In the matter of Timor Sea Petroleum NL [2000] VSC 337 (25 August 2000)

13. In order to accommodate the acquisition of e-Estate, Timor Sea proposes the division of that company into two parts.

16. The cornerstone activities of Timor Sea being its existing and oil gas interests and associated assets are intended to be transferred to a newly incorporated subsidiary, Natural Gas. It is proposed also that Natural Gas will be allotted shares equivalent to approximately 25% of the present issued capital of Timor Sea. Timor Sea will then transfer the National Gas shares on a pro rata basis to existing Timor Sea shareholders and Natural Gas will seek its own listing with the Australian Stock Exchange. If approved by shareholders and ultimately by the court it is intended that the name of Timor Sea will be changed to "escapeIIId.Limited". In many respects the demerger scheme proposed by Timor Sea with respect to Natural Gas is similar to the demerger proposal approved by this court in the matter of Amcor Limited (2000) VSC 157.

19. The second component of the proposed scheme has been referred to as the "trustee stock scheme". The object of this scheme is to create the capacity for capital to be raised for Timor Sea by the implementation of a trustee share scheme. It involves Timor Sea issuing shares designated as "Trustee Shares" to a trustee to be held on trust for sale on the basis that the net proceeds of sale are paid to the company as subscription moneys for those shares. It is proposed that 40,000,000 Trustee Shares be issued and allotted to the trustee and that, as the trustee sells those trustee shares, Timor Sea will receive all net proceeds of sale as capital, all of which will then be available to Timor Sea with respect to funding its operations. It logically follows that if the Trustee Shares are not issued and eventually allotted to the trustee, then the trustee stock scheme cannot come into effect.

22. A further aspect of the proposals is the acquisition by Timor Sea of all shares in e-Estate in exchange for the issue and allotment of a total of 80,000,000 ordinary shares in the capital of Timor Sea. The acquisition is intended to be completed after the implementation of the scheme, the distribution of the Natural Gas shares to the members and upon the company obtaining approval from the Australian Stock Exchange for reinstatement of trading in the securities of Timor Sea.

Section 411(1) - The Meeting Phase and the Role of ASIC

27. Section 411 of the Corporations Law confers jurisdiction upon a court to order a meeting or meetings of the members or classes of members of a Part 5.1 body where a "compromise or arrangement" has been proposed between that body and its members or classes of its members. Any meeting ordered to be held under s.411 is referred to as a "court ordered meeting". Further, the court has power under s.1319 of the Law to give such directions with respect to the convening, holding or conduct of the meeting and ancillary or consequential directions in relation to the meeting, as it thinks fit. A very significant aspect of the approval contemplated under s.411 exists in sub-s.(2). Section 411(2) of the Law provides that a court shall not make an order pursuant to s.411(1) unless the Australian Securities and Investment Commission ("ASIC") has had a reasonable opportunity to examine the terms of the proposed compromise or arrangement. In particular, s.411(2)(b)(ii) provides that the court is to be satisfied that the Commission has had a reasonable opportunity to make submissions to the court in relation to the proposed arrangement and the draft explanatory statement.

30. This matter came before me first on 16 June 2000. On that occasion Mr J. Merralls QC who appeared with Mr G. McEwan urged orders for the convening of meetings under s.411 of the Law. I considered the matters contained in the draft explanatory statement exhibited to the affidavit in support and I was satisfied that the matters under s.411(3) had been met. Most importantly, s.411(17) of the Law provides that a court shall not approve a compromise or arrangement until one of two matters are satisfied. On the one hand, the court is satisfied that the arrangement has not been proposed for the purposes of enabling any person to avoid the operation of any of the provisions of Chapter 6. Alternatively, the court is not to approve an arrangement unless there is produced to the court a written statement by ASIC stating that it has no objection to the compromise or arrangement.

33. Section 411(17) is concerned with the ultimate approval by the court after the notification to shareholders processes have been completed. Section 411(2) of the Law contemplates that ASIC will have the opportunity to make submissions to the court as to the propriety or otherwise of the proposal. In my view although sub-s.(2) comes before notification to shareholders and sub-s.(17) comes after that event when the court reaches the stage of contemplating ultimate approval of an arrangement the two sub-sections are to be considered in conjunction. For example, if ASIC makes submissions to the court initially under s.411(2)(b)(ii) of the Law expressing objections or concerns as to a proposal a court might readily contemplate that in all likelihood it would not approve a compromise under s.411(17) because ASIC has foreshadowed its objection under sub-s.(17)(b).

36. These matters are relevant as ASIC appeared before the court on 23 June 2000 to be heard with respect to the trustee stock scheme.

39. Mr Merralls QC for Timor Sea submitted that in the past ASIC had not appeared on applications under s.411 (or its predecessors) but had communicated to the court by way of letter its assent to the relevant proposal. It was suggested by Mr Merralls QC that this was the first occasion that ASIC had appeared. This position does not accord with my experience, for example, in the matter of Amcor Limited, supra, the Commission appeared at first instance to formally indicate that it had no objection to the proposal. Presumably Mr Merrals confined his observations to defendant type schemes. In any event, in my view s.411(2)(b)(ii) of the Law clearly contemplates that the court is obliged to give the Commission the opportunity to make submissions in relation to a proposed arrangement and the relevant draft explanatory statement. On each occasion it is a matter for the court as to whether those submissions are received orally or in writing or both.

44. In the present matter Mr A. Bulman appeared as solicitor for ASIC. Prior to the convening of the hearing Mr Bulman on behalf of the Commission provided written submissions (in accordance with Practice Note [1993] VicRp 73; 1993 (2 VR 314)). In both written and oral submissions ASIC expressed its concern that the trustee stock scheme may directly contravene or, alternatively, effectively circumvent the operation of s.707(3) of the Law. The concern of ASIC was that the trustee stock scheme involved the shareholders of the company agreeing to the issue of shares to a trustee for sale on the market. As the shares were to be sold on the market without a disclosure document (as defined by s.9 of the Law) ASIC articulated the view that the scheme may contravene or circumvent s.707(3) of the Corporations Law.

47. Section 707 falls within Chapter 6D of the Law concerned with fundraising and Part 6D.2 concerned with disclosure to investors about securities. Division 2 of Part 6D.2 is concerned with those types of offers that require disclosure to investors.

50. Section 700(2)(b) of the Law provides that the offering of securities for sale includes inviting offers to purchase the securities. Section 700(3) provides that for the purposes of Chapter 6D concerned with fundraising the person who offers securities is the person who has "the capacity, or who agrees, to issue or transfer the securities if the offer is accepted". Sections 92(3) and 700(1) of the Law define "securities" for the purposes of Chapter 6D as meaning, among other matters, shares and legal or equitable rights or interests in shares. The significance of Chapter 6D to transactions is apparent from s.703 of the Law that provides that a contract for the sale or issue of securities is void if it provides for contracting out of the requirements of the Part.

53. Turning then to s.707 of the Law. It provides:

"SECTION 707 SALE OFFERS THAT NEED DISCLOSURE 707(1) Only some sales need disclosure. An offer of securities for sale needs disclosure to investors under this Part only if disclosure is required by subsection (2), (3) or (5). 707(2) Off-market sale by controller. An offer of a body's securities for sale needs disclosure to investors under this Part if: (a) the person making the offer controls the body; and (b) either: (i) the securities are not quoted; or (ii) although the securities are quoted, they are not offered for sale in the ordinary course of trading on a stock market of a securities exchange; and section 708 does not say otherwise. 707(3) Sale amounting to indirect issue. An offer of a body's securities for sale within 12 months after their issue needs disclosure to investors under this Part if the body issued with securities: (a) without disclosure to investors under this Part; and (b) with the purpose of the person to whom they were issued: (i) selling or transferring them; or (ii) granting, issuing or transferring interests in, or options or warrants over, them; and section 708 does not say otherwise. 707(4) Evidence of intention - indirect issue. Unless the contrary is proved, a body is taken to issue securities with the purpose referred to in paragraph (3)(b) if any of the securities are subsequently sold, or offered for sale, within 12 months after their issue. 707(5) Sale amounting to indirect off-market sale by controller. An offer of a body's securities for sale within 12 months after their sale by a person who controlled the body at the time of the sale needs disclosure to investors under this Part if: (a) at the time of the sale by the controller either: (i) the securities were not quoted; or (ii) although the securities were quoted, they were not offered for sale in the ordinary course of trading on a stock market of a securities exchange; and (b) the controller sold the securities without disclosure to investors under this Part; and (c) the controller sold the securities with the purpose of the person to whom they were sold: (i) selling or transferring them; or (ii) granting, issuing or transferring interests in, or options or warrants over, them; and section 708 does not say otherwise. 707(6) Evidence of intention - indirect sale by controller. Unless the contrary is proved, a person who controls a body is taken to sell securities with the purpose referred to in paragraph (5)(c) if any of the securities are subsequently sold, or offered for sale, within 12 months after their sale by the controller."

57. Section 708 of the Law is concerned with the types of offers that do not require disclosure. Section 708(17) provides:

"708(17) Compromise or arrangement under Part 5.1. An offer of securities does not need disclosure to investors under this Part if it is made under a compromise or arrangement under Part 5.1 approved at a meeting held as a result of an order under subsection 411(1) or (1A)."

61. Chapter 6D of the Law is concerned with fundraising and is a new provision inserted by the Corporate Law Economic Reform Programme Act 1999 ("CLERP"). Sections 707 and 708 of the Law in their present form are entirely new.

64. In both oral and written submissions ASIC submitted that the policy underlying s.707(3) is to ensure that the requirement for a disclosure document is not circumvented by a company issuing shares to a person for the purpose of selling those shares without a disclosure document. The Commission submitted, further, that insofar as Timor Sea purported to rely upon the exemption provided under s.708(17) of the Law, the operation of that section should be read narrowly. A narrow reading was urged on the basis that the shareholders of a company could agree under a scheme to an issue of shares to numerous persons without a disclosure document and, as a consequence, an eventual issue of shares being an integral part of an arrangement between a company and its members would be exempt under s.708(17). In this way, it was said on behalf of the Commission, the sub-section could be relied upon so that an issue of shares could be arranged by way of a scheme to defeat the operation of the fundraising requirements of Chapter 6D of the Law. The Commission urged a narrower reading of s.708(17) on the basis that the sub-section is intended to exempt offers of shares under a compromise or arrangement where the offer of securities is made to the members who have a copy of an explanatory memorandum that provides disclosure in relation to the securities being offered. It was said that as a consequence such an offer is made under a compromise or arrangement where the person who receives the offer also receives an explanatory memorandum.

67. However, a different construction of ss.707(3) and 708(17) can be postulated from that urged by ASIC. Section 706 of the Law provides that an offer of securities needs disclosure to investors under Part 6D.2 of the Law unless s.708 "says otherwise". The proposed scheme in the present matter covered both the issue of shares and their sale. Shares are proposed to be issued under the scheme to a trustee without any application moneys being received but upon terms that they are to be sold by the trustee and the net proceeds of sale will be the subscription moneys for those shares. Further, it is to be noted that the proposal before the court with respect to the trustee arrangement scheme was not a compromise but an arrangement. As a consequence, the shares are proposed to be issued to the trustee and issued under the scheme which would be approved at a meeting held as a result of any order that the court may make under s.411(1) of the Law.

72. The Commission cited Australian Securities Commission v Marlborough Gold Mines Limited [1993] HCA 15; (1993) 177 CLR 485 at 502 to support the proposition that a scheme of arrangement may not be used as a vehicle for enabling the achievement of that which is not permitted under the law. In Marlborough Gold Mines it was held that the Law should be taken as impliedly prohibiting a conversion of a limited liability company into a no liability company because the law made no provision for such conversation by conventional means. It follows, therefore, that s.411 of the Corporations Law should be interpreted as not "constituting authority for approving an arrangement containing a provision" for conversion. A scheme of arrangement cannot be a mechanism for avoiding an express or implied prohibition under the law. However, it is necessary in each case to consider the nature of the scheme proposed to ascertain whether or not the exemption provided by s.708(17) applies. Ultimately, whether a particular scheme is within s.411 depends upon whether or not it is a compromise or arrangement. As already observed, the trustee stock scheme constitutes an arrangement: see In Re NFU Development Trust Limited (1972) 1 WLR 1548, 1555; In Re Bank of Adelaide Limited (1979) 22 SASR 481, 499, 511-512, 537-542; In Re Savoy Hotel Limited (1981) 1 Ch 351, 359.

75. In the trustee stock scheme the members of the company will be precluded from any complaint or dispute or allegation of a breach of duty to those members owed by the company because of the statutory contract between the company and its members. The abandonment of rights in return for the undertaking of the company to issue the trustee shares upon the terms of the scheme and the proposed deed of covenant will satisfy the requirements of an arrangement as recognised by the authorities: see In Re NFU Development Trust Limited, supra. ASIC expressed concern that s.708(17) of the Law could be utilised where the shareholders of a company agreed under a scheme to an issue of shares to numerous persons without a disclosure statement and as such arrangement would form an integral part of a compromise or arrangement an exemption would arise from the requirements of s.706. In my view such a scheme as postulated by the Commission would not constitute a compromise or arrangement. In my view a court would, in all likelihood, apply the principle in Marlborough Gold Mines and either refuse to authorise the convening of a meeting or refuse approval of the scheme. The Commission cited also Re Archaean Gold NL (1997) 15 ACLC 382, 384; 23 ACSR 143, 145-146 in support of the proposition that where the proposed transaction under a scheme could be achieved by way of a takeover then there should be a similar standard of disclosure in documents relating to the proposed scheme as would be required by a Part A statement under the Law. Obviously this is so. The Law requires a specified standard of disclosure to be made for a scheme of a particular character and that standard must be observed. However the exceptions to the investor disclosure provisions of Chapter 6D of the Law accept the disclosure provided in the various ways mentioned in s.708(17) as being sufficient to dispense with disclosure to investors in accordance with Divisions 3 and 4 of that chapter.

78. With respect to s.707(3), there are slight differences in wording between ss.706, 707(3) and 708(17) but such differences in language carry no significance in the overall operation of the provisions. The requirements of 707(3) do not apply to the present proposal because of the very fact that s.708 "says otherwise" in that it says that there is no need for disclosure to investors because the offer is under the arrangement and it is so under the arrangement because that arrangement requires the subscription moneys to be provided by the sale of the shares. The sale of the shares is, therefore, an integral part of the arrangement for which approval is sought. It is not something which is separate from the arrangement as might be the case in other types of schemes. In my view it is quite clear that in the examples given by ASIC in its submissions the actual sale of the shares would not be under the arrangement but would arise under something else. In essence, therefore, I consider the language of s.708(17) is wide enough to "say otherwise" for the application or exclusion of the application of s.707(3) with respect to an arrangement.

83. The Commission cited Re Cascade Pools Australia Pty Ltd (1985) 9 ACLR 995, 996 in support of the proposition that if s.708(17) applies then the trustee stock scheme should not be approved because it undermines the purpose behind s.707(3) of the Law and is contrary to public policy. In Cascade Pools it was held on grounds of public policy that an order for the convening of meetings should not be made in circumstances where it appeared that a company with substantial liabilities but no assets would be left to carry on business. Clearly that is not the present case. In my view, no public policy consideration applies to negate the effect of a dispensation from s.707(3) expressly conferred under s.708(17); the relevant public policy is manifest in terms of that sub-section.

88. The Commission argued, also, that in the present matter a problem would arise under s.707(3) if offers for sale by the trustee were dispensed by s.708(17) from compliance with s.707(3) when scheme shares were offered for sale within 12 months of issue by purchasers from the trustee. In my view s.707(3) does not apply to re-sale. Section 707(3) applies to certain offers for sale of securities where they are issued with the purpose of the issuing body of "the person to whom they were issued" selling or transferring those shares. The purpose of the issuing body is only concerned with sales or transfers by that person. As a consequence, when s.708(17) states "otherwise to the prohibition of sale or transfer by that person", s.707(3) no longer applies to the relevant securities. In my view s.720 of the Corporations Law sits comfortably with such a construction. It assumes proximity between the seller (as the person to whom the securities were issued) and the directors of the issuing body. Similarly, s.707(4), which imputes the purpose referred to in sub-s.(3)(b) to a body issuing securities where they are subsequently sold, or offered for sale, within 12 months after issue, assumes complicity or at least proximity between the issuer and the on-seller. In my view it would be anomalous if the first sale were to be dispensed from the requirements of s.707(3) by s.708 but a subsequent sale by a person who had no connection with the issuer were to be the basis for imputing a purpose to the issuer at the time of issue.

93. The final basis relied upon by ASIC for a narrow reading of s.708(17) was that such reading promotes the purpose or object underlying the Law. Section 109H of the Law provides:

"Section 109H Regard to be had to purpose or object of law. 109H In the interpretation of a provision of this Law, a construction that would promote the purpose or object underlying the Law whether that purpose or object is expressly stated in the Law (or not) is to be preferred to a construction that would not promote that purpose or object."

In my view the exemption granted under s.708(17) of the law is plain in its meaning. Nevertheless, s.109J(1) of the Law permits the use of extrinsic material in its interpretation. Section 109J(4) requires that in determining whether consideration should be given to any extrinsic material I must have regard to the desirability of persons being able to rely upon the ordinary meaning of a provision. Section 109J(2) provides that subject to sub-s.(4) consideration may be given to extrinsic material, among other matters, to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision. Given that the issue is raised in this matter by ASIC and, further, as it seems the issue has not been considered by the courts previously I consider it is appropriate to have regard to extrinsic material under sub-s.(2) of s.109J of the Law. In this respect it is instructive to consider the explanatory memorandum to the Corporate Law Economic Law Programme Bill 1998. Paras 8.100-8.103 of the memorandum provided:

"Offers of securities issued for resale 8.100 The Bill will provide that a disclosure document is required if a person offers securities for sale within 12 months after their issue and the body issuing the securities did so without a disclosure document and with the purpose of having the securities resold by the person to whom they were issued (proposed subsection 707(3)). 8.101 In the absence of evidence to the contrary, where securities are sold within 12 months of their issue, that issue will be regarded as having been for the purpose of resale (proposed subsection 707(4)). The body or the person who controls the body issuing the securities will have to show that there was no purpose of resale. The Bill will make it clear that the obligation to prepare a disclosure document is on the person offering the securities for sale. However, the directors of the issuing body or the controller must consent to the issue of the disclosure document (proposed section 720, item 3). After 12 months, the securities would be able to be traded freely in the market. 8.102 This anti-avoidance provision replaces current section 1030, which deems a document offering securities issued for the purpose of on-sale to be a prospectus issued by the corporation which issued the securities. Where securities are sold within 6 months of their issue, they are deemed to have been issued for the purpose of on-sale. The aim of section 1030 was to prevent avoidance of the prospectus provisions by issuing securities to an intermediary under one of the exclusions and the intermediary then on-selling the securities at large. 8.103 The Bill will rectify a number of problems which have been identified with the operation of current section 1030, including: * The indefinite tainting of securities issued for the purpose of resale (at present, whenever the securities are resold in the future, a prospectus is required); * The potential for subsection 1030(1A), which provides an exemption for offers made on the Stock Exchange Automated Trading System screens, to undermine the anti-avoidance purpose of section 1030; * Uncertainty whether the resale purpose is that of the issuer or the seller; and * Deeming a sale document to be a prospectus, with the corporation potentially being made liable for the contents of a document prepared by another party, and the persons purchasing the securities to be subscribers, with uncertainty whether the rules relating to offers for subscription apply."

99. Earlier in time, the report of the Prospectus Law Reform Subcommittee of the Companies and Securities Advisory Committee of March 1992 ("the Lonergan Report") considered the pre-cursor of s.707(3) of the Law namely s.1030. The Lonergan Report (at para 200) concluded that s.1030 as it was "has assumed a quite inappropriate and unintended significance and it should be amended to clarify that it is, indeed, an anti-avoidance provision aimed at the mischief of a corporation seeking to avoid lodging or registering a prospectus by exploiting one of the excluded offer exemptions".

102. The disclosure provisions among other matters were considered by the joint Parliamentary Committee on Corporations and Securities Report on the Corporate Law Economic Reform Programme Bill 1998 (dated May 1999). In paras 4.31-4.32 the joint committee gave specific consideration to the previous s.1030 of the Law and the proposed clause now contained in s.708 of the Law:

"4.31 In correspondence with the Committee the Minister for Financial Services and Regulation, the Hon Joe Hockey MP, has indicated that the changes incorporated in the Bill arise from problems with the operation of the current legislation. A number of problems have been identified with the operation of current section 1030, including the potential for subsection 1030(1A), which provides an exemption from offers made on the ASX, to undermine the anti-avoidance purpose of section 1030. In addition, the Government questions whether the reforms would undermine the market for placements. In particular, an institution would be able to on-sell in the wholesale market without preparing a disclosure document (Bill section 708). In effect, this would create an 'upstairs market' for the trading of these securities within the 12 month period. This approach is broadly consistent with that in North American jurisdictions. These reforms also remove an inappropriate incentive for issuers to make placements and may therefore encourage issuers to make rights issues to existing shareholders. This would be welcomed by shareholder groups. A relaxation for placements for listed entities, as proposed by the ASX would, on the other hand, make rights issues less attractive and effectively undermine the policy requirement that a disclosure document be prepared for a rights issue. 4.32 In considering this matter the Committee was mindful of several factors. Firstly, although an on-market sale within 12 months would be problematical, the institutions would not be prevented from selling their securities. They would be able to re-sell the securities off-market to other sophisticated or professional investors under the provisions of proposed section 708. Under proposed section 741 the ASIC has extensive powers to exempt a person or class of person from the Law, or modify the Law regarding disclosure. This provides a second avenue through which any problems which arose could be addressed. Finally, the Committee is concerned that any general weakening of the legislation may have the effect of seriously undermining the disclosure regime. For these reasons the Committee has not been persuaded that the Bill should be amended."

106. In An Introduction to the CLERP Act 1999 - Australia's New Company Law, Ford Austin and Ramsay, 2000 it is observed (at para 4.24) that the anti-avoidance mechanism contained in s.707(3) of the Law applies only if the initial transaction took place without a disclosure document and that non-disclosure is permitted, for example, where the person acquiring the securities initially was "a sophisticated or professional investor or within the exemptions in s.708". The authors express the view that the anti-avoidance provisions contained in s.707(3) do not have any application if the on-sale is exempted by virtue of s.708. Hence, it is said "the new provision is consistent with the development of an 'upstairs' market during the 12 months period, in which the securities could be traded amongst professional and sophisticated investors without a disclosure document."

109. In my view the extrinsic materials do not give rise to any foundation for a different view to the construction of the relevant sections that I have already determined. Indeed, in my view the extrinsic materials demonstrate that the disclosure provision was intended to meet circumstances quite different from that presently before me. As already observed it is a question in each individual scheme brought before a court for approval as to whether the exemption provided by s.708(17) applies to the particular facts. Where a scheme is proposed to be utilised to achieve the purposes contemplated by the Commission and the various agencies reported in the extrinsic materials it would not constitute a compromise or arrangement and a court could be expected to deal with such a proposed scheme on the basis of Marlborough Gold Mines. Where a scheme is devised as a form of artifice to achieve an outcome that is contrary to public policy the courts will deal with it: see Re Cascade Pools Australia Pty Ltd, supra.

114. Ultimately, in determining the proper construction of the provisions of the Law, broadly speaking, there will be a need for an interpretation regulating commercial activities that gives those activities a sensible and consistent effect: Catto v Ampol Limited (1989) 16 NSWLR 342, 345; also, Re Sonodyne International Limited (1995) 15 ACSR 494, 497-498.

117. Ultimately the issue for me to determine was whether or not Timor Sea qualified for an exemption under s.708(17) of the Law. For the reasons already expressed, I considered that Timor Sea qualified for an exemption under the sub-section by virtue of the fact that the proposal before the court was an arrangement under Part 5.1 of the Law that required approval under s.411(1).

120. Furthermore, it is to be observed that insofar as ASIC may have concerns at any time about reliance by a party upon the exemption provision contained in s.708(17) it is open to the Commission to exercise its powers under s.741(1)(b) so as to declare that Chapter 6D of the Law applies to a person as if "specified provisions were omitted, modified or varied". No suggestion was put before me to indicate that the Commission had concerns such as to contemplate exercising its powers under s.741 of the Law. Furthermore, the observation must be made that the formal position of ASIC before the court on 23 June 2000 was that it did not oppose the orders sought by Timor Sea, rather, it purported to express "concerns". It was apparent, despite the matter being specifically raised with Mr Bulman during the course of submissions on 23 June 2000, that ASIC did not go so far as to voice an objection to the proposal.

123. For these reasons, therefore, I was satisfied on 23 June 2000 that it was appropriate to make the orders sought by Timor Sea under s.411(1) of the Law for the convening of a meeting of shareholders to consider the schemes and made orders accordingly.

128. In accordance with those orders meetings of shareholders were held on 7 August 2000 in relation to the demerger scheme at 11.15 a.m. and in relation to the trustee stock scheme at 11.30 a.m. at the Media Centre, Australian Stock Exchange, 530 Collins Street, Melbourne.

131. On 18 August 2000 orders were made by the Master pursuant to Order 16 that the meetings were duly convened and held in accordance with the orders of the court, the provisions of the Law and the constitution of the applicant company. The Master ordered, also, that the resolutions in relation to each scheme were duly passed pursuant to s.411(4) of the Corporations Law.

134. The principle applied on an application for approval of a scheme to which no objection has been made is that if the court is satisfied that there has been an absence of oppression and that the relevant scheme is one capable of being accepted by the shareholders it should be approved: see Re Sonodyne International Limited (1995) 15 ACSR 494, 499; Re Amcor Limited, supra, 208. No opposition has been made to this application for approval of the schemes and it has not been suggested that a shareholder will be oppressed by either of these schemes. On the basis of the principles expressed in Re Hudson Conway Limited [2000] VSC 21; (2000) 33 ACSR 657 by Beach J at 662, 665, 667, it is appropriate to regard the shareholders as the best judges of whether these schemes are to their commercial advantage. In light of the passing of the resolutions and, in particular, the majorities achieved, it is apparent that the shareholders have resolved that the schemes are to their commercial advantage.

137. As I have observed on other occasions, e.g. in Re Amcor, supra, ultimately, the authorities are to the effect that the court must be satisfied that the initial orders ordering the meetings have been complied with, whether the resolutions have attained sufficient majorities and, finally, whether the proposed scheme is capable of being approved by the members. I am satisfied on the basis of the evidence before me that each of these matters have been met.

140. The remaining matter to be considered is the position of ASIC pursuant to s.411(17) of the Corporations Law. There was no appearance on behalf of ASIC on the final application on 24 August 2000. However, a letter dated 23 August 2000 from ASIC signed by Mr Bulman was provided to the court advising that ASIC had no objection to the schemes of arrangement " ... on the basis that it is satisfied that they have not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Law". I interpolate that if the Commission has concerns as to non-disclosure it should consider its powers under s.741. As matters transpired, on 23 June 2000 after I informed the parties of my view with respect to the requirements of disclosure, if any, already considered I was informed by Mr Merralls QC that Timor Sea had resolved, in any event, to provide a prospectus. I was informed that the need for a prospectus arose from the fact that the business of the listed company will be substantially changed as a result of the schemes and that the Australian Stock Exchange required a prospectus to be issued as a condition for re-listing the company after the substantial change. In my view the circumstances leading to the production of a prospectus as a result of the attitude of the Australian Stock Exchange does not affect the matters I have already considered in relation to disclosure. In any event, it may be assumed that the requirements of the Exchange have ultimately appeased any hesitation that ASIC may have had.

143. There are then the other matters to be considered under s.411(17) of the Law. On the basis of the evidence before me I was satisfied that all of the requirements of the sub-section have been met.

146. In light of all these matters I considered it appropriate to approve each of the schemes and orders were made accordingly on 24 August 2000.

I certify that this and the 17 preceding pages are a true copy of the reasons for judgment of Warren J of the Supreme Court of Victoria delivered on 25 August 2000.