In the matter of Boart Longyear Limited [2021] NSWSC 1272

In the matter of Boart Longyear Limited [2021] NSWSC 1272 | Case summary | Zoe

Background and affidavit evidence

In proceedings 2021/209335, the Plaintiff, Boart Longyear Ltd ("BLY") and other entities within the BLY Group obtained orders under s 411 of the Corporations Act 2001 (Cth) in respect of a secured creditors' scheme and unsecured creditors' scheme. At the first Court hearing in these proceedings, the Court previously made an order under s 411 of the Corporations Act that BLY convene a meeting of its shareholders to consider a scheme of arrangement which would provide for the redomiciliation of BLY to Canada. This judgment deals with the second Court hearing in respect of that scheme of arrangement.
BLY relies on the affidavit dated 22 September 2021 of Ms Nora Pincus who is the Company Secretary of BLY and has given affidavit evidence in the previous creditors' schemes proceedings and at the first hearing of this application. Ms Pincus addresses the satisfaction of conditions precedent to the redomiciliation scheme in that affidavit. By a second affidavit dated 27 September 2021, Ms Pincus addressed the position in respect of further conditions precedent to the redomiciliation scheme, including the completion of implementation of steps in the creditors' schemes and necessary ASX approvals.
By his affidavit dated 23 September 2021, Mr Jason Ireland, who is a non-executive director of BLY and acted as chair of the redomiciliation scheme meeting, gave evidence of the convening of and conduct of that meeting. He gave evidence of the results of that meeting at which the relevant resolutions were passed by a substantial majority by number of votes cast (99.68%) and by a smaller majority of the number of illegible shareholders present and voting (74.71%), satisfying the statutory thresholds in respect of the scheme. By her affidavit dated 24 September 2021, Ms Lucy Chiu, who is a Client Relationship Manager at Link Market Services, which maintains BLY's shareholder register, referred to the dispatch of the redomiciliation scheme explanatory memorandum, and the processing of proxy forms and voting at the redomiciliation scheme meeting which was held virtually by reason of Government restrictions in relation to the coronavirus pandemic. Ms Chiu confirmed the result as to voting at that scheme and also addressed the relatively low shareholder participation rate at the scheme meeting.
By his affidavit dated 23 September 2021, Mr Aleksandar Nikolic, who is a partner in a Canadian law firm, provided an opinion as to matters of Canadian federal law and Ontario provincial law in respect of the redomiciliation scheme deed poll executed by Boart Longyear Group Ltd, an Ontario corporation, and an assumption deed poll executed by that Company dated 26 July 2021. By his affidavit dated 27 September 2021, Mr Simon Parmeter, a solicitor in the form of solicitors acting for BLY, gave evidence of publication of an advertisement of the second Court hearing in a national newspaper and of confirmation by the Australian Securities and Investments Commission ("ASIC"), under s 411(17)(b) of the Corporations Act, that it had no objection to the re-domiciliation scheme.

[3]

BLY's submissions and determination

Mr Jackman identifies the questions to be addressed at the second Court hearing in respect of the redomiciliation scheme in familiar terms, as whether relevant procedural requirements have been satisfied and if so, whether the Court should exercise its discretion to approve the scheme: Re Central Pacific Minerals NL [2002] FCA 239 at [12]; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 at [21]; Re Redcape Property Fund and the Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 at [7]; Re Aveo Group Limited and Aveo Funds Management Ltd [2019] NSWSC 1679 at [15]. As Mr Jackman points out, the Court is not bound to approve a scheme merely because it has previously made orders for the convening of meetings and the statutory majorities have been achieved, but will have regard to the assessment by members of their interest (as manifested in the voting at the meeting) and will generally take the view that members are the best judges of whether an arrangement is to their commercial advantage: Re NRMA Ltd (No 2) (2000) 156 FLR 412; (2000) 34 ACSR 261; [2000] NSWSC 408 at [22]; Re Seven Network Ltd (No 3) (2010) 267 ALR 583; 77 ACSR 701; [2010] FCA 400 at [31]; Re Atlas Iron Ltd (No 2) [2016] FCA 481 at [5]; Re Ellerston Global Investments Ltd [2020] NSWSC 1108 at [10].
Relevant matters to the exercise of the Court's discretion include whether any other statutory or regulatory requirements for the scheme have been met; whether all conditions precedent to the scheme have been met or waived, other than for Court approval and lodgement of the Court's orders with ASIC; whether the scheme is fair and reasonable so that an intelligent and honest man or woman who was a member of the relevant class, properly informed and acting alone, might approve it; whether there was full and fair disclosure to members and creditors of all information material to the decision whether to vote for or against the applicable scheme; whether there is any suggestion of oppression of any minority; whether any third parties will be disproportionately adversely affected by the operation of the scheme; whether the scheme offends against any aspect of public policy; and 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: Re Seven Network (No 3) above at [35]-[40]; Re Atlas Iron (No 2) above at [6]; Re Ellerston Global Investments Ltd above at [11]-[12].
Mr Jackman points out that, as I noted above, the statutory majorities in favour of the redomiciliation scheme were satisfied at the scheme meeting and requirements as to the lodgement of the Court's orders at the first court hearing and redomiciliation scheme booklet with ASIC were also satisfied. I accept that the redomiciliation scheme has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Ch 6 of the Corporations Act and BLY has tendered a letter from ASIC confirming that it has no objection to the redomiciliation scheme for the purposes of s 411(17)(b) of the Act. No material issues arise in respect of the conduct of the scheme meeting. A high percentage of BLY's shares was voted, being 84.97% of BLY shares, although they were held by only 7.33% of BLY shareholders. Mr Jackman submits, and I accept, that the Court should not assume (in the absence of complaint) that the low turnout of BLY shareholders voting was because of any error in the dispatch of the notice of the meeting or the scheme booklet and, in any event, a relatively low shareholder turnout in number does not prevent the court from making orders approving a scheme of arrangement: Re Saracen Mineral Holdings Ltd (No 2) [2021] WASC 32 at [44]-[47]; Re WPP AUNZ Ltd [2021] NSWSC 520 at [9].
Mr Jackman submits, and I accept, that the Court should be satisfied that the redomiciliation proposal is fair and reasonable to BLY shareholders, where no shareholder has sought to oppose the proposal at the second Court hearing; a comfortable statutory majority of BLY shareholders supported the scheme at the scheme meeting; an independent expert report in respect of the redomiciliation proposal, prepared by Mr Jedlin and Ms Thomas, concluded that the redomiciliation scheme was on balance in the best interests of shareholders; and, after implementation of that scheme, BLY shareholders will still hold the same proportional economic interests in the assets of the BLY Group as they did following implementation of the creditors' schemes, and will have broadly similar rights and entitlements as holders of New BLY Parent CDIs (as defined) as they previously had as BLY shareholders. I also accept that no third parties will be disproportionally affected by the redomiciliation, where BLY will continue to exist as a subsidiary of New BLY Parent (as defined) and third parties will continue to have their rights against BLY. There is no suggestion that the redomiciliation scheme offends public policy, where the BLY Group identifies its commercial justification as to better align the legal structure of the BLY Group with the geography of its shareholder base and improve its access to capital.

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