date (as that term is defined in the scheme booklet at s 14).[24] There are 31 holders of Firefly performance rights.[25]
42 Subject to the court approving the scheme at the second court hearing, each Firefly performance right will automatically vest and be converted to a new Firefly share on a 'one for one' basis. In this regard, cl 4.5 of the scheme implementation deed provides that, subject to the scheme becoming effective, Firefly must take such action as is necessary to ensure that all Firefly performance rights will vest and be converted into Firefly shares, which are to be issued and registered before the Scheme Record Date.[26] Firefly shares will be issued to those Firefly performance rights holders and they will be dealt with by the scheme. An ASX waiver to ASX Listing Rule 6.23.2 was granted to this effect.[27]
43 The directors of Firefly unanimously recommended that shareholders vote in favour of the scheme.[28]
44 Firefly engaged BDO Corporate Finance (WA) Pty Ltd to undertake a review and to provide an opinion on the scheme.[29] Upon undertaking the review it was concluded that, in the absence of a superior proposal, the scheme was fair and reasonable and in the best interests of Firefly's shareholders.
45 The scheme will not be effected unless and until a number of conditions precedent are satisfied or waived. The conditions precedent which are required to be satisfied are disclosed in a summarised form in the scheme booklet.[30]
46 If the scheme is approved by Firefly shareholders and by the court at the second court hearing, on the Implementation Date, all existing Firefly shares will be transferred to Gascoyne; Gascoyne will be entered in the register as the holder of all Firefly Shares; and Gascoyne will provide the Scheme Consideration to Firefly shareholders in return for their shares in Firefly.
47 The obligations of Gascoyne under the scheme are supported by the deed poll which was executed by Gascoyne on 1 September 2021.[31]
48 The documents before the court at the first court hearing included the draft scheme booklet which was submitted to ASIC on 17 August 2021;[32] and a fully collated clean version of the scheme booklet with all annexures as at 3 September 2021.[33] The scheme booklet is 615 pages and contains the following sections:
(a) a letter from Michael Edwards, Chairman of Firefly, outlining the rationale for the scheme;
(b) a list of important dates and times for the scheme and demerger;
(d) scheme meeting details and information for shareholders as to how to vote.
(a) key reasons to vote in favour of the scheme (which included an outline of considerations relevant to the vote of shareholders, and reasons to vote in favour of the scheme);
(b) reasons why a shareholder may choose to vote against the scheme;
(f) profiles of Firefly and Gascoyne, and an overview of the combined group;
(h) Australian tax implications for Firefly shareholders;
(j) the key terms of the scheme implementation deed; and
(k) additional information, including the relevant interests of Firefly's directors and the benefits they will obtain if the scheme is approved.
50 The following documents are annexed to the scheme booklet:
(c) the deed poll executed by Gascoyne on 1 September 2021;
(f) the scheme implementation deed dated 15 June 2021; and
(g) a table setting out details of option consideration.
51 Recently, Hill J in Re Galaxy Resources Ltd; Ex parte Galaxy Resources Ltd [2021] WASC 277 succinctly summarised the legal principles to be applied at a first court hearing, which I reproduce below and I applied in determining Firefly's application.
[31] Pursuant to s 411 of the Act, a scheme of arrangement can be used to re-organise a company in a manner which will be binding on its members, provided that:
(a) the arrangement is agreed by the requisite majorities as prescribed by s 411(4)(a) of the Act, namely 75% of shareholders by value and 50% by number; and
(b) the court approves the arrangement pursuant to s 411(4)(b) of the Act.
[32] There are three stages to an application under s 411 of the Act. First, the court approves the convening of a scheme meeting and the draft explanatory statement to be sent to the scheme members. Second, the members vote on the proposed scheme at the scheme meeting. Third, assuming the first two stages have occurred, the court approves the proposed scheme.
[33] There are well-established principles which apply to the first stage of proceedings. The court will order the convening of the scheme meeting and approve the dispatch of the scheme booklet if satisfied that:
(a) there is a pt 5.1 body;
(b) there is a compromise or arrangement within the meaning of s 411 of the Act;
(c) the proposed scheme booklet contains the prescribed information and provides proper disclosure;
(e) ASIC has had at least 14 days' notice of the proposed hearing date and a reasonable opportunity to examine the terms of the scheme and the scheme booklet and make submissions;
(f) the procedural requirements of the Act and the Corporations Rules have been met; and
(g) the scheme is of such a nature that, if it receives the necessary statutory majority at the scheme meeting, the court will be likely to approve it.
[34] Any issues about classes of members is usually determined at the first hearing. This is so that costs and court time are not wasted which would otherwise occur if this issue was left to the second hearing.
[35] The standard of review that is undertaken by the court at the first hearing is whether the proposed scheme is not inappropriate and is one that sensible businesspeople might consider is of benefit to its members. If the proposed arrangement is one that appears fit for consideration by a meeting of members and is a commercial proposition likely to gain the court's approval if passed by the necessary majority, leave should be given to convene the meeting. [Footnotes omitted]
52 The formal matters that Firefly were required to prove were satisfied for the reasons stated in the written submissions filed on behalf of Firefly.
53 The term 'Part 5.1 body' is defined in s 9 of the Corporations Act to mean, relevantly a company. The term 'company' is defined in s 9 to mean, relevantly, a company registered under the Corporations Act. I accepted that Firefly is a public company registered under the Corporations Act.[34]
An arrangement within the meaning of s 411
54 The scheme participants are members of Firefly. The term 'member' is defined in s 9 of the Corporations Act to mean, in relation to a company, a person who is a member under s 231. I accepted that the proposed scheme will be between Firefly and its shareholders, as shown on its register of members.[35]
55 I accepted that the word 'arrangement' is of wide import,[36] and that the proposed scheme is an 'arrangement' of a type that has been accepted by courts on numerous occasions. Further, for the reasons set out below, I was satisfied that the scheme meeting will be convened between members of the same class.
56 An arrangement to which s 411(1) of the Corporations Act applies is one between a company and its members or creditors or any class of them. The orders sought on behalf of Firefly assumed that the Firefly shareholders form only one class for purposes of voting on the proposed scheme.
57 Section 411 does not define the term 'class'. In determining whether a new or separate class is required, the following threefold test is to be applied.[37]
(a) What are the rights which existing members have against the company and to what extent are they different?
(b) To what extent are those rights affected by the scheme?
(c) Does the different treatment of rights make it impossible for the members in question to consider the scheme as one class?
58 Counsel for Firefly submitted that all Firefly shareholders are being treated equally, and as a result constitute a single class.[38] As all Firefly shareholders have the right to receive the Scheme Consideration provided for in cl 5 of the scheme, it was submitted, and I accepted, that there is only a single class of shareholder for the scheme.
59 It was submitted, and I accepted, that the existence of mechanisms to deal with Ineligible Foreign Shareholders, and the existence of shareholders who also hold other securities for which separate value will be given under the scheme and Option Cancellation Deed, are not class-creating.[39]
60 As to Ineligible Foreign Shareholders, the court's attention was drawn to the fact that there is a more substantial than usual percentage of shares held by the 11 foreign shareholders - approximately 8.45% of the ordinary issued capital.[40] It was appropriate that this was drawn to the court's attention, but as to the treatment of Ineligible Foreign Shareholders, I accepted that mechanism proposed is commonplace and is not class creating.[41] There is a sensible commercial justification for these sale mechanisms in not requiring scheme companies to ascertain and comply (if possible) with numerous sets of foreign securities laws.[42]
61 Turning to the Firefly options, as noted at [39] and [40] above, they are not being dealt with by a separate scheme of arrangement as between Firefly and the holders of Firefly options, nor will they be the subject of the compulsory 'mop-up' provisions post scheme.
62 Counsel submitted that the fact of ownership of the Firefly options by the option-holders is not class creating, nor does it create any collateral benefit, as Firefly shareholders are not treated differently under the scheme on account of their holding other securities.[43] Option‑holders and Firefly shareholders receive consideration at the same ratio.
63 Counsel for Firefly submitted that a separate class of option-holders does not arise.[44] That is because the question of whether a separate class exists must be considered by reference to the rights of the relevant Firefly shareholders as shareholders. That some Firefly shareholders also hold Firefly options does not alter the Scheme Consideration that they will receive for their Firefly shares.
64 It was drawn to the court's attention that ASIC had raised a concern in relation to the mechanism by which, it was said, a 'floor price' is secured for holders of Firefly options (who also hold Firefly shares), and may (it was postulated) 'induce' a positive vote.[45] The communications as between ASIC and Firefly's representatives were annexed to the affidavits of Mr Langdon, and my attention was drawn to the responses provided on behalf of Firefly to ASIC.
65 The communications annexed to Mr Langdon's affidavit of 3 September 2021 reveal that upon receipt of Firefly's response to ASIC's queries and upon Firefly making amendments as requested by ASIC to the scheme booklet, ASIC indicated that it did not propose to intervene in the first court hearing (and ultimately it did not). By an email communication sent on 2 September 2021, Mr Matthew Bevins on behalf of ASIC stated:[46]
...
Thank you for providing your detailed answer to question 16. We note that ASIC is presently not proposing to intervene at the first court hearing on this basis. However, we will closely consider this issue after we have had the opportunity to observe the outcome of the vote at the scheme meeting and reserve our right to take any action we deem necessary at the second court hearing. So as to assist us in any determination we make, we request that company tag the votes of Firefly shareholders who hold options and confirm that it will provide ASIC a copy of the voting report following the scheme meeting.
...
66 I accepted the submissions made on behalf of Firefly and I was satisfied that a separate class of option-holders does not arise, having regard to the rights of the relevant Firefly shareholders as shareholders. I accepted that while some Firefly shareholders also hold Firefly options, this does not alter the Scheme Consideration that they will receive for their Firefly shares.
67 As noted at [41] and [42] above, Firefly performance rights are not being dealt with by a separate scheme of arrangement as between Firefly and the holders of that class of securities. Rather, Firefly shares will be issued to those Firefly performance rights holders and they will be dealt with by the scheme.
68 I accepted the submission made on behalf of Firefly that the fact of ownership of the Firefly performance rights by Firefly shareholders is not class creating, nor does it create any collateral benefit, as Firefly shareholders are not treated differently under the scheme on account of their holdings of these other securities.[47]
69 Section 411(2) of the Corporations Act requires that before making an order, the court be satisfied of two matters. First, that ASIC has been given 14 days' notice of the hearing, or such lesser period of notice as the court or ASIC permits: s411(2)(a). Secondly, that ASIC has had a reasonable opportunity to examine the terms of the scheme and the draft explanatory statement, and to make submissions to the court: s 411(2)(b).
70 ASIC considers that its role is to assist the court by, among other things, reviewing the content of the scheme's documents; reviewing the nature and function of the scheme; representing the interests of investors and creditors; and bringing all relevant matters to the court's attention before it orders a scheme meeting or confirms a scheme.[48]
72 I was satisfied that ASIC had been give 14 days' notice of the first court hearing and a reasonable opportunity to examine the terms of the scheme, the draft explanatory statement and the scheme booklet. I also noted that ASIC had asked questions, provided comments and requested amendments to the proposed scheme booklet.[52]
73 The role of ASIC has been referred to by the High Court, which observed that its predecessor, the Australian Securities Commission, had an obligation to assist the court by presenting argument if it deems that course necessary or desirable.[53] In an application such as this, the court relies on ASIC, as it is not for the court to fulfil the role of contradictor.[54]
74 On 3 September 2021, HWL Ebsworth Lawyers received a letter from ASIC regarding the scheme booklet and the proposed scheme. By the letter, ASIC confirmed that it did not currently propose to appear to make submissions, or intervene to oppose the scheme at the first court hearing. A copy of ASIC's letter was annexed to Mr Langdon's affidavit of 6 September 2021 as TJL-17. In determining to grant the application, I had regard to the same.
75 I had regard to whether the proposed scheme booklet contained the prescribed information and provided proper disclosure.
76 The court was informed that the draft scheme booklet prepared by Firefly in relation to the scheme had been drafted to satisfy the disclosure requirements prescribed in:
(b) the takeover provisions of the Corporations Act;
(c) the prospectus provisions of the Corporations Act; and
(d) s 441(3), s 412 and sch 8 of the Corporations Act, and sch 8 of the Corporations Regulations 2001 (Cth).
77 Further, the court was informed that the explanatory statement would be registered with ASIC before it was dispatched in accordance with s 412(6) of the Corporations Act.[55]
78 I read the revised scheme booklet attached to the affidavit of Mr Langdon affirmed on 3 September 2021. I was provided with a copy of correspondence as between ASIC and Firefly's solicitors relating to ASIC's review of the draft scheme booklet.
79 I was satisfied that there would be proper disclosure as to the effect of the proposed scheme and the material considerations for shareholders of Firefly.
80 There was evidence before me as to the due diligence and verification process that was undertaken by both Firefly and Gascoyne.[56] On the basis of this evidence, I accepted that:
(a) Firefly had undertaken a process of due diligence and verification to verify the accuracy of statements attributable to Firefly in the scheme booklet;
(b) Gascoyne had undertaken a similar process to verify the statements attributable to it; and
(c) appropriate steps had been taken to satisfy Firefly and Gascoyne that the scheme booklet did not omit any material information.
81 The directors of Firefly had resolved to approve the scheme booklet.[57]
82 Based on the information provided to the court on behalf of Firefly, I was satisfied that the scheme booklet contained the prescribed information in accordance with s 412(1)(a)(ii) of the Corporations Act and sch 8 of the Corporations Regulations. The checklist annexed to the plaintiff's submissions filed on 2 September 2021 assisted in verification of the same.
83 I was satisfied that the procedural requirements of the Supreme Court (Corporations) (WA) Rules 2004 had been met.
84 The requirements include compliance with r 3.2, which requires Firefly to file an affidavit stating the names of the persons nominated to be the chairman and alternate chairman of the scheme meeting; and that each person nominated is willing to act as chairman, has had no previous relationship or dealing with Firefly or any other person interested in the scheme except as disclosed in the affidavit, and has no interest or obligation that may give rise to a conflict of interest or duty if the person were to act as chairman of the scheme meeting, except as disclosed in the affidavit. This requirement was satisfied by the affidavits of Mr Hardcastle and Ms Carpenter.
The proposed scheme is bona fide and properly proposed
85 Counsel for Firefly submitted that the court should be satisfied that the scheme is properly proposed (bona fides and intra vires), noting that where there is no suggestion of an improper purpose on the material before the court, bona fides is a matter for consideration on any application to approve the scheme.[58]
86 There was nothing in the materials before the court to suggest that the scheme was not bona fides or had not been properly proposed.
87 Having given careful consideration to the materials filed, and having weighed in the balance the unanimous recommendation of Firefly's directors; the conclusion of the independent expert; the involvement and expressed position of ASIC; and the matters drawn to the court's attention by counsel for Firefly, I was satisfied that there was no apparent reason why the scheme should not, in due course, receive the court's approval if the necessary majority of member's votes were to be achieved.
88 Courts endeavour to carefully scrutinise the material provided, but are heavily reliant on counsel to expressly address those features of the scheme that require attention.[59] For completeness, I note that in written and oral submissions, Firefly's counsel drew my attention to the following specific matters, which I weighed in the balance.
89 The first was the demerger, described at [7] to [9] above.
90 The demerger proposal is to be considered immediately following the scheme meeting at a separate general meeting. I was satisfied that no separate scheme of arrangement was required for the demerger as Firefly's constitution provides for the reduction of capital by way of distribution of shares in other body corporates, in this case Firetail.[60]
91 The second was that the implementation of the scheme was to be subject to the satisfaction of conditions precedent.[61] Mr Lawson deposed that he was not aware of any basis to believe that any condition precedent would not be satisfied or waived by the necessary time.[62] There was no evidence that a condition precedent could not or would not be satisfied.
92 The third concerned the recommendations made by Firefly's directors in the context of their respective interests, which interests were disclosed in the scheme booklet and in the chairman's letter to be included in the scheme booklet.
93 Counsel referred specifically to cl 5.6(a) of the scheme implementation deed, which requires the Board to give a supportive recommendation. The scheme implementation deed contains some exceptions in cl 5.6(b) whereby the Board can, if certain conditions are satisfied, not provide or continue to provide a recommendation.
94 The court's attention was drawn to the exception in cl 5.6(b)(3). Counsel noted that the scheme implementation deed does not create a fiduciary carve out for each director individually, such that a director who must withdraw their recommendation (say, on account of personal interest or request by ASIC), could not do so without putting Firefly at risk of payment of a reimbursement fee (pursuant to cl 12.2(a)), or conferring a right of termination on Gascoyne (pursuant to cl 13.1(b)(2)(B)).
95 I had regard to the terms of the scheme implementation deed, particularly to the limited exception in cl 5.6(b)(3)), and concluded that it did not ground a basis to refuse the application. The execution of the scheme implementation deed followed arm's-length commercial negotiations in which both parties were separately advised and represented by external legal advisors.[63] Further, I had regard to the evidence of the directors, who individually had considered their position and who had each set out their own personal reasons as to why they recommend the proposed scheme, having given due consideration that their interests did not prevent them from making a recommendation.
96 I concluded that in all of the circumstances disclosed, there was nothing to impugn the appropriateness of the directors recommending the scheme.
97 The fourth matter raised and addressed by counsel was the meeting of the Board on 15 June 2021 to consider the proposed scheme implementation deed, in circumstances where there were material personal interests in the transaction. Counsel drew my attention to the minutes of meeting which confirmed that all relevant notifications had been given.[64]
98 The fifth matter raised and addressed by counsel was whether a benefit exists for one shareholder in particular so as to bring into question the overall fairness of the scheme. As noted by counsel, the 'net benefits' test, used by the Takeovers Panel in Guidance Note 21, is utilised to determine if there is overall disparity in favour of the party to the non-scheme transaction. Having regard to the proposed scheme and to the matters raised by counsel,[65] I examined and concluded that no benefit exists for one shareholder in particular so as to bring into question the overall fairness of the scheme.
99 The sixth matter raised and addressed by counsel was performance risk. That is, risk that after transferring their shares, shareholders in a target will be left with no scheme consideration; and no capacity to sue the acquirer to get back their shares or damages.
100 I was satisfied that the nature and terms of the proposed scheme were such that the performance risk was minimal.[66] I had regard to the terms of the scheme and the deed poll provided by Gascoyne and understood that:
(a) the transfer of Firefly shares would be subject to provision of the Scheme Consideration;[67]
(b) Firefly and each scheme participant would have individual rights against Gascoyne in the event that Gascoyne failed to provide the Scheme Consideration;[68] and
(c) Gascoyne must allot and issue 0.34 Gascoyne shares to each eligible shareholder for each Firefly share held on the Implementation Date.[69]
101 The arrangements under the terms of the proposed scheme are supported by the deed poll. By the deed poll, Gascoyne covenants in favour of each Firefly shareholder that it will perform all actions attributed to it under the scheme. There is also an acknowledgement that the deed poll may be relied upon and enforced by any scheme shareholder in accordance with its terms.[70]
102 The seventh matter concerned the provision for exclusivity and a reimbursement fee under the scheme implementation deed.
103 The scheme implementation deed at cl 11 contains lock up devices in the form of 'no shop', 'no talk', 'notification obligations' and 'matching right' provisions. The 'no talk' provision which binds Firefly is subject to a fiduciary carve out by operation of cl 11.2. In certain circumstances, under cl 12, a reimbursement fee of $500,000 is payable by Firefly to Gascoyne, and by Gascoyne to Firefly.
104 In considering whether the exclusivity provision may impact on the completion of the transaction and the duties of directors, the court has regard to:[71]
(a) the period of exclusivity, which should be no more than a reasonable period and capable of precise ascertainment;
(b) whether the provisions are subject to an overriding obligation that the directors not breach their fiduciary duties or are otherwise unlawful; and
(c) whether there is adequate prominence given to these provisions in the scheme booklet.
105 In this case the exclusivity period is defined at cl 11 of the scheme implementation deed and, at most, is a period of six months from 15 June 2021.[72] Further, the no-talk provision contains an appropriate fiduciary carve-out;[73] and the exclusivity arrangements are prominently disclosed in the scheme booklet.[74]
106 In his affidavit of 1 September 2021, Mr Lawson deposed to the commercial justification for the exclusivity provisions and the reimbursement fee.[75] He deposed that the inclusion of these provisions in the scheme implementation deed followed arm's-length commercial negotiations in which both parties were separately advised and represented by external legal advisers.[76]
107 The amount of the reimbursement fee is $500,000, which is below the 1% required for the implied valuation of Firefly based on the price of the Firefly shares on the ASX on 15 June 2021 (the business day prior to the announcement of the entry into the scheme implementation deed).[77] During the course of the first court hearing, counsel also referred to an alternative method of calculating the implied value of Firefly for the purposes of assessing whether or not the reimbursement fee fell below the requisite 1% guidance.[78] This method was to value the options by reference to the value ascribed to those options in sch 6 to the scheme implementation deed, rather than on a fully diluted basis.
108 I was satisfied that on either method of calculating the implied valuation of Firefly, the reimbursement fee was within generally accepted commercial parameters for break fees.
109 The reimbursement fee is intended to compensate the parties for the costs (both costs incurred and opportunity costs) if the scheme does not proceed. The reimbursement fee is not payable if Firefly shareholders do not vote in favour of the scheme.[79] Accordingly, I considered that the reimbursement fee was unlikely to influence shareholders in their decision to vote on the scheme.
110 The eighth matter raised by counsel concerned cl 8.2 of the scheme, which contains a 'deemed warranty' provision in which Firefly shareholders warrant to Firefly for the benefit of Gascoyne that all of their shares transferred under the scheme (including any rights and entitlements attaching to those shares) are fully paid and unencumbered and free from restrictions at the date of transfer. Having drawn this matter to the court's attention, counsel noted that such deemed warranties are common in members' schemes.[80]
111 The ninth matter that counsel raised was the question posed by s 411(17).
112 Counsel noted, and I accepted, that it is now settled that the appropriate occasion on which the court is required to address the question posed by s 411(17) is on an application to approve a scheme at the second court hearing.[81] Consequently, it is not incumbent upon the court at the first court hearing to canvass the question of avoidance of the operation of ch 6. However, counsel submitted that in any event, no such issue arose in this case.
113 I note that prior to the first court hearing, ASIC provided a written statement that it did not intend to appear and make submissions at the first court hearing, a copy of which was before the court. I weighed the same in the balance.
114 The tenth matter raised by counsel concerned the inclusion of cl 9.6 in the scheme, which provides as follows:
Each Scheme Holder agrees that neither Firefly nor Gascoyne nor any director, officer, secretary or employee of Firefly or Gascoyne or Gascoyne Group shall be liable for anything done or omitted to be done in the performance of this Scheme or the Deed Poll in good faith.
115 I did not consider that this clause would deprive members of their intended benefits under the scheme having regard to its proper construction: see Re Wesfarmers Ltd; Ex parte Westfarmers Ltd [No 2] [2018] WASC 357 [49(4)].
116 The standard of review that was to be undertaken was to consider whether the proposed scheme was not inappropriate, and one that sensible businesspeople might consider to be of benefit to its members. Having conducted a review on this basis, and having taken into account all of the matters raised by counsel, I concluded that the proposed arrangement was one that appeared fit for consideration by a meeting of members and a commercial proposition likely to gain the court's approval if passed by the necessary majority. I concluded that there was no apparent reason why the scheme should not, subject to the vote of members at the scheme meeting, receive the court's approval.
Electronic dispatch of the scheme booklet and proxy form
117 Firefly sought orders pursuant to s 1319 of the Corporations Act for electronic dispatch of the scheme booklet; applicable proxy form; and Opt-in Notice by email to those Firefly shareholders who had nominated an electronic address for the purpose of receiving shareholder communications from Firefly. I accepted that such orders are now common.[82]
118 Details were provided as to the terms of the proposed electronic notification, namely that email notices would be provided to Firefly shareholders containing links to the scheme booklet and proxy forms.
119 I was satisfied, having read the terms of the proposed email communication to shareholders, that an order for electronic dispatch of the scheme booklet was appropriate.
120 In respect of Firefly shareholders who had not nominated an electronic address, or for whom electronic delivery had been notified as ineffective, Firefly proposed the dispatch of a notice by post, including links to the scheme booklet, proxy form and other information. I considered this was appropriate.
121 Firefly proposed that the scheme meeting scheduled to take place at 2.00 pm (AWST) on 21 October 2021, be held in person and electronically, or in light of the COVID-19 pandemic, only electronically if it is not possible to conduct a physical meeting. I accepted that such an arrangement was consistent with the conduct of previous scheme meetings recently convened,[83] and appropriate given the pandemic.
122 If the meeting could not proceed in person and it was necessary to hold the meeting only electronically, Firefly proposed that notice be given by publishing a notice on its website and by making an ASX announcement. Given the uncertainty surrounding the pandemic and the short notice with which stay at home directions or lockdowns may be ordered, I also considered that this was appropriate.
Conclusion and orders of the first court hearing
123 Taking into account all of the matters referred to above, I considered that there was no apparent reason why the scheme should not, if approved at the scheme meeting, receive the court's approval. There was nothing to suggest that the scheme had not been properly proposed.
124 Upon considering the comprehensive affidavit evidence filed in support of the application, and upon considering the submissions made by counsel on behalf of Firefly, I was satisfied that the substantive and procedural requirements of s 411(1) and s 1319 of the Corporations Act had been satisfied, that the scheme was fit for consideration by Firefly's shareholders, and that leave ought to be given. I also approved for distribution to Firefly shareholders the scheme booklet containing the explanatory statement required by s 412(1)(a) of the Corporations Act. The orders made at the conclusion of the first court hearing are reproduced at sch A to these reasons.
Supplementary disclosure and postponement of scheme meeting
125 As noted above, after Gascoyne made its announcement to the market on 13 October 2021, Firefly made an urgent application to the court for orders regarding the approval and dispatch of a supplementary scheme booklet to Firefly shareholders; and for directions with respect to convening, holding and the conduct of the meeting of Firefly's shareholders on a later date, with ancillary and consequential directions.
126 The application was heard and determined on 15 October 2021. Counsel for Gascoyne appeared in support of the application. ASIC did not seek to be heard.
127 At the hearing of the application, Firefly relied upon the evidence that was read and relied upon at the first court hearing. Four further affidavits were filed and all were read in support of Firefly's application. They were as follows.
128 First, the third affidavit of Mr Lawson sworn on 14 October 2021, which attached documents marked SIL-31 to SIL-52.[84] By his affidavit, Mr Lawson deposed to, among other things, the lodgement of the scheme booklet with ASIC and the dispatch of the scheme booklet to Firefly shareholders in accordance with the orders made on 6 September 2021. Mr Lawson also attached to his affidavit various market announcements made in relation to Westgold's intention to make an unsolicited and conditional off-market takeover bid for Gascoyne, and described the response of Gascoyne's Board to the same. Mr Lawson deposed to Firefly having been served with an application made by Westgold to the Takeovers Panel, seeking a declaration in relation to particular terms of the scheme implementation deed; and to Firefly's receipt of a supplementary report from BDO Corporate Finance (WA) Pty Ltd regarding the scheme. Attached to Mr Lawson's affidavit was a copy of the supplementary independent expert's report; the draft supplementary scheme booklet prepared by Firefly with the assistance of its lawyers, which included a revised notice of meeting to defer the date of the scheme meeting to 27 October 2021; and a verification report in relation to the draft supplementary scheme booklet.
129 Mr Lawson also deposed that it remained his opinion that it was appropriate for him to make a recommendation on the scheme, and that the scheme was in the best interests of Firefly and Firefly's shareholders in the absence of a superior proposal, subject to the independent expert continuing to conclude that the scheme is in the best interests of Firefly shareholders. He also deposed that he had been informed by each of the other directors of Firefly that they too continued to hold this opinion; and that each had read the supplementary scheme booklet and had approved the contents to the extent that the supplementary scheme booklet referred to the opinions of the directors of Firefly.
130 The second affidavit was made by Christopher Paul Hood sworn on 14 October 2021, with attached documents marked CPH-1 to CPH-6. Mr Hood is a partner of the firm HWL Ebsworth Lawyers and acts for Firefly. Among other things, Mr Hood deposed to communications as between HWL Ebsworth Lawyers and ASIC concerning the proposed supplementary disclosure; and between HWL Ebsworth Lawyers and HopgoodGanim Lawyers on behalf of Westgold. Mr Hood also deposed to what he believed to be the status of Westgold's application to the Takeovers Panel as at the date of his affidavit.
131 The third affidavit was the second affidavit made by Mr Coyne sworn on 15 October 2021, with attached documents marked DATC-8 to DATC-18. As noted above, Mr Coyne is the Chief Financial Officer and Company Secretary of Gascoyne. In his affidavit, Mr Coyne described the offer by Westgold and the response to the Board of Gascoyne to the same. He also deposed to the Board of Gascoyne having endorsed certain revisions to its business plan; and to the process that had been undertaken to verify the supplementary scheme booklet.
132 The fourth affidavit was the fourth affidavit of Mr Lawson sworn on 15 October 2021, with attached documents marked SIL-53 to SIL‑61.[85] Among other things, Mr Lawson attached to his affidavit the signed circulating resolution of the Board of Firefly, by which the Board (among other things) resolved to approve the supplementary scheme booklet; and resolved that they considered that the scheme was in the best interests of Firefly's shareholders for the reasons set out in the booklet. He further deposed to service of the documents filed for the purpose of this application on ASIC, and attached to his affidavit correspondence with ASIC.
133 At the hearing of the application on 15 October 2021, Firefly also relied upon the written outline of submissions and the minute of proposed orders both filed on 15 October 2021. A letter from ASIC dated 15 October 2021 was also tendered.[86]
135 Where a meeting has been convened by an order of the court under s 411 of the Corporations Act, only material which has been approved by the court for dispatch should be provided to shareholders.[89] It was not open to Firefly to make supplementary disclosure without court approval.
136 The court has broad powers under s 1319 of the Corporations Act, which include the power to vacate or vary interlocutory orders made under s 411(1) of the Corporations Act at a first court hearing because of a change of circumstances, including to adjourn a meeting convened under s 411(1) or to authorise the dispatch of supplementary material.[90]
(a) vacate or vary orders made under s 411 in relation to a scheme meeting (whether or not the meeting has commenced);
(b) authorise the dispatch of further explanatory material; and
(c) make orders as to the validity of proxies lodged in relation to a scheme meeting.[92]
140 ASIC Regulatory Guide 60, which deals with schemes of arrangement, states that in general, shareholders should be given at least 10 days' notice of any material new information in relation to a scheme.[94] I accepted that while the court should take this into account, it is a matter for the court to assess whether there is sufficient time for shareholders to consider the information and to understand its effect.[95]
141 In the written submissions filed on behalf of Firefly on 15 October 2021, counsel for Firefly listed the matters that are typically considered by a court on the hearing of an application such as this. I reproduce that list below and note that I adopted and applied the same in determining this application.[96]
142 First, whether there remains utility in the proposed scheme (with or without modification) being put to the shareholders in the sense that something is capable of approval at a second court hearing if agreed by the requisite majorities.
143 Secondly, whether any proposed modification to the scheme or some other development in the related transactions is permissible (to the same standard as at the first court hearing in the sense of the modification being lawful and for a proper purpose, class creating, fair, not unreasonable and not oppressive of a minority).
144 Thirdly, whether the court should grant leave to dispatch any proposed supplementary disclosure to shareholders having regard to:
(a) there being a change in circumstances that warrants further disclosure;
(b) the obligation of the company and its directors to provide members with new material information about a proposed scheme; and
(c) the court being satisfied prima facie that there will be proper disclosure by sending the proposed supplementary materials.
145 Fourthly, whether there has been notice to ASIC and ASIC's position (including from RG 60.94-60.96 of the ASIC Regulatory Guide 60).
146 Fifthly, whether there are any other matters relevant to the court's discretion to allow the proposed scheme to be considered.
147 Sixthly, what procedural directions under s 1319 are appropriate in the circumstances for any adjourned or postponed scheme meeting, including:
(a) dispatch of any replacement or supplementary notice of meeting;
(b) the sufficiency of notice, both as to time and content;
Disposition Utility in the scheme meeting proceeding
148 After considering the papers filed and hearing counsel for Firefly, I was satisfied that there remained utility in the arrangement contained in the scheme being put to Firefly shareholders at the postponed scheme meeting.
149 The terms of the scheme had not altered. Rather, there had been a change in circumstances that warranted supplementary disclosure, being the announcement of an updated business plan by Gascoyne. This change of circumstance was said to increase cashflow and reduce capital expenditure. It was also proposed that there be disclosure of the Westgold takeover bid for Gascoyne and the related Takeovers Panel application.
150 In considering utility, I had regard to the evidence before me that the Board of Firefly continued to unanimously recommend that Firefly shareholders vote in favour of the scheme subject to the independent expert continuing to conclude that the scheme was in the best interests of shareholders.[97] I also weighed in the balance that the independent expert had confirmed that it had not changed its opinion regarding the scheme, and that the scheme remained in the best interests of Firefly shareholders.[98]
151 I had regard to the offer made by Westgold and that Westgold had lodged an application with the Takeovers Panel on the basis that, among other things, it said that the scheme implementation deed operates as an unacceptable lock-up device such that 'an entity that wishes to acquire a stand-alone or pre-merger Gascoyne is practically prevented from doing so'.[99]
152 I noted that Westgold's bid was for the shares in Gascoyne and not Firefly. On balance, I was satisfied that neither Westgold's expressed concerns in relation to the scheme implementation deed, nor Westgold's application to the Takeovers Panel grounded a sound foundation to conclude that there would be no utility in the scheme meeting proceeding. As at 15 October 2021, the Takeovers Panel had not formed a Panel of its members. No orders had been made, nor had any hearing been scheduled. I did not consider it appropriate to pre-empt what may occur in relation to Westgold's application. If the scheme were to be approved by the requisite majorities, Westgold could seek to be heard at the second court hearing, at a time when the position of Firefly's shareholders (and potentially the Takeovers Panel) would be known.
153 I had regard to the fact that ASIC had reviewed the proposed supplementary disclosure and did not intervene at the hearing of the application. I was cognisant that on an application such as this, the court relies on ASIC. It is not for the court to fulfil the role of contradictor.[100]
154 Also for the reasons set out at [85] to [116] above, I considered that there remained utility in the proposed scheme being put to Firefly shareholders, and that it was appropriate for the scheme meeting to be postponed and not cancelled.
155 The terms of the scheme had not altered. In the circumstances, the court was not required to examine the terms of any proposed modifications to the scheme. There was no need to consider whether it was appropriate for two resolutions to be put to Firefly shareholders at the scheme meeting (one to propose the scheme and the second to propose the amendments to the proposed scheme).[101]
156 I considered whether leave ought be granted to Firefly to dispatch the proposed supplementary scheme booklet to Firefly shareholders having regard to those matters identified at [144(a) to (c)] above.
157 The additional information sought to be provided included the update to Gascoyne's guidance for proposed operations in the medium term (2022 - 2024); and the independent expert's views in relation to the scheme having considered the update.
158 Gascoyne updated its business plan after dispatch of the scheme booklet to Firefly shareholders. I accepted that the additional information may be material to a shareholder's decision as to how to vote at the scheme meeting and is a change of circumstances that warrants further disclosure. I accepted that the disclosure was needed so as to explain the Gascoyne update and to inform shareholders of the supplementary opinion of the independent expert, given in light of Gascoyne's Board's comments concerning its valuation. I was therefore satisfied of there being a change in circumstances that warranted further disclosure; and that it was incumbent upon Firefly and its directors to provide Firefly shareholder with the additional information.
159 Counsel for Firefly submitted that the court could be satisfied that there was nothing apparently misleading or deceptive in the draft supplementary scheme booklet as each of Firefly and Gascoyne had undertaken a process of verifying the accuracy of the statements relating to them in the draft. Further, ASIC had reviewed the supplementary scheme booklet and had not raised any concern.
(a) Firefly had undertaken a process to verify the accuracy of statements attributable to Firefly in the supplementary scheme booklet; and
(b) Gascoyne had undertaken a process to verify the accuracy of statements attributable to Gascoyne in the supplementary scheme booklet.
161 The directors of Firefly had resolved to approve the supplementary scheme booklet.
162 For these reasons, I was satisfied that prima facie that there would be proper disclosure to Firefly shareholders by sending the proposed supplementary materials.
163 ASIC was informed on 13 October 2021 of Firefly's proposal to make supplementary disclosure to Firefly shareholders.[104] At about 9.17 pm AWST on 14 October 2021, ASIC was provided with the draft supplementary scheme booklet, after some email conferral as between ASIC and Firefly's legal representatives.[105]
164 At the hearing, counsel for Firefly tendered a letter from ASIC dated 15 October 2021, which recorded as follows.
...
ASIC's review of the draft supplementary explanatory statement and current intention in relation to the Scheme
ASIC has examined the draft supplementary explanatory statements, in accordance with our policy in Regulatory Guide 60 Schemes of arrangement (RG 60).
ASIC does not currently propose to appear to make submissions or intervene to oppose the dispatch of the draft supplementary explanatory statement.
This current intention is based on ASIC's examination of the terms of the Scheme, and the draft supplementary explanatory statement, in accordance with our policy in RG 60. It is also based on information available to ASIC, as at the date of this letter, on the matters to which ASIC will have regard before stating that it has no objection to a scheme under paragraph 411(17)(b) of the Act. These matters are set out in RG 60. ASIC's position may change if further information becomes available.
ASIC is not responsible for the contents of the draft supplementary explanatory statement. Although ASIC has reviewed the draft supplementary explanatory statement in accordance with our policy in RG 60, ASIC has not verified the information in the draft supplementary explanatory statement either as to accuracy or as to whether there may be additional information that is relevant to the Scheme that may need to be disclosed in the draft explanatory statements. ASIC has not formed any view as to the merits of the Scheme or as to how members should vote.
Other matters relevant to the exercise of discretion
165 I considered whether there might be other maters relevant to the exercise of discretion, and concluded that there were not.
166 For completeness, I note that I understood that Firefly intended to postpone the meeting to consider the demerger until after the postponed scheme meeting. The arrangements were disclosed in the materials filed. They were not matters which were relevant to the exercise of the discretion to make the orders sought by Firefly pursuant to s 411(1) and s 1319 of the Corporations Act.
167 I was satisfied that the procedural directions proposed on behalf of Firefly pursuant to s 1319 were appropriate in the circumstances.
168 I had particular regard to whether there would be sufficient notice to Firefly shareholders, so as to ensure that they had sufficient time to consider the supplementary disclosure. I understood that upon the making of orders on 15 October 2021, it was intended for dispatch to take place by the close of Saturday, 16 October 2021, allowing 11 days. Given the nature and significance of the information to be disclosed, and the various disclosures to the market on Firefly's ASX announcements platform, I was satisfied that the procedural directions were appropriate to ensure that Firefly shareholders were given sufficient notice.
169 Firefly proposed that valid proxy forms that had been lodged for the scheme meeting remain valid unless they are withdrawn, revoked, or a new proxy form is lodged. This was prominently disclosed in the supplementary scheme booklet.[106] Given the terms of the scheme had not been amended, I considered it is appropriate to make the orders sought by Firefly. This was consistent with the approach that has been adopted previously by the courts.[107]
Conclusion and orders for the hearing on 15 October 2021
170 Having had regard to all of the matters referred to above, I was satisfied that it was appropriate for the supplementary scheme booklet to be dispatched to Firefly shareholders. Further I was also satisfied that it was appropriate that the scheme meeting be adjourned to 27 October 2021. The orders made at the conclusion of the hearing on 15 October 2021 are reproduced at sch B to these reasons.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
[1] Affidavit of SI Lawson sworn 1 September 2021 par 23; referred to in the plaintiff's submissions filed 2 September 2021 par 3.
[2] The scheme booklet s 7.1(a), as annexed to the affidavit of GW Hummel sworn 16 August 2021, 'GWH-5'; and to the affidavit of TJ Langdon affirmed 3 September 2021, 'TJL-15'.
[3] The scheme implementation deed is annexed to the affidavit of GW Hummel sworn 16 August 2021 par 8, 'GWH-1'. The term 'Scheme Record Date' is defined in s 14 of the scheme booklet.
[6] Plaintiff's submissions filed 2 September 2021 par 9.
[8] Affidavit of GW Hummel sworn 16 August 2021 par 13, 'GWH-7' (demerger implementation deed), pages 798 - 1439.
[9] Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [2018] WASC 308 [112], referenced in the plaintiff's submissions filed 2 September 2021 par 93.
[10] Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358, 362 [7], cited in the plaintiff's submissions filed 2 September 2021 par 15.
[11] Affidavit of TJ Langdon affirmed 6 September 2021 par 5, 'TJL-17'.
[12] Affidavit of SI Lawson sworn 14 October 2021, 'SIL-41'.
[13] Affidavit of TJ Langdon affirmed 3 September 2021 par 5, 'TJL-10'.
[15] Affidavit of GW Hummel sworn 16 August 2021 par 7, 'GWH-1'.
[16] Affidavit of GW Hummel sworn 16 August 2021 par 8, 'GWH-2' and 'GWH-3'.
[20] Affidavit of SI Lawson sworn 1 September 2021 par 33, 'SIL-12'.
[21] Affidavit of SI Lawson sworn 1 September 2021 par 23(b), 'SIL-13', page 150.
[22] Affidavit of SI Lawson sworn 1 September 2021, 'SIL-13', page 150, as referenced in the plaintiff's submissions filed 2 September 2021 par 39.
[23] As summarised in the plaintiff's submissions filed 2 September 2021 at pars 41 - 43.
[24] Affidavit of SI Lawson sworn 1 September 2021 pars 48 - 54.
[25] Affidavit of SI Lawson sworn 1 September 2021, 'SIL-15', page 154.
[26] Affidavit of GW Hummel sworn 16 August 2021, 'GWH-1', pages 20 - 21.
[27] Affidavit of SI Lawson sworn 1 September 2021 pars 46 - 47, 'SIL-14'.
[28] Affidavit of GW Hummel sworn 16 August 2021, 'GWH-2'; affidavit of SI Lawson sworn 2 September 2021 pars 5 - 6, 'SIL-23', 'SIL-24' and 'SIL-25'.
[29] Scheme booklet 'Annexure A'; see also ts 2 - 3 (6 September 2021).
[31] Affidavit of DAT Coyne sworn 2 September 2021 pars 9 - 10, 'DATC-1'; ts 4 (6 September 2021).
[32] Affidavit of TJ Langdon affirmed 1 September 2021 pars 8 - 9, 'TJL-3'.
[33] Affidavit of TJ Langdon affirmed 3 September 2021, 'TJL-15'.
[34] Affidavit of GW Hummel sworn 16 August 2021, 'GWH-10', pages 1474 - 1533.
[35] Affidavit of GW Hummel sworn 16 August 2021, 'GWH-4' (scheme, sch 1), pages 195 - 198.
[36] Re NRMA Insurance Ltd (No 1) [2000] NSWSC 82; (2000) 156 FLR 349, 356 [20], cited in the plaintiff's submissions filed 2 September 2021 par 23.
[37] First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116; (2017) 320 FLR 78, 92 - 94 [77] ‑ [81]; see also Re Zenith Energy Ltd; Ex Parte Zenith Energy Ltd [2020] WASC 266 [36], cited in the plaintiff's submissions filed 2 September 2021 par 30 footnote 19.
[38] ts 12 (6 September 2021); and the plaintiff's submissions filed 2 September 2021 par 31.
[40] Affidavit of SI Lawson sworn 1 September 2021 par 33, page 149, 'SIL-12'; plaintiff's submissions filed 2 September 2021 par 35; ts 11, 17 (6 September 2021).
[41] See Excelsior Gold Limited; Re Excelsior Gold Limited [2018] FCA 2064 [37] - [43]; Re Doray Minerals Ltd; Ex parte Doray Minerals Ltd [2019] WASC 57 [45]; Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [96]; Piedmont Lithium Ltd [2021] WASC 76 [41].
[42] Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [96], [97].
[43] Anatolia Energy Limited, in the matter of Anatolia Energy Limited [2015] FCA 1134 [16] - [17]; SRG Limited, in the matter of SRG Limited [2018] FCA 1092 [18], [29] ‑ [33], cited in the plaintiff's submissions filed 2 September 2021 par 44 footnote 30.
[45] Affidavit of TJ Langdon affirmed 1 September 2021, 'TJL-4', page 43, question 16.
[46] Affidavit of TJ Langdon affirmed 3 September 2021, 'TJL-10'.
[47] Excelsior Gold Limited, Re Excelsior Gold Limited [36]; cited in the plaintiff's submissions filed 2 September 2021 par 54.
[48] ASIC Regulatory Guide 60 at RG 60.4.
[49] Affidavit of TJ Langdon affirmed 1 September 2021 par 6, 'TJL-1'.
[50] Affidavit of TJ Langdon affirmed 1 September 2021 par 7, 'TJL-2'.
[51] Affidavit of TJ Langdon affirmed 1 September 2021 pars 8 - 9; affidavit of TJ Langdon affirmed 6 September 2021, 'TJL-17'.
[52] Affidavit of TJ Langdon affirmed 1 September 2021 pars 10 - 12, 'TJL-4'.
[53] Australian Securities Commission v Marlborough Gold Mines Limited [1993] HCA 15; (1993) 177 CLR 485, 506; Re Advance Bank Australia Limited (1997) 136 FLR 281, 287, cited by Jacobson J in Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited [2010] FCA 220 [15].
[54] Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited [No 3] [2010] FCA 400 [43].
[55] Plaintiff's submissions filed 2 September 2021 pars 63 and 64.
[56] Affidavit of DAT Coyne sworn 3 September 2021, pars 11 - 28; affidavit of SI Lawson sworn 1 September 2021 pars 69 - 85.
[57] Affidavit of SI Lawson sworn 1 September 2021 par 84.
[58] Re NRMA Insurance Ltd (No 1), 356 - 357 [22] - [24], cited in the plaintiff's submissions filed 2 September 2021 par 86.
[59] Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited [No 3] [42].
[60] See cl 10.2 of Firefly's constitution, annexed to the affidavit of SI Lawson sworn on 1 September 2021, 'SIL-5'.
[61] Scheme implementation deed cl 3.1.
[62] Affidavit of SI Lawson sworn 1 September 2021 par 30.
[63] Affidavit of SI Lawson sworn 1 September 2021 par 102.
[64] Plaintiff's submissions filed 2 September 2021 pars 111 - 113; affidavit of SI Lawson sworn 2 September 2021, 'SIL-76', page 14.
[65] Plaintiff's submissions filed 2 September 2021 pars 116 - 118.
[66] APN News & Media Limited, in the matter of APN News & Media Limited [2007] FCA 770; (2007) 62 ACSR 400, 405 [23]; Anatolia Energy Limited, in the matter of Anatolia Energy Limited [34]; Creso Pharma Limited [2019] WASC 472 [75] - [77].
[67] Affidavit of GW Hummel sworn 16 August 2021, 'GWH-4' cl 4.2(a) and cl 8.3(b).
[68] Affidavit of DAT Coyne sworn 3 September 2021, 'DATC-1' cl 1.3, cl 2.3 and cl 7.2; Property Law Act 1969 (WA) s 11.
[69] Affidavit of DAT Coyne sworn 3 September 2021, 'DATC-1' cl 3.1.
[70] Affidavit of DAT Coyne sworn 3 September 2021, 'DATC-1' cl 1.3(a).
[71] APN News & Media Limited, in the matter of APN News & Media Limited [29] - [35]; Re Kangaroo Resources Ltd; Ex parte Kangaroo Resources Ltd [2018] WASC 327 [57] - [61]; Re Pacific Energy Limited [2019] WASC 443 [58].
[73] Scheme implementation deed cl 11.2.
[75] Affidavit of SI Lawson sworn 1 September 2021 pars 94 - 96, 102 - 105.
[76] Affidavit of SI Lawson sworn 1 September 2021 par 102.
[77] Affidavit of TJ Langdon sworn 1 September 2021, 'TJL-5'.
[80] APN News & Media Ltd, in the matter of APN News & Media Limited 412 - 413 [57] - [63]; Re Macquarie Private Capital A Ltd [2008] NSWSC 323 [13] - [14]; Creso Pharma Limited [94]; Re Galaxy Resources Ltd, Ex parte Galaxy Resources Ltd [79].
[81] See Re Macquarie Private Capital A Ltd [25] - [37].
[82] See for example, SRG Limited, in the matter of SRG Limited [48]; Re Doray Minerals Ltd; Ex parte Doray Minerals Limited [72]; Re Galaxy Resources Ltd; Ex Parte Galaxy Resources Ltd [73] - [76].
[83] Re NTM Gold Ltd; Ex parte NTM Gold Ltd [2021] WASC 22 [81]; Piedmont Lithium Ltd; Re Galaxy Resources Ltd; Ex parte Galaxy Resources Ltd.
[84] The affidavit of SI Lawson sworn 14 October 2021 was titled 'second supplementary affidavit', and was the third affidavit of Mr Lawson filed in the proceeding.
[85] The affidavit of SI Lawson sworn 15 October 2021 was titled 'third supplementary affidavit', and was the fourth affidavit of Mr Lawson filed in the proceeding.
[87] Affidavit of SI Lawson sworn 14 October 2021, 'SIL-48'; affidavit of SI Lawson sworn 15 October 2021, 'SIL-60' (amended par 6 of the draft supplementary scheme booklet).
[88] Affidavit of SI Lawson sworn 14 October 2021, 'SIL-48', Annexure A pages 795 - 801.
[89] Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited (No 3) [2015] FCA 596 [15]; Associated Advisory Practices Ltd, in the matter of Associated Advisory Practices Limited (No 2) [2013] FCA 979 [8]; Re Zenith Energy Ltd; Ex parte Zenith Energy Ltd [No 2] [2020] WASC 275 [14], cited in the plaintiff's submissions filed 15 October 2021 par 38.
[90] Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited (No 2) [2015] FCA 410 [10]; In the matter of Lend Lease Primelife Ltd, In the matter of Lend Lease Village Responsible Entity Ltd [2009] NSWSC 1340 [10], [16], cited in Re Piedmont Lithium Ltd; Ex parte Piedmont Lithium Ltd [No 2] [2021] WASC 106 [11].
[91] Cleary v Australian Cooperative Foods Ltd (Nos 2 and 3) (1999) 32 ACSR 701, 746 [52]; Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited (No 2) [12]; Diversa Limited, in the matter of Diversa Limited (No 2) [2016] FCA 1142 [7]; Tawana Resources NL, in the matter of Tawana Resources NL (No 2) [2018] FCA 1724 [20]; cited in the plaintiff's submissions filed 15 October 2021 par 16(b).
[92] In the matter of Lend Lease Primelife Ltd, In the matter of Lend Lease Village Responsible Entity Ltd [16]; Felix Resources Pty Ltd; in the matter of Felix Resources Pty Ltd (No 2) [2009] FCA 1337 [10]; Associated Advisory Practices Ltd, in the matter of Associated Advisory Practices Limited (No 2) [8]; Nexus Energy Ltd, in the matter of Nexus Energy Ltd [2014] FCA 558 [6]; Aurora Oil & Gas Ltd, in the matter of Aurora Oil & Gas Ltd [2014] FCA 612 [3]; Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited (No 2) [10] - [13]; Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited (No 3) [14]; Tawana Resources NL, in the matter of Tawana Resources NL (No 2) [20]; Re Piedmont Lithium Ltd; Ex parte Piedmont Lithium Ltd [No 2] [11] - [12] and [23], cited in the plaintiff's submissions filed 15 October 2021 par 21.
[93] Re Aspen Group Ltd [2015] NSWSC 1718 [33] - [34]; In the matter of Pulse Health Limited [2017] NSWSC 653 [6], cited in the plaintiff's submissions filed 15 October 2021 par 22.
[94] ASIC Regulatory Guide 60 [RG60.96].
[95] Re Prime Media Group Ltd [2019] NSWSC 1888 [8]; Re Piedmont Lithium Ltd; Ex parte Piedmont Lithium Ltd [No 2] [13].
[96] The issues as summarised at [142] - [147] were adopted by this court in Tawana Resources NL, in the matter of Tawana Resources NL (No 2) [21], and in Re Piedmont Lithium Ltd; Ex parte Piedmont Lithium Ltd [No 2] [14].
[97] Affidavit of SI Lawson sworn 14 October 2021, 'SIL-48'.
[98] Affidavit of SI Lawson sworn 14 October 2021, 'SIL-47'.
[99] Affidavit of SI Lawson sworn 14 October 2021 par 21, 'SIL-44'.
[100] As discussed at [70] and [73] above.
[101] Re Citect Corp Ltd [2006] NSWSC 143; (2006) 225 ALR 137, 140 - 142 [9] - [19], Re Excel Coal Ltd (ACN 002 818 699) (No 3) [2006] FCA 1383; (2006) 60 ACSR 184, 185 [9], Re Strategic Energy Resources Ltd (No 2) [2012] VSC 75 [11] and Re Zenith Energy Limited; Ex parte Zenith Energy Ltd [No 2] [13], cited in the plaintiff's submissions filed 15 October 2021 par 37(b).
[102] Affidavit of SI Lawson sworn 14 October 2021, 'SIL-48'; affidavit of SI Lawson sworn 15 October 2021, 'SIL-60' (amended par 6 of the draft supplementary scheme booklet).
[103] Affidavit of SI Lawson sworn 14 October 2021, 'SIL-48', Annexure A pages 795 - 801.
[104] Affidavit of CP Hood sworn 14 October 2021 par 8.
[105] Affidavit of CP Hood sworn 14 October 2021 pars 9 - 11, 'CPH-1' to 'CPH-3'.
[106] Affidavit of SI Lawson sworn 14 October 2021, 'SIL-48', page 790.
[107] Aurora Oil & Gas Ltd, in the matter of Aurora Oil & Gas Ltd; Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited (No 2); Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited (No 3); Tawana Resources NL, in the matter of Tawana Resources NL (No 2); Re Piedmont Lithium Ltd; Ex parte Piedmont Lithium Ltd [No 2] [22] - [23] .
(2010) 183 FCR 358
(2000) 156 FLR 349
(1993) 177 CLR 485
(1997) 136 FLR 281
(2006) 225 ALR 137
(2017) 320 FLR 78