REASONS FOR JUDGMENT
1 This is an application for approval of the Court pursuant to ss 411(4)(b) and 411(6) of the Corporations Act 2001 (Cth) (the Act), in relation to a scheme of arrangement between the five plaintiff companies and their respective members. The five plaintiff companies are all members of a group of companies called the Newmont Australia Group which is wholly owned by Newmont Mining Corporation, an American parent company. The five companies have common directors, and all of the shareholders of the five companies are Newmont Group companies.
2 Each of the plaintiffs is a participant in the 'Kalgoorlie Joint Ventures', a series of three contractual joint venture agreements between Barrick Gold of Australia Limited (Barrick Gold) as a 50 per cent participant, and one or more of the plaintiff companies. The proposed scheme of arrangement will amalgamate the business of four plaintiffs, Macapa Pty Ltd, Norkal Pty Ltd, Newmont GRPL Pty Ltd, and North Kalgurli Mines Pty Ltd, with that of Kalgoorlie Lake View Proprietary Ltd (KLV) so that their interest in the Kalgoorlie Joint Ventures will become owned and operated solely by KLV.
3 The objective of the arrangement is set out in par 2.1 of the Explanatory Statement:
' … to consolidate the interests held by the Scheme Companies in the Kalgoorlie Joint Ventures into a single Newmont entity, for essentially four reasons:
a. to reduce the number of companies in the Newmont Australia Group;
b. to eliminate costly and time-consuming statutory accounting and inter Scheme Company accounting referrable to the Kalgoorlie Joint Ventures;
c. establish a basis on which it would be possible, with Barrick's consent, to consolidate the three Kalgoorlie Joint Ventures into a single joint venture or to streamline joint venture accounting for the Kalgoorlie Joint Ventures; and
d. to facilitate a more efficient management, administration and reporting structure for the Newmont Australia Group.' [Yellow Tab A]
4 On 8 July 2005, Finn J ordered pursuant to S 411(1) of the Act that each of the plaintiff companies convene a meeting of its members for the purpose of considering, and if thought fit, agreeing to (with or without modification), the scheme of arrangement proposed. Those orders were slightly amended by further orders of 20 July 2005 and 21 July 2005.
5 Meetings of the members of each of the plaintiff companies have now been convened in accordance with the orders of the Court. At each meeting, a resolution in favour of the scheme of arrangement was passed by the sole member of each of the plaintiff companies. At each of these meetings, an amendment was made to paragraph 4.2 of the scheme of arrangement concerning the date of deregistration of the second to fifth plaintiffs. Resolutions have been passed by the members of each of the plaintiff companies approving this amendment.
6 The particular amendment involved the deletion of a sunset date for the de-registration of each of the plaintiff companies other than KLV. The scheme of arrangement as proposed originally, and as subject to the orders of Finn J for the holding of meetings, provided that what was called stage two would by 31 December 2005 involve the deregistration of the other four plaintiff companies. The amendment is simply to delete the reference to 31 December 2005 as the date by which, in any event, those four plaintiff companies should be deregistered.
7 I am satisfied that the proposed amendment is a minor one. Under s 411(6), the Court is empowered to approve a compromise or arrangement of the scheme as put forward to the members with such alterations and additions as it thinks just. In Re Mattine Limited (1998) 28 ACSR 268, Santow J said at 284:
'The discretion of the Court under s 411(6) is at large, but the Court would obviously have regard to whether the proposed variation was so novel or substantial as to take the varied Scheme beyond the reasonable contemplation of shareholders at the time they agreed to it.'
8 In this case, the scheme has not varied in essence from the scheme as originally proposed. Moreover, the members of each of the plaintiff companies have agreed to the proposed variation.
9 On the material before me, the variation is directed to addressing a particular problem. It is a problem to which Finn J adverted when his Honour gave approval for the holding of the meetings: In the Matter of Kalgoorlie Lake View Pty Limited [2005] FCA 960 at [8]. His Honour referred to the significance of the views of the relevant Minister administering the Mining Legislation in Western Australia as to the scheme. Under the relevant Western Australian legislation, applications for exploration licences do not constitute property rights and are not transmissible, except in certain circumstances. The scheme as originally proposed contemplated that in some form exploration licence applications made by one or other of the plaintiff companies, other than KLV, would be transmitted to KLV, so that the place in the queue which they presently hold would not be lost. Apparently that itself is a valuable asset in some form. The dealings with the relevant Department in Western Australia and the Minister were to explore the way in which those exploration licence applications might be transmitted as part of the orders of the Court, so that the place in the queue where those applications presently exist would not be lost. It has now been accepted by the plaintiff companies that that cannot be done. They are content, therefore, for those exploration licence applications to remain in the names of the respective plaintiffs, so that when and if the exploration licences to which the applications refer are granted, they will be granted in the name of the particular plaintiff company and will then be assigned by deed by the particular plaintiff company to KLV. Hence, the plan to deregister the plaintiff companies other than KLV had not been pursued. They will remain in existence for the time being for that limited purpose.
10 In those circumstances it is not necessary further to consider the particular attitude of the Minister of the Department of Industry and Resources in Western Australia to the application. That was the only issue which was of concern to the Minister. The solicitors for the plaintiffs by letter of 15 July 2005, wrote to the Director of the Department of Industry and Resources, inter alia raising the question:
'Prior to de-registration an application will be made pursuant to Regulation 102 of the Mining Regulations 1981 (WA) for devolution of a number of tenement applications made jointly with Barrick Gold of Australia Ltd by each of NKM and Norkal.'
A schedule of those applications was enclosed. It was that particular aspect which drew the comment of the relevant Minister, who otherwise did not regard it as necessary to appear at the hearing having been served otherwise with the proposed application, including details of the scheme. The Minister's response was to seek further written submissions as to why the devolution proposed could apply to the scheme of arrangement. The Minister then proposed that that would be explored by advice from the State Solicitor's Office. As I have said, that was the only issue concerning the Minister. It is no longer an issue, because the sunset clause for the deregistration of the plaintiffs other than KLV is not to take place. There is no proposal under the scheme to 'transfer' the exploration licence applications from the plaintiff companies other than KLV to KLV.
11 In those circumstances it seems to me that the variation is of minor nature. Subject to being otherwise satisfied that the scheme should be approved, I will approve the scheme with that variation.
12 The Court is, of course, not bound to approve the scheme simply because it has previously made orders for the convening of meetings and because the requisite majority of members, in this case a sole member of each of the plaintiff companies, has agreed to it: see for instance Re NRMA Ltd (2000) 33 ACSR 595 at 607 (Re NRMA Ltd). The function of the Court in deciding whether or not to approve the scheme has been described in the following terms:
'In exercising the discretion to approve the scheme, the court will determine:
1. whether all the conditions required by CA s 411 have been complied with;
2. whether the majority of the members or creditors, through acting regularly, have acted in good faith and not in pursuit of some illegitimate purpose; and
3. whether the proposal was "at least so far fair and reasonable, as that an intelligent and honest man, who is a member of that class, and acting alone in respect of his interest as such member, might approve it".
Fundamentally, the jurisdiction is supervisory; the court is concerned to be satisfied that there has been an absence of oppression and that the compromise or arrangement is one which is capable of being accepted.'
That passage is from Renard and Santamaria, Takeovers and Reconstruction in Australia, at 15,061. It was cited with approval in Re NRMA Ltd at 607. See also Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 at 247; Re Dorman Long & Co Ltd [1934] Ch 635; Scottish Insurance Corp Ltd v Wilsons and Clyde Coal Co Ltd [1949] AC 462 at 486.
13 I am satisfied on the whole of the material that the scheme is in truth a member scheme and is not a creditor scheme. Subject to my addressing the interests of particular creditors below, it is plain that the creditors of each of the plaintiff companies will become creditors of KLV and will share in a greater pool of assets than each of them individually presently have access to: see Re AGL Sydney Ltd (1994) 13 ACSR 597; Re Clydesdale Bank Ltd [1950] SC 30.
14 I am also mindful that I should not substitute or, or indeed presume to substitute, my commercial judgment regarding the desirability of the scheme as proposed for that of the members of the scheme. Santow J in re NRMA Ltd (No 2) (2000) 34 ACSR 261 said at 270:
'When it comes to appraising the fairness of a scheme, the court does not determine that the scheme is intrinsically in the members' interests or otherwise.'
15 As I have said the scheme, in essence, involves the transfer of the assets and liabilities of the plaintiff companies other than KLV to KLV. It is to achieve that end that the Court is also asked to make orders pursuant to s 413 of the Act so that, by virtue of its order, the transfer of assets and liabilities will take place without further act or deed. The Court is empowered to make such orders by s 413(1)(a) of the Act.
16 There are a number of matters to which the Court should have regard before approving the proposed scheme.
17 One of course is the interests of creditors of the plaintiff companies. The proposed scheme was publicly advertised on 14 July 2005. The advertisement drew attention to the nature of the scheme, and gave any person interested the opportunity to oppose the approval of the scheme by filing and serving a notice to that effect in the Court and then of course to appear. No notice has been filed or served in the Court, and there is no appearance of any creditor or any other person opposing the scheme. I also accept on the evidence that no communication from any entity seeking to oppose the making of an order approving the scheme has been received by any of the plaintiff companies through their solicitors.
18 Creditors of the plaintiff companies are, as counsel for the plaintiff companies indicated, broken into a number of categories.
19 There is of course the joint venture company, Barrick Mines. It is aware of the scheme. It has been served with the details of the scheme. It consents to the scheme. There are creditors in the nature of third party financiers of one or more of the plaintiff companies. They are two substantial banking entities. They have been served with the details of the scheme and the application. They consent to the proposed scheme. There is a third party equipment financier to one or more of the plaintiff companies, SP Rentals Pty Limited. It too was served with the scheme and details of the application. It too has consented to the proposed scheme. There are, as one might expect, a number of inter-company creditors, being themselves members of the Newmont Australia Group. They are fully aware of the scheme and its circumstances and their interests are properly protected.
20 There is also the question as to trade creditors of the group venture. The manager of the joint venture is Kalgoorlie Consolidated Gold Mines Pty Limited. On the material before me, the trade creditors are all trade creditors directly of the joint venture manager, rather than of individual plaintiff companies. They will continue to deal with the manager of the joint venture and have access to it, and then behind the joint venture manager (if necessary) to the assets of the joint venturers to secure their liabilities. They too are not at risk by the approval of the proposed scheme. On the evidence there are no trade creditors of the individual plaintiff companies whose interests need to be addressed.
21 Finally, there is the Australian Taxation Office. There are difficulties, as counsel for the plaintiff companies acknowledged, of liabilities for taxation under the Income Tax Assessment Act 1936 (Cth) being passed with the scheme. I do not need to go into the details of that. The details of the scheme have been conveyed to the Commissioner of Taxation. Upon a certain condition, namely the delivery of a Deed Poll duly executed to secure payment of the current taxation liabilities, the Commissioner of Taxation does not object to the proposed scheme. I am satisfied that the condition imposed by the Commissioner of Taxation upon his non-objection to approval of the proposed scheme, namely the delivery of the duly executed Deed Poll, has been fulfilled.
22 Accordingly, I am satisfied that in respect of existing creditors of any of the plaintiff companies, those creditors are properly protected and consent to or do not oppose the proposed scheme or, in the case of trade creditors of the joint venture, they are at least no worse off.
23 In addition, it is plain on the material before me that each of the plaintiff companies is solvent and comfortably so, and that following approval of the proposed scheme, the creditors of the individual plaintiffs will have access to a larger pool because of the transfer of assets to KLV and access to KLV to secure payment of any outstanding indebtedness. The proposed scheme will not diminish in any way the assets available, presently individually and after approval collectively through KLV.
24 I do not think in the circumstances that it is necessary to convene meetings of any creditors to approve the proposed scheme.
25 In fact, the evidence before me shows that the proposed accounting treatment upon the amalgamation will secure proper maintenance of the share capital of each of the plaintiff companies, so as to protect their creditors. The independent accounting advice, as well as the internal accounting advice, shows that the proposed accounting treatment following the amalgamation will accord with the Australian requirements now imposed by the International Reporting Standards in an appropriate way.
26 I am also mindful in that regard that the Australian Securities and Investment Commission has no objection to the proposed scheme.
27 Those comments are sufficient to indicate that I am satisfied that the proposed scheme has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Act.
28 I am also satisfied that the additional requirement imposed by s 411(17) - namely, that they produce to the Court a statement in writing by ASIC, stating that ASIC has no objection to the compromise to the proposed scheme - has been complied with.
29 I further observe, relevant to approval or otherwise of the proposed scheme, that the Western Australian Stamp Duties Office has indicated that, in the event that the Court makes the order sought approving the proposed scheme and as to its manner of implementation, the scheme will be able to be implemented and that appropriate relief from stamp duty which might otherwise be payable upon the giving effect to the scheme will be granted in Western Australia.
30 The remaining matter that I need to address is the application under s 411(12) of the Act exempting the plaintiff companies from complying with s 411(11) of the Act, namely, that a copy of any orders of the Court be annexed to every copy of the constitution of the scheme companies. The purpose of s 411(11) was referred to by Heenan J in Re Equinox Resources Limited [2004] WASC 143 at [22]. His Honour said that its purpose:
' … is to ensure that any modification of the rights of shareholders of the company which is the subject of the scheme or any other provision in the scheme which may affect the interests of persons dealing with the company, such as prospective creditors or purchasers of shares, will be sure to have the opportunity of seeing what the exact rights of shareholders in the company or of its creditors are, as modified, if at all, by the scheme which has been approved.'
31 I do not know whether his Honour was intending to exclude from consideration the interests of existing creditors of the plaintiff companies. In my view, part of the purpose of s 411(11) of the Act could be also to ensure that those existing creditors of the plaintiff companies, whose assets may be significantly affected by a proposed scheme will be informed of the nature of the proposed scheme so that whereas they become aware that entitlement to recover any indebtedness from a particular plaintiff company becomes an entitlement to recover that indebtedness against a different entity, KLV. In this matter, on the material before me, there is no need for that information to be conveyed by means of the constitution of the plaintiff companies. That is because, as I have said, each of the existing creditors of the plaintiff companies is aware of and has consented to the proposed scheme other than the trade creditors of the joint venture, and as I have indicated the trade creditors of the joint venture are primarily able to recover their indebtedness from the manager of the joint venture itself and then indirectly, if necessary, from the assets of the joint venture. The assets of the joint venture are not affected.
32 Accordingly I propose to make the order sought under s 411(12) of the Act. I am otherwise satisfied, as Finn J was, that all of the formal requirements of the Act have been complied with. I do not think it is necessary to record each of the steps involved in being satisfied of those matters.
33 For those reasons, in my view, this is an appropriate matter in which to grant the orders sought. I will make orders in terms of the draft minutes of order as altered and initialled by me this day.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.