In the matter of Southern Cross Gold Limited (No 2) [2025] NSWSC 2

Supreme Court of NSW|2025-01-14|Before: Black J, Mr J

Solicitors: Hamilton Locke (Plaintiff) Hogan Lovells (Bidder) File Number(s): 2024/289709

Judgment

By Originating Process filed on 7 August 2024, Southern Cross Gold Ltd ("SXG") applied under s 411 of the Corporations Act 2001 (Cth) ("Act") for orders relating to a proposed scheme of arrangement and associated orders. By way of background, SXG is a natural resources company engaged in the exploration of precious and base mineral interests and is listed on the Australian Securities Exchange ("ASX"). The acquirer, Mawson Gold Limited ("Mawson"), is a natural resources company listed on the TSX Venture Exchange (which is the Canadian venture stock exchange) ("TSXV"). Mawson already owns 96,590,910 ordinary shares in SXG, representing 48.67% of SXG's share capital. The scheme provides that Mawson will acquire the shares in SXG that it does not already own in exchange for one Mawson Chess Depository Interest ("CDI") or, if an SXG shareholder elects, a Mawson share quoted on the TSXV. Following implementation of the scheme, the current directors of SXG will become the directors of Mawson and the current senior executive team of SXG will become the senior executive team of Mawson. I made the orders sought by SXG to convene the scheme meeting at the conclusion of the hearing on 12 November 2024 for the reasons set out in my judgment in Re Southern Cross Gold Limited [2024] NSWSC 1470.

Affidavit evidence

SXG reads the affidavit dated 23 December 2024 of its solicitor, Mr Guy Sanderson, who refers to the lodgement of the orders made by the Court at the first Court hearing with the Australian Securities and Investments Commission ("ASIC"), registration of the final scheme booklet with ASIC and the dispatch of scheme documents. Mr Sanderson also addresses announcements made by SXG on 12 November 2024, 14 November 2024, 10 December 2024 (which disclosed the deferral of the second Court hearing to 14 January 2025, prior to the scheme meeting held on 13 December 2024) and 13 December 2024 and indicates that he is not aware of any person who raised any issues of concern about the scheme meeting or objected or indicated that they intended to object to the scheme at the second Court hearing.
Mr Sanderson also addresses the change to the scheme timetable, by which the second Court hearing was deferred to 14 January 2025 and the Effective Date and Election Date (as defined) for the scheme were also extended, reflecting the timetable for Mawson to obtain a listing on ASX and a voluntary extension of the statutory deadline for the Foreign Investment Review board to consider associated arrangements for a share swap agreement between SXG and Sparr Nominees Pty Ltd. As I noted above, the amended timetable for the scheme was announced to ASX on 10 December 2024, prior to the scheme meeting. Mr Sanderson also addressed the position in respect of a shareholder in SXG which has a registered address in Monaco, which SXG and Mawson have determined would not be treated as an Ineligible Overseas Shareholder (as defined) for the purposes of the scheme. Mr Sanderson noted that one shareholder in SXG had at that time elected to be issued shares in Mawson quoted on TSXV rather than CDIs; addressed the position in respect of the Euro Canna transaction and the Skellefte Gold Project reference which are noted in the scheme booklet; addressed communications by shareholders with SXG's shareholder information telephone line and email and matters raised at the scheme meeting; and referred to an extension of the End Date (as defined) for the exclusivity arrangements provided under the Scheme Implementation Deed, which was agreed between SXG and Mawson consequential on the change in the scheme timetable. That amendment will have no continuing practical effect after approval of the scheme at this hearing. Mr Sanderson also noted the receipt of conditional approval for the admission of Mawson to the official list of ASX.
SXG also reads the affidavit dated 24 December 2024 of its corporate secretary, Mr Justin Mouchacca, who also indicates that he is not aware of any person who has raised any issues of concern with the scheme meeting or has objected or indicated that he or she intends to object to the scheme at the second Court hearing. Mr Mouchacca also addressed the conduct of the scheme meeting; notes that the scheme resolution was carried at the scheme meeting by the requisite majorities; and addresses voter turnout at the scheme meeting.
SXG reads an affidavit dated 13 January 2025 of its solicitor, Mr Farquhar, which addresses the calculation of voting participation rates, as adjusted for three abstentions from voting and updates the position as to the completion of the Euro Canna transaction and to Mawson's termination of the Skellefte Gold Project. Mr Farquhar also addresses the position as to Ineligible Overseas Shareholders and notes that one further SXG shareholder has elected to receive Mawson shares quoted on the TSXV rather than CDIs.
SXG also tenders a letter dated 14 January 2025 from ASIC confirming that it has no objection to the scheme for the purposes of s 411(17) of the Act and a certificate executed by SXG and Mawson in respect of the satisfaction or waiver of the conditions precedent to the scheme.

Applicable principles and submissions

The Court must be satisfied of several matters in order to approve a scheme of arrangement at the second Court hearing, namely that the plaintiff has complied with the orders of the Court convening the meeting of members; the meeting of members so convened has approved the scheme with the requisite majorities; all other statutory requirements have been satisfied; the scheme is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it; the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion; and there was full and fair disclosure to members of all information material to the decision whether to vote for or against the applicable scheme: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601; [2002] NSWSC 1177 at [8]-[10]; Re Central Pacific Minerals NL [2002] FCA 239 ("Central Pacific Minerals") at [8]-[14]; Re Seven Network (No 3) (2010) 267 ALR 583; [2010] FCA 400 ("Seven Network") at [35]-[39]; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 at [18]-[24]; Re Redcape Property Fund Ltd and the Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 at [7]; Re Amcor Ltd (No 2) [2019] FCA 842 at [7]-[11]; Re Ellerston Global Investments Ltd [2020] NSWSC 1108 ("Ellerston") at [10]-[12]; Re Coca-Cola Amatil Ltd [2021] NSWSC 489 at [9]; Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [9]. The Court will also have regard to shareholders' assessment of their interests as manifested in the voting results on the scheme resolution in recognising that shareholders are "the best judges of whether an arrangement is to their commercial advantage": Central Pacific Minerals at [13]; Ellerston at [10]. I have drawn on my judgment in Re Bionomics Ltd (No 2) [2024] NSWSC 1666 at [7] for this summary.
I also summarised the applicable principles in Re InvoCare Ltd (No 2) [2023] NSWSC 1350 at [8]-[9] as follows: "The matters of which the Court must be satisfied in approving the scheme at the second Court hearing are whether there was compliance with the orders of the Court convening the scheme meeting or meetings; whether the resolution to approve the scheme was passed by the requisite majority and whether other statutory requirements have been satisfied; and whether all conditions to which the scheme is subject (other than Court approval and lodgement of the Court's orders with ASIC) have been met or waived: Re ELMO Software Ltd (No 2) [2023] NSWSC 81 ("ELMO") at [7]. The Court also has, in exercising its power of approval, a residual discretion whether to approve a scheme and is not bound to approve it merely because it has made orders for the convening of meetings or because the statutory majorities have been achieved: Re Seven Network Ltd (No 3) (2010) 267 ALR 583 ("Seven Network") at [31]; Re Staging Connections Group Ltd (No 2) [2015] FCA 1102 at [12]. In exercising that residual discretion, the (non-exhaustive) matters the Court will take into account include whether the scheme is fair and reasonable so that an intelligent and honest member of the relevant class, properly informed and acting alone, might approve it; whether there was full and fair disclosure to members of all information material to the decision whether to vote for or against the scheme; and whether the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [8]; Seven Network at [35]-[40]; Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [10]; ELMO at [8]."

Submissions and determination

I am satisfied that SXG complied with the Court's orders in respect of the distribution of scheme documents to its shareholders. As I noted above, the scheme meeting was held on 13 December 2024 and SXG shareholders (excluding Mawson and its subsidiaries) voted in favour of the scheme by the requisite statutory majorities. The level of shareholder participation at that meeting was not high but was better than that achieved at SXG's recent annual general meetings. This matter does not suggest any defect in the notice of the scheme given to SXG shareholders and does not give rise to any reason not to approve the scheme.
Turning now to the exercise of the Court's discretion in respect of the scheme, the scheme was recommended by an independent board committee of SXG and the independent expert whose report was included in the scheme booklet expressed the view that the scheme was fair and reasonable and in the best interests of SXG shareholders in the absence of a superior proposal. As I noted above, no SXG shareholder or other person indicated an intention to appear at the second Court hearing to oppose the scheme and there was no such appearance. I am satisfied that there is no reason to doubt that the scheme is fair and reasonable so that an intelligent and honest SXG shareholder, properly informed and acting alone, might approve it. There is otherwise no reason to doubt that SXG has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion or that there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme. I am therefore satisfied that the scheme is appropriate for the Court's approval.

Securities Act 1933 (US)

At the first Court hearing, SXG indicated that, if the scheme was approved by the Court, SXG and Mawson intended to rely on that approval for the purpose of qualifying for an exemption from the requirements of the Securities Act 1933 (US) ("Securities Act") in respect of the shares and CDIs to be issued by Mawson in connection with the scheme. That exemption is provided for by s 3(a)(10) of the Securities Act and, in Re Simeon Wines Ltd (2002) 42 ACSR 454 at [22], Lander J summarised the elements of that exemption as that the relevant securities are issued in exchange for other securities; the issuer advises the Court whose order will be relied upon that the issuer itself will rely on s 3(a)(10) on the basis of the Court's approval; the Court has sufficient information before it to determine the value of the securities to be surrendered and those to be issued in the proposed transaction; the Court holds a hearing to determine whether the terms and conditions of the transaction are fair to all those who will receive securities and approval of the terms of the exchange; and the hearing is open to everyone to whom the securities would be issued in the proposed exchange and a notice of the hearing in appropriate terms has been provided in a timely manner; see also Ellerston at [18]-[19]; Re Telstra Corporation Ltd (2022) 163 ACSR 543; [2022] NSWSC 1460; Re Newcrest Mining Ltd (No 2) [2023] FCA 1251; Re TASK Group Holdings Limited (No 3) [2024] NSWSC 854 ("Task Group").
I accept that I should adopt that approach and I record that SXG and Mawson have satisfied the requisite conditions of the exemption, as follows. First, the Court was advised before the approval hearing that reliance would be placed on the s 3(a)(10) exemption on the basis of the Court's approval of the scheme and SXG shareholders were also informed of this in the scheme booklet; second, the Court has been informed of the securities to be offered as scheme consideration, and an independent expert report concluded that the proposal is in the best interests of SXG shareholders; third, the Court has held a hearing to consider the fairness and reasonableness of the proposed scheme; fourth, that hearing was open to the public, and any person to whom Mawson shares or CDIs are to be issued had standing to appear; and, fifth, notice of the time and date of the approval hearing was provided through the scheme booklet.

Exemption under s 411(12) of the Act

SXG also seeks an exemption pursuant to s 411(12) of the Act from compliance with s 411(11) so that a copy of the Court order approving the scheme does not need to be annexed to any copy of SXG's constitution that may be issued in the future. I accept that an order of this kind is properly made where, as here, the rights of shareholders in SXG are not modified in any way: Re Equinox Resources Ltd (2004) 49 ACSR 692; [2004] WASC 143 at [22]-[23]; Re Murchison Metals Ltd [2014] NSWSC 951 at [10]-[11]; Re The Trust Company Ltd [2013] NSWSC 1947 at [19].

Determination and orders

For these reasons, I made the orders sought by SXG at the conclusion of the second Court hearing on 14 January 2025.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 January 2025

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