Kumarina Resources Ltd, in the matter of Kumarina Resources Ltd (No 2) [2013] FCA 723

REASONS FOR JUDGMENT 1 The plaintiff applied for orders approving the scheme of arrangement between the plaintiff and its members under s 411(4)(b) of the Corporations Act 2001 (Cth). Orders were made on 8 April 2013 authorising the plaintiff to convene a meeting of shareholders to consider and if thought fit, to approve, the Scheme. On 24 May 2013, an order was made approving the Scheme. 2 Aumex Mining Pty Ltd and Mr Wayne Van Blitterswyk (the Objectors) appeared at the second hearing, held on 23 May 2013, to oppose the Scheme being approved. They did not apply to adjourn the second hearing: their grounds for opposing the approval of the Scheme were heard on the day first listed for the second hearing. 3 The Objectors submit that they are entitled to be paid their party/party costs by the plaintiff. 4 In Re NRMA Ltd (No 1) (2000) 156 FLR 349 at [45], Santow J summarised the principles which have emerged from the cases on the issue of whether the costs of objectors on their objection should be met by a plaintiff scheme company, as follows: [45] . . . (i) The ordinary rule is that the scheme companies pay the objector's costs and do not suffer cost orders against them. (ii) However, this is subject to the objections not being frivolous or without substance but rather such as to be properly and justifiably advanced, even if unsuccessfully. I would add that even sensible objections should be capable of being advanced with reasonable economy of time, consistent with the summary nature of a s 411(1) application. (iii) These principles reflect the fact that the scheme procedure unavoidably must provide an independent court forum on two separate occasions - for convening and then to approve the scheme. The court will often be assisted by having a contradictor at either stage. It must not be forgotten that the end point of most schemes, if adjudged sufficiently fair and achieving the statutory majorities, is compulsory acquisition of the member's property and the court is no rubber stamp in that process. (iv) Where there is a clear indication that objectors are using the tactics of technical and artificial objection so as to stall a scheme of arrangement for their own purposes, the courts will not hesitate to make costs orders against objectors to the extent warranted; those cost orders may even be indemnity cost orders in appropriate cases. (v) Since assessment of the objections cannot be made in advance, cost orders should not be made in advance either. 5 Although these guidelines were set out in the context of applications for approval of scheme documents, including an information memorandum, they have also been considered and applied in the context of applications for the approval of a scheme: see for example, Re Gas2Grid Ltd (No 2) (2010) 80 ACSR 179 at [11]-[17]. 6 The Objectors submit that they are entitled to be paid their party/party costs by the plaintiff in circumstances where: (a) their property will be compulsorily acquired against their wishes if the Scheme is implemented; (b) they raised their concerns before and at the Scheme Meeting; (c) they have not used any delaying tactics to stall the Scheme; (d) they made sensible objections that were not frivolous or without substance but rather such as to be properly and justifiably advanced; and (e) they advanced those objections with reasonable economy of time. 7 However, the plaintiff submits that this is a not a case in which the ordinary rule, that the scheme company pays the objectors' costs and the objectors do not suffer cost orders against them, should apply, for the reasons that the Objectors contended at the hearing that: (a) the Court should disregard the fact that Utilico Investments Limited, ICM Limited and Peter Sullivan voted their Kumarina shares at the Scheme Meeting; and (b) the Court ought, in the exercise of its discretion under s 411(4), refuse to approve the Scheme, even if the Scheme has been approved by shareholders. 8 In relation to the first contention, I determined that the rights of all shareholders in the plaintiff were identical as were their rights in the proposed Scheme. There was no reasonable foundation for the contention that there were different classes of shareholders. 9 As to the second contention, I found relevantly that: (a) The Objectors' foundation for this contention was obscure. (b) The concerns which had been raised by the Objectors about the Scheme through their solicitors had been responded to by the plaintiff through its solicitors. The Objectors had originally stated, through Mr Van Blitterswyk that they would support the Scheme, although, for reasons unknown, they changed their minds. (c) An independent expert expressed the opinion that the Scheme was fair and reasonable and in the best interest of the plaintiff's shareholders. The Objectors offered no expert evidence to the contrary. (d) There was no basis for treating Utilico or ICM as in a different class of shareholders. (e) The votes cast at the Scheme Meeting in favour of the Scheme were representative of the views of the plaintiff's shareholders and the Objectors were very much in the minority. (f) There was no reasonable basis advanced by the Objectors for the court to refuse to approve the Scheme. 10 Accordingly, the Objectors' contentions, in combination, were obscure, without substance and provided no reasonable grounds for refusing to approve the Scheme. I do not consider that their contentions were properly and reasonably advanced. Indeed, there was an air of artificiality about them. In those circumstances, the plaintiff should not be required to pay the Objectors' costs. Accordingly, there be no order as to costs. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour.