First Pacific Advisers LLC v Boart Longyear Ltd

Federal Court of Australia|2023-08-16|Before: Mr AJ, Colvin J

Pursuant to s 411(1) of the Corporations Act 2001 (Cth): (a) the plaintiff convene and hold a meeting of holders of fully paid ordinary shares (Shareholders) (Scheme Meeting), for the purpose of considering and, if thought fit, approving a scheme of arrangement (with or without modifications) proposed to be made between the plaintiff and the Shareholders (Scheme), being the scheme substantially in the form set out in in annexure GD-25 to the affidavit of Georgia Kaye Jennifer Denny sworn on 16 August 2023 (Third Denny Affidavit); (b) the Scheme Meeting be held at 1.00 pm (AWST) on Monday, 18 September 2023 at the Parmelia Hilton Perth, 14 Mill Street, Perth, Western Australia, and electronically; and (c) the Scheme Booklet, which contains the explanatory statement required by section 412(1)(a) of the Corporations Act, at GD-16 of the affidavit of Georgia Kaye Jennifer Denny sworn on 15 August 2023 (Second Denny Affidavit), be approved for distribution to Shareholders, subject to: (i) making all changes and amendments contemplated in annexure GD-26 in the Third Denny Affidavit; (ii) inclusion of the Independent Expert Report, and the proposed Scheme contained in annexure GD-27 and GD-25 in the Third Denny Affidavit, and the Investigating Accountant's Report (included at GD-5 of the first affidavit of Georgia Kaye Jennifer Denny sworn on 31 July 2023, at pages 587-591); (iii) correction of any minor typographical or grammatical errors and final typesetting, formatting and page numbering; (iv) any minor amendments required, requested or approved by the Australian Securities and Investments Commission (ASIC) for registration under s 412(6) of the Corporations Act; (v) correction or update of any relevant date references, interests held by shareholders of the plaintiff or of Perenti Limited (ACN 009 211 474) (Perenti), issued capital or last trading prices, or other references to figures and data; and (vi) any other amendments approved by the Court.
Subject to these orders and pursuant to s 1319 of the Corporations Act, the Scheme Meeting is to be: (a) convened, held and conducted in accordance with the provisions of Part 2G.2 of the Corporations Act that apply to members of a company and the provisions of the plaintiff's constitution, provided at Annexure SVD-1 to the affidavit of Sybrandt Jacobus Van Dyk sworn on 10 August 2023, that are not inconsistent therewith and that apply to meetings of members; (b) convened using the notice of scheme meeting substantially in the form contained in Annexure D of the Scheme Booklet, which is contained in annexure GD-16 of the Second Denny Affidavit (with any necessary amendments contemplated above) (Notice of Scheme Meeting); (c) held and conducted pursuant to the arrangements for attending, participating and voting described in the Notice of Scheme Meeting, including in respect of the effect of a Shareholder's attendance at the Scheme Meeting on a proxy or attorney appointment by that Shareholder, and in accordance with that provisions of Part 2G.2 of the Corporations Act (Meeting Arrangements); and (d) convened, held and conducted as if r 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules) does not apply.

COLVIN J: 1 DDH1 Limited is a drilling and mining services company based in Perth, Western Australia. Perenti Limited is a global mining contractor. Both companies are listed on the Australian Securities Exchange (ASX). 2 DDH1 proposes to implement a scheme of arrangement (Scheme). By application dated 31 July 2023, it sought approval to convene a meeting of its members under s 411(1) of the Corporations Act 2001 (Cth) and, if approved by its members, the approval by the Court of the Scheme. 3 On 16 August 2023 I made orders approving the convening of a meeting of members of DDH1 to consider the Scheme. These are my reasons for doing so. They reflect, in part, some matters that were raised at a direction's hearing that was convened prior to the hearing at which the orders were made.

The scheme process, the role of ASIC and the role of the Court 4 In order to implement a scheme, the following steps must be undertaken: (1) the hearing of a court application at which an order is made that a meeting be convened to consider the scheme; (2) the convening of a meeting in accordance with the terms of the order; (3) a vote by members (or creditors) that achieves the requisite majorities; (4) a further court hearing at which an order is made approving the scheme; and (5) implementation of the scheme in the approved terms. 5 Fundamentally, the role of the Court in considering whether to order that a meeting be convened to consider a scheme of compromise with creditors or scheme of arrangement with members is supervisory. It looks forward to the prospect of an application for an order approving the scheme. Save for any issue as to the purpose for which the scheme has been proposed (see s 411(17)(a)), at the time of considering whether to order that a meeting to consider the scheme be convened, the Court will scrutinise the terms of the scheme (and the information to be provided to those who will vote) both with an eye to the fairness of the meeting procedure (including disclosure) as well as an eye to aspects that may be relevant to whether the scheme will be approved by the Court if the requisite majorities are achieved. 6 The Court discharges its responsibility within a legislative context that entrusts to the relevant regulator, Australian Securities and Investments Commission (ASIC), a significant role in the scheme approval process. Before an order is made that a meeting be convened to consider the scheme as proposed, ASIC must have been given a reasonable opportunity to examine both the terms of the scheme as proposed and a draft explanatory statement for the scheme as well as to make submissions to the Court: s 411(2). Further, a scheme must not be approved unless there is produced to the Court a statement in writing by ASIC that ASIC has no objection to the scheme: s 411(17)(b). 7 ASIC also has a role in prescribing information that must be set out in the explanatory statement: s 412(1)(a)(ii). Otherwise, the explanatory statement must (a) explain the effect of the scheme and, in particular, state any material interests of directors and the effect on those interests to the extent that it is different from the effect on like interests of others; and (b) set out the prescribed information and any other information that is material to the making of a decision whether to agree to the scheme that is within the knowledge of the directors and has not previously been disclosed. 8 Inherent in the legislative provisions is a need for ASIC to be given prior notice of the application to the Court as well as a draft of the explanatory statement. They also contemplate that the regulator will inform the Court if it has concerns at the point where an order is sought convening a meeting to consider a scheme and, ultimately, that the scheme will not proceed if ASIC has an objection. In consequence, the legislation contemplates a process which commences with engagement with ASIC as the regulator. 9 Section 411(17) makes clear that the Court need not approve a scheme merely because ASIC has no objection and thereby entrusts a separate supervisory jurisdiction in the Court. However, that jurisdiction is one which is exercised with due regard to the mandated involvement of ASIC as the regulator. 10 In addition, it is usual for the application for an order that a meeting be convened and any subsequent application to approve a scheme to be made in circumstances which give rise to the obligations which arise whenever the Court is moved for orders on an ex parte basis. Although there may be an appearance by other parties, it is common for there to be no proper contradictor. The present case is an example where counsel for Perenti appeared to support the application but there was no opposing party. 11 In such cases, counsel appearing for the moving party will have a responsibility to explain the scheme to the Court and to expose any matters which may be contentious having regard to the established jurisprudence as well as any novel aspects of the particular scheme. The duty of candour that falls upon counsel is to supply the place of a contradictor by bringing to the attention of the Court all material matters which may have been raised by a party with an opposing interest to those proposing the scheme: Young v Cooke [2017] NSWCA 33 at [27] (Gleeson JA, Macfarlan JA agreeing). 12 In consequence, it may be expected that the Court will discharge its supervisory jurisdiction on the basis that no objection has been raised by the regulator and that counsel has explained the scheme and drawn the attention of the Court to any potentially contentious or novel matters. 13 Recently, Jackman J expressed the view that the practice which had grown of providing a lengthy affidavit containing all of the correspondence with ASIC in relation to the scheme as 'wasteful': Vita Group Ltd, in the matter of Vita Group Ltd [2023] FCA 400 at [18]. His Honour there reasoned that: 'If there is a genuine issue which remains at the time of the first court hearing which must be brought to the Court's attention pursuant to the plaintiff's ex parte disclosure obligations, then that should be done by way of written or oral submissions'. I agree that no purpose is served by providing all of the correspondence and that it is neither necessary nor desirable for that to occur. However, what is appropriate is for a judgment to be formed by the parties and counsel as to whether there are any matters that have arisen in the course of the exchange with ASIC that should be brought to the attention of the Court. This is not a matter for evidence. This is a matter for submission. 14 In some instances, it may be appropriate for a particular issue to be exposed even though it has been resolved in a manner that is acceptable to ASIC. This is consistent with the need for the Court to be informed of matters which bear upon the exercise of its overall supervisory jurisdiction in the circumstances of the particular case. As has been explained this would be the case in respect of any matters reasonably viewed as being potentially contentious (when measured against the established jurisprudence) or matters that raise novel issues not previously considered by the Court. Respectfully, with that qualification, I agree with the approach of Jackman J to the ASIC communications. The course followed in the present case conformed to that qualified position.

The conditions that must be met before the court has a discretion to order a meeting 15 Having regard to the terms of s 411, the Court has a discretion to order that a meeting be convened to consider a scheme if the following conditions are met in respect of the proposed scheme (Conditions): (1) it is in respect of a Part 5.1 body; (2) it is between the body and its members (or creditors); (3) 14 days' notice of the Court hearing at which the order is sought has been given to ASIC (or such lesser period as ASIC or the Court permits); and (4) the Court is satisfied that ASIC has had a reasonable opportunity to examine the scheme and a draft explanatory statement and make submissions to the Court as to those matters. 16 Further, as the legislation allows for a scheme as between a company and its members (or creditors) or any class of them, it is appropriate when considering whether the Conditions have been met to also consider whether the nature of the scheme means that distinct classes amongst those invited to approve the scheme have been appropriately addressed, particularly whether voting should occur on the basis of separate classes or there should be separate meetings. As to the test to be applied: see First Pacific Advisers LLC v Boart Longyear Ltd [2017] NSWCA 116 at [80] (Bathurst CJ, Beazely P and Leeming JA agreeing).

Scrutiny of the disclosure by explanatory statement 17 If the meeting is convened, an explanatory statement that sets out the information that I have described must be sent to every member (or creditor) and notice must be given in the manner required by the order. According to established practice, at the hearing at which an order is sought for a meeting to be convened, the Court considers whether there are any issues with the explanatory statement and whether there is any apparent reason why the scheme should not, in due course, receive the Court's approval if the requisite majorities are achieved at the meeting: see the recent summary by Banks-Smith J in Essential Metals Limited, in the matter of Essential Metals Limited [2023] FCA 240 at [20]-[22] in terms which I gratefully adopt. 18 In Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [2018] WASC 308, to which her Honour made reference, Vaughan J described the required standard of disclosure to be effected by the explanatory statement in the following terms (at [54]): • The emphasis is on ensuring full disclosure so that the members are properly informed in their consideration of the proposed scheme. Thus the explanatory statement must provide proper disclosure conformable with s 411(3) and s 412 of the Act. • What is required is a statement of all of the main facts as will enable shareholders to exercise their judgment on the proposed scheme. • The court is also concerned with the notion of a fair picture being presented; there should not be an unbalanced presentation. The expectation is one of forthrightness. Cards must be placed on the table. • The court must be satisfied, at least to a prima facie level, that there has been proper disclosure with nothing misleading or deceptive in any material sense. (footnotes omitted) 19 The Court undertakes its consideration of the explanatory statement in a context where that content is itself regulated: see the summary of the provisions by Anderson J in Cellnet Group Limited, in the matter of Cellnet Group Limited [2023] FCA 767 at [20]. 20 The Court will have a keen eye to any conflict of interest and whether appropriate independent assessment has been undertaken when considering the disclosure. In an appropriate case, the Court may need to evaluate whether there should be a recommendation by independent directors. 21 Issues have arisen as to the extent to which the Court should scrutinise proposed communications with members (or creditors) that are proposed to occur before the meeting. There have been occasions when the Court has approved draft scripts to be used to guide communications that are said to be reasonable and necessary in order to encourage participation or to respond to participant questions that may be raised. There are occasions when those communications may have a particular purpose that is closely connected with the informational process that is regulated by the provisions concerned with the explanatory statement and the prescribed matters to be included in that statement. 22 In Essential Metals Banks-Smith J dealt with the authorities in terms with which I respectfully agree: at [87]-[102]. In essence, when asked to make an order that a meeting be convened to consider a scheme, the Court should be informed about any plan in relation to communications with members (or creditors). Further, the proponent of the scheme must proceed on the basis that, at the time of moving the Court for orders approving the scheme, the Court will need to be informed about any relevant matters that have arisen from the manner in which communications have occurred in the period leading up to the meeting. However, there is no requirement for all such plans (or the scripts to be used) to be approved by the Court at the time of considering whether to order a meeting to be convened.

The nature of the Court's discretion 23 As to the exercise of the Court's discretion, in Essential Metals Banks-Smith J summarised the position in the following terms at [24]: 'If the proposed arrangement is one that seems 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, then leave should be given to convene the meeting'. See also the neat summary by Beach J in Amcor Limited, in the matter of Amcor Limited [2019] FCA 346 at [47]. 24 In order to be fit for consideration by members, the scheme itself must propose dealings that will be legally effective and which do not expose members (or creditors) to unreasonable performance risk. That is to say, it must be fit for consideration by members (or creditors) in the sense that it may be comprehended and is capable of being implemented and also be likely to be approved by the court if passed. The nature of this aspect of the court's discretion is evident in the following passages taken from the reasons of Emmett J in Central Pacific Minerals NL [2002] FCA 239 at [8]-[14] (as accepted in CSR Limited, in the matter of CSR Limited [2010] FCAFC 34; (2010) 183 FCR 358 at [12] (Keane CJ and Jacobson J)): … the Court will not convene a meeting unless the arrangement proposed is of such a nature and is cast in such terms that, if the arrangement receives approval by the statutory majority at the relevant meeting, the Court will be likely to approve the arrangement on the hearing of any application that is unopposed. At the stage of convening a meeting, the Court will give consideration to compliance with such preliminary matters as are relevant to the holding of the meeting. Of paramount importance at that stage is the need to ensure that there will be sufficient disclosure, to those who will be affected by the arrangement, of its details and effect … In exercising its discretion whether to convene a meeting, the Court will have regard to such matters as the acceptability of the documentation of the proposed arrangement, the commercial viability and morality of the arrangement, the likely acceptability of the arrangement, the bona fides of the proposals, whether the proposals could be achieved by another method and any objections or submissions by the Commission. It is always the practice of the Court, at the first stage, to go through the proposed arrangement, to raise matters as to the drafting of the documentation, to ascertain whether the arrangement complies with the substantive requirements of the law and to ensure that the arrangement, if given effect, will not involve any unfair or oppressive result. In considering whether to convene a meeting, the Court will take into account questions of public policy as well as commercial morality. The Court will have regard to the interests of parties who will be bound by the arrangement and who might be careless of their own best interests. While security holders of a company may be considered to be better judges than the Court could be of what is to their commercial advantage, that does not extend to the technical or mechanical aspects of an arrangement. Security holders are likely to be influenced largely by their understanding of the broad economic consequences of an arrangement. However, they are entitled to rely on the Court's approval as a sufficient safeguard against defects at the technical or mechanical level. Accordingly, for the purposes of protecting the interests of security holders who have not agreed to an arrangement and yet will be bound by it, the Court will ordinarily seek to ensure that the terms of the arrangement would be enforceable by all persons bound by it against those who are seeking to implement it or obtain benefits from it … … The jurisdiction of the Court in relation to an arrangement is supervisory, in the sense that the Court is concerned to be satisfied that there has been an absence of oppression and that the arrangement is one that is capable of being accepted. For example, the Court will withhold its approval where a majority is shown to be acting in bad faith or where a majority's acceptance is in the nature of a fraud on the minority. The Court will, of course, generally take the view that the shareholders are the best judges of whether an arrangement is to their commercial advantage and will be reluctant to make decisions contrary to the views of security holders expressed at meetings. The function of the Court does not extend to usurping the views of the relevant security holders. Nevertheless, the Court is not a mere rubber stamp and it will look at the arrangement to ensure that it is a reasonable one. If the Court concludes that there is an objection to the arrangement, such that a reasonable person might not approve it, then the Court may refuse to approve the arrangement. The Court must be satisfied that the proposal is at least so fair and reasonable that an intelligent and honest person, who is a member of the class of security holders bound by the arrangement acting alone in respect of his or her interests, as such security holder, might approve it. 25 However, it must be observed that the Court now has regard to a body of regulatory practice and experience as well as established jurisprudence in the exercise of its discretion. With the benefit of a considerable history of deliberation by ASIC and the courts exercising the supervisory jurisdiction invested by s 411 of the Corporations Act, schemes with various characteristics have come to be identified as schemes in respect of which the discretion will be favourably exercised. The Court exercises its discretion in that context. Accordingly, it is not necessary to reinvent the wheel in respect of each and every application. For that reason, it is appropriate, for applications for an order that a meeting be convened to consider a scheme, to focus upon those aspects which are out of the ordinary or which have characteristics that the Court regularly subjects to close scrutiny. 26 In discharging these aspects of the discretionary task, the Court is aided considerably by an understanding of what has emerged from the scrutiny of the scheme and the proposed explanatory material by ASIC and the discharge by counsel of their duties.

Matters to be addressed by submissions 27 It follows that at the hearing of an application for an order that a meeting be convened to consider and approve a scheme, usually the Court may be expected to be presented with: (1) a concise description of the nature of the scheme that exposes its commercial rationale, how it will be carried into effect and the extent of any performance risk; (2) evidence and submissions to the effect that the Conditions are met; (3) submissions as to any director benefits and consequences for director recommendations; (4) submissions as to any significant matters which have arisen in the course of dealings with ASIC; (5) submissions as to any features of the scheme (or the form of the explanatory information) that counsel considers ought be drawn to the attention of the court in the discharge of counsel's duty which should include potentially contentious aspects of the scheme (or form of the explanatory information) or matters that raise novel issues not previously considered by the Court; (6) submissions to the effect that the scheme, if approved, will be able to be carried into effect without exposing members (or creditors) to unreasonable performance risk, including as to any liability imposed by the scheme upon members (or creditors) such as warranties; and (7) proposed arrangements for dispatch of materials and convening the meeting, including identification of the proposed chair for the meeting and any conflict of interest issues. 28 The Court, informed by an explanation of the nature of the scheme, must then determine that the Conditions are met, that the scheme is able to be carried into effect, evaluate the matters raised by the submissions and exercise the discretion having regard to long standing authority as to the nature of that discretion. The Court will also address the proposed arrangements for the meeting itself. 29 In the present case each of the above matters were the subject of written submissions. I deal with each of them below.

(1) The nature of the scheme in the present case 30 The proposed scheme provides for all of the fully paid ordinary shares in DDH1 (Shares) to be transferred to Perenti with the consequence that DDH1 will become a wholly owned subsidiary of Perenti. It seeks to achieve synergies by bringing together the businesses conducted by Perenti and DDH1. 31 The standard consideration payable under the scheme will comprise cash and shares in Perenti calculated on a specified basis. Shareholders will also be able to elect for maximum cash consideration or maximum scrip consideration, with scale back mechanisms to apply based upon the extent of such elections. The calculations are to be undertaken on the basis that a fixed amount (just over $50 million) will be applied to cash consideration with the extent of the opportunity of electing shareholders to receive a greater component of their consideration in cash (compared to the standard consideration) dependent upon the extent of shareholders electing for a greater scrip component, and vice versa. 32 The formula for the final calculation of the consideration payable depends upon three variables, namely: (1) the extent to which shareholders elect for maximum cash or scrip consideration; (2) the amount of any dividends declared by DDH1 or Perenti between the convening of the meeting and a specified date; and (3) the volume weighted average price (VWAP) of Perenti shares over the five trading days that end two business days before a date (defined as the Election Date). 33 It is proposed to seek approval for supplementary information to be provided to shareholders if any dividends are declared. 34 The effect of the VWAP adjustment and any dividend adjustment on the share consideration will be announced after close-of-trade on 8 September 2023 being two business days before the date by which shareholders have to notify any election as to the form of consideration. Those who have elected before that date may change their election after that date if they choose to do so. 35 Those overseas shareholders who meet the definition of 'Ineligible Overseas Shareholder' will receive the standard consideration for which the scrip component will be sold under a sale facility. 36 In addition to the Shares, DDH1 has issued unlisted performance rights. They have been issued as part of an employee incentive plan. If the requisite performance criteria are met then the holder of the performance right is entitled to the issue of a share (on a one for one basis) without any payment for the share. Based upon the value implied by the terms of the proposed scheme, the aggregate value of the performance rights is approximately $2.9 million. The performance rights are issued on terms which confer an absolute discretion upon the board of DDH1 to determine how those rights will be dealt with in the event that the shareholders of DDH1 approve a scheme of arrangement. The board of DDH1 has resolved that the performance rights will automatically vest and convert into shares in DDH1 immediately following the scheme meeting such that the holders will receive the consideration payable under the scheme that is payable to holders of the Shares. 37 The scheme includes arrangements that deal with shares issued under an employee share plan that are subject to disposal restrictions and shares issued under limited recourse loan arrangements. 38 The scheme otherwise has provisions as to its implementation that are relatively familiar. To the extent that there are aspects of the scheme that have significance they are addressed below.

(2) The Conditions 39 DDH1 demonstrated by affidavit that the Conditions were met. All shareholders have the same rights in the scheme save for standard treatment of ineligible overseas shareholders and elections for small parcels: see Re Edge Minerals Ltd; Ex Parte Edge Minerals Ltd [2022] WASC 395 at [86]-[87] (Strk J). The holders of performance rights are not in a separate class.

(3) Director benefits and recommendation 40 Section 412(1)(a)(i) requires the explanatory statement to state any material interests of the directors. The prescribed information deals with circumstances in which an independent expert opinion should be obtained. Otherwise, as to director benefits and director recommendations, I agree with what was said by Banks-Smith J in Asaleo Care Limited, in the matter of Asaleo Care Limited [2021] FCA 406 at [71]. The issue is fact sensitive and there may be instances where, given the nature and extent of a director's interest, it is appropriate for the director to abstain from making a recommendation in that capacity: ThinkSmart Limited, in the matter of ThinkSmart Limited [2022] FCA 1314 at [50]-[53] (Jackson J). 41 In the present case, Mr Van Dyk, the managing director and chief executive officer of DDH1, has performance rights, employee shares and loan shares. It is proposed that he will be employed as the head of a division of Perenti if the scheme proceeds and that his loan shares arrangement will be rolled over. There is prominent disclosure in the information memorandum of these matters at appropriate points. They are also explained in the frequently asked questions section of the information memorandum. The proposed new role of Mr Van Dyk if the scheme proceeds was included in the market announcement of the proposed transaction. 42 Also, it is proposed that two of the current directors of DDH1 will join the board of Perenti. These aspects are also prominently disclosed in the information memorandum, the frequently asked questions section and were included in the market announcement of the proposed transaction. 43 I was satisfied that these matters reflect common practice and may be viewed as positive aspects of the scheme in circumstances where the standard consideration will see members of DDH1 receive scrip consideration in Perenti as part of a dealing by which DDH1 will become a subsidiary of Perenti and form part of an operating division of Perenti. The amounts involved were not out of all obvious proportion. All in all, it is appropriate for such matters to be disclosed to members and for them to make their own assessment of the recommendations given by directors taking those matters into account.

(4) Significant matters which had arisen in the course of dealings with ASIC 44 At the case management hearing I raised concerns as to the length of the draft scheme booklet (as then being considered by ASIC), particularly the attachments in circumstances where summaries of the terms of those documents were provided in the booklet itself. Those matters were raised with ASIC. In consequence, the scheme implementation agreement and a deed poll relating to performance risk have been removed as annexures. However, the full text of the independent expert's report and the independent investigating accountant's report have been retained as annexures in addition to the detailed summaries in the scheme booklet. 45 I note that the ASIC's regulatory guide recognises the benefit of concise expert reports but says that any concise expert report 'must include all material information that is contained in the full report' and must include a statement to that effect. I also observe that the desirability of the explanatory statement being concise and economical in order to satisfy its statutory purpose has been emphasised and the use of summaries has been endorsed: see Wesfarmers at [57]-[58]. 46 On the basis that these matters had been considered and the view had been taken by ASIC that the full text is required in the absence of the preparation of an appropriate short form report, I accepted that the expert reports should be included as annexures. 47 Otherwise, DDH1 provided the Court with what was described as 'key correspondence with ASIC'. It concerned an issue that has been raised by ASIC as to the terms of two matching right opportunities provided to Perenti by the terms of a scheme implementation agreement entered into as between DDH1 and Perenti. The Court was taken to the terms of the matching right. The relevant provisions appeared to meet the principles as to exclusivity arrangements summarised by Banks-Smith J in Essential Metals at [65].

(5) Particular features of the scheme and the terms of disclosure 48 The following further matters of significance were exposed by submissions.

Performance risk 49 The submissions outlined possible issues as to whether the terms of the scheme might be understood as contemplating the provision of scheme consideration before the transfer of shares. Appropriate amendments to the scheme provisions were proposed. They led to the possibility that there may need to be a new form of deed poll to be executed by Perenti. In the result, a mechanism by which the amendments could be agreed in writing by Perenti (and thereby brought within the terms of the deed poll) was deployed.

Arrangements for shareholder communications 50 It was disclosed that DDH1 proposed to instruct an experienced shareholder communications firm for the purpose of increasing shareholder engagement. It was also disclosed that the firm has been instructed to follow a script of material that is consistent with the information memorandum and not to deviate. Further, it was proposed to lead evidence at any approval hearing to confirm that staff had been instructed to use the script and that there had been monitoring and audit to ensure compliance. I was satisfied that these steps were appropriate in the present case. 51 I indicated that I considered such an approach to be appropriate, noting that it was qualified as an approach that would be adopted 'absent any widespread and substantial deviation from the content' of the information memorandum. As I have explained, it would be expected that any such occurrence would be disclosed at the time of any hearing to approve the scheme. 52 The Court was also provided with the terms of investor presentations that were given at the time of announcement of the proposed scheme and as released to the ASX. They referred to the fact that a scheme booklet would be forthcoming. No particular aspects of those communications were raised by way of submission.

Financial assistance 53 In some instances, where a scheme is proposed whereby shares are to be acquired in the manner proposed in the present case, an issue may arise as to whether a dividend issued by the scheme proponent in a manner the might be said to breach the implied prohibition of financial assistance under s 260A of the Corporations Act: see the reasoning of O'Bryan J in Legend Corporation Limited, in the matter of Legend Corporation Limited [2019] FCA 1249 at [71]-[76]. 54 There were no apparent issues of that kind. In any event, it was proposed that there would be an application to approve supplementary materials for shareholders in the event of a dividend issue once financial reporting has occurred, which is expected on or about 29 August 2023.

Disclosure of adjustment to scheme consideration 55 There are some complexities as to the manner in which the scheme consideration will be determined. The information memorandum has prominent provisions that refer to the adjustment mechanisms (described at the outset of these reasons). They are referred to in the recommendation letters included with the scheme booklet. 56 The adjustments deploy the market measure of the VWAP. It was submitted that there was no issue about the extent of trading in the shares for using the VWAP to make the adjustment as it was expected to generate an appropriate measure of market value through trading in the ordinary course of business. 57 There are worked examples for how the scale back mechanism will operate. The information will be able to be updated when information is released as to the effect of any dividend and there is the contemplated announcement of the calculation of the VWAP. The actual operation of these arrangements will be able to be known prior to the meeting to consider the scheme. 58 In those circumstances, I was satisfied that there was no aspect of the adjustment mechanisms and their disclosure that gave rise to concern.

(6) Scheme able to be carried into effect 59 The issue of performance risk has already been addressed. There were no evident aspects of the scheme that raised issues as to whether it would be able to be carried into effect in the manner contemplated.

(7) Arrangements for convening the meeting 60 DDH1 proposed a physical and electronic meeting. It contemplated provision of hard copy materials where required by applicable law but otherwise notification with a link to a functioning website or platform where all relevant materials could be accessed. The arrangements reflect common practice. Newspaper advertising was proposed, so it was ordered. Appropriate affidavits of disclosure were provided by the proposed chair of the meeting and the proposed alternate chair.

Exercise of discretion 61 In the above circumstances and for the above reasons, I was persuaded that it was appropriate to exercise the discretion in favour of ordering that a meeting be convened to consider the scheme in the terms proposed by DDH1. I also made usual orders exempting compliance with aspects of the Federal Court (Corporations) Rules 2000 (Cth). 62 The orders as to the convening of the meeting followed the form of orders recently made in Essential Metals. I was satisfied that the orders were appropriate. I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.

Corporations Act 2001(Cth)ss 411, 412, 260A

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