Fowler v Lindholm

B. THE ROLE OF THE COURT 4 The Court's task is to ensure that the approval of the Scheme under s 411 of the Act complies with the law, including the relevant procedural and other requirements prescribed by the Act, the Corporations Regulations 2001 (Cth) and the Federal Court (Corporations) Rules 2000 (Cth): see Re Tronox Ltd (No 2) [2019] FCA 681 (Tronox) at [13]-[14] per O'Callaghan J; Re Amcor Ltd (No 2) [2019] FCA 842 (Amcor) at [8] - [10] per Beach J; Re SILK Laser Australia Limited (No 2) [2023] FCA 1418 (Re Silk) at [9] per Halley J. 5 In exercising its discretion whether to approve the Scheme, the Court takes into account, amongst other factors, whether the Scheme is fair and reasonable which, in turn, involves consideration of whether "an intelligent and honest [shareholder], properly informed, acting alone, might approve [the scheme]": Amcor at [11] citing Fowler v Lindholm (2009) 178 FCR 563 at [79] per Emmett, Gordon and Jagot JJ. 6 Without being exhaustive, the factors I need to be satisfied about include: (a) that there has been compliance with the orders made by the Court at the first hearing; (b) that there has been compliance with s 412 of the Act; (c) whether there has been an accurate and comprehensive disclosure of the details of the Scheme and its effect to those voting on it; (d) whether there is any suggestion of oppression of any minority shareholder and whether any third parties will be disproportionately affected adversely by the operation of the Scheme; (e) whether the Scheme offends any aspect of public policy; (f) whether the Scheme has been approved by the requisite majorities required by s 411(4)(a)(ii) of the Corporations Act; (g) whether s 411(17) of the Act has been satisfied including whether the Australian Securities and Investments Commission (ASIC) opposes the Scheme; (h) whether the conditions precedent to the Scheme have been satisfied or waived; (i) whether the proposal is fair and reasonable so that an intelligent and honest person who was a member of the relevant class of members, properly informed and acting alone, might approve it; (j) whether the plaintiff has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion (k) other factors that may be relevant to the exercise of my discretion. 7 It is also relevant to note that, in deciding whether to approve the Scheme, the Court is not bound to approve it merely because it has previously made orders for the convening of meetings or because the statutory majorities have been achieved: Re SILK at [11]. The Court will usually approach the task on the basis that the members are better judges of what is in their commercial interests than the Court: Re SILK at [12].

Reasons for granting approval 8 As to the formal procedural requirements, I am satisfied on the evidence of Mr Vardora (Tamboran's Company Secretary and Legal Counsel) that the orders that I made on 27 October 2023 have been complied with. Specifically: (a) a copy of the Court's orders dated 27 October 2023, a completed ASIC Form No 105 and the scheme booklet (Scheme Booklet) were lodged with ASIC on 27 October 2023; (b) the Scheme Booklet was also despatched to Scheme Shareholders in accordance with the Court's orders dated 27 October 2023 Orders; (c) announcements were lodged with and published through the Australian Stock Exchange (ASX) in relation to the second court hearing and the Scheme. 9 Tamboran's Annual General Meeting was held on 7 November 2023 at which time a presentation was made including in relation to the Scheme. This presentation was published by Tamboran through the ASX on the same day. 10 The Scheme Meeting was held on 1 December 2023. I was satisfied that the requisite statutory majorities for approval for the purposes of s 411(4)(a) of the Act had been achieved at the Scheme Meeting. The evidence establishes that the results were as follows: (a) 897,961,452 votes were cast in favour of the Scheme by 119 shareholders (attending in person, electronically, or by proxy); (b) 2,173,262 votes were cast against the Scheme by 18 shareholders (attending in person, electronically, or by proxy); (c) 3 shareholders abstained from voting representing 30,567 votes. 11 The raw shareholder turnout at the Scheme Meeting represented 5.98% of the total shareholders of Tamboran, but the proportion of shares cast in favour of the Scheme relative to the shares on issue was 52.44%. Whilst the raw turnout of shareholders was low, the number of votes cast in favour of the Scheme as a representation of issued capital was significant. 12 A very low turnout of members might lead the Court to seek confirmation that the Scheme Booklet and notice of the meeting had been successfully distributed to members in accordance with the Court's orders, and that all who wished to vote in person or by proxy were able to do so: Re Alloggio Group Ltd (No 2) [2023] FCA 1053 at [15] per Kennett J. However, the evidence before me does not give rise to any such concerns. 13 Mr Scruby SC of Counsel who appeared for Tamboran submitted that the Scheme "itself is not of such a nature as would necessarily be expected to generate a high voter turn-out. It is a simple re-domicile scheme. It does not involve any significant change to Tamboran's day to day business." I accept those submissions having regard to the nature of the Scheme. 14 It is well established that low voter turnout is not in and of itself a reason to refuse to exercise the discretion under s 411(4) of the Act to approve the scheme. Apathetic shareholders are not presumed to be antagonistic to schemes and do not "warrant paternalistic protection": see Re Vita Group Ltd (No 2) [2023] FCA 623 at [6]. In the present case, there was nevertheless a majority of votes cast as a proportion of issued capital. Nothing before me suggests that Tamboran's shareholders did not have an opportunity to consider and approve the Scheme. 15 I am satisfied that the condition precedent certificates tendered into evidence establish that there is no impediment to implementation of the Scheme so as to stand in the way of approval. I am satisfied that the tender of such certificates in this case is adequate proof of satisfaction that those conditions have been met: see In the matter of Investa Listed Funds Management Limited as responsible entity for the Armstrong Jones Office Fund and the Prime Credit Property Trust (No 2) [2018] NSWSC 1995 at [13] per Black J; Fiducian Portfolio Services Ltd v Fiducian Investment Management Services Ltd (No 2) (2015) 228 FCR 587; [2015] FCA 95 at [48] per Yates J. 16 Finally, I was satisfied that I should exercise my discretion to approve the Scheme. I did so for the following reasons: (a) the Scheme is a relatively simple transaction involving a remdomiciliation. (b) the Scheme's potential advantages and disadvantages were set out in the Scheme Booklet and were a matter for shareholders to judge. In making their assessments to approve the Scheme, the Scheme Shareholders had the benefit of the opinion of the independent expert as set out in the Scheme Booklet. (c) the Scheme was supported by the directors of Tamboran. (d) there was nothing before me to suggest that the Scheme Shareholders voted other than in good faith, that they cast their votes for an improper purpose, or that any member had been treated in a way that may be characterised as oppressive. (e) there was no evidence as to any defect in the procedures taken in advance of or during the Scheme Meeting, or the information relating to it. (f) no notice had been received of any opposition to the Scheme, no shareholders appeared to oppose the Scheme being approved at the second court hearing and ASIC had provided a statement pursuant to s 411(17)(b) of the Act stating that it had no objections to the Scheme. (g) I was satisfied that Scheme Shareholders had had the opportunity to make and have made an informed decision in their interests; (h) in all the circumstances, including the obtaining of the statutory majorities in the Scheme Meeting, I was satisfied that the Scheme was one that an intelligent, honest and properly-informed shareholder, acting alone, might approve.

Exemption under the Securities Act of 1933 (US) 17 In the First Hearing Decision at [38]-[40], I adverted to the fact that Tamboran drew to my attention that "Tamboran HoldCo" would seek an exemption from registration under the Securities Act of 1933 (US). In relation to the application for that exemption, I note the following: (a) the Scheme contemplates the issue of "Tamboran Us HoldCo CDIs" as consideration for the transfer of the Tamboran shares. (b) the Court was advised before the commencement of the approval hearing that "Tamboran US HoldCo" would rely on the exemption under s 3(a)(10) of the Securities Act of 1933 (US) on the basis of the Court's approval of the Scheme. (c) the Court has been fully informed of the value of the Tamboran's shares and the value of the "Tamboran Us HoldCo CDIs" to be offered as consideration for the transfer of the Tamboran's shares. A valuation has been prepared by an expert independent of "Tamboran US HoldCo" as to questions of value and the relative advantages and disadvantages of the Scheme. The Court has taken this evidence into account in determining whether the Scheme is fair and, thus, in approving the Scheme. (d) the Court has held a hearing to consider the fairness and reasonableness of the proposed Scheme. This hearing was open to the public, and any person to whom "Tamboran US HoldCo CDIs" are to be issued had standing to appear. Notice of the time and date of the approval hearing was included in the Scheme Booklet which was sent to all Scheme Shareholders prior to the proposal being considered by the meeting of those Shareholders. There was no appearance by any Scheme Shareholder, let alone to oppose the Scheme.

Exemption under s 411(12) 18 Section 411(12) confers a discretion on the Court to exempt Tamboran from compliance with s 411(11). Section 411(11) requires that a copy of the Court's order approving a scheme of arrangement be annexed to every copy of Tamboran's Constitution issued after the order is made. 19 I was satisfied that it was appropriate to make an order pursuant to s 411(12) of the Act exempting Tamboran from compliance with s 411(11) of the Act. No ongoing purpose would be served by requiring that these orders be annexed to Tamboran's Constitution. As in the top-hat scheme considered in Re Tronox Ltd (No 2) [2019] FCA 681, Tamboran's constitution has not been altered: see at [55]-[56].

D. Conclusion 20 For the foregoing reasons, I was satisfied that the orders that were sought should be made, and, accordingly, exercised my discretion to make those orders. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Shariff.