Peak Coal Limited (ACN 125 884 031), in the matter of Peak Coal Limited (ACN 125 884 031) (No 2) [2010] FCA 45

REASONS FOR JUDGMENT 1 On 21 December 2009, I granted leave to the plaintiff (Peak Coal) to convene a meeting of shareholders to consider and, if thought fit, to approve a scheme of arrangement (a Share Scheme) (Peak Coal Limited (ACN 125 884 031), In the matter of Peak Coal Limited (ACN 125 884 031) [2010] FCA 6) (Peak Coal No 1). I also gave leave for Peak Coal to convene a meeting (Option Holders Meeting) of each person registered as a holder of an option issued by Peak Coal with an exercise price of 20 cents expiring on 31 December 2011 (Optionholders) for the purpose for considering and, if thought fit, approving with or without amendment the scheme of arrangement contained in the Scheme Booklet, the Booklet which was before the Court when those orders were made (the Option Scheme). Additional ancillary orders were made to facilitate the granting of leave for purposes of s 411 of the Corporations Act 2001 (Cth) (CA). 2 This (from the Court's perspective), is the second stage in relation to the implementation of the Scheme. 3 The Court's role as observed by Santow J in Re NRMA (No 1) (2000) 156 FLR 349 (at 361) on this occasion is to determine: (a) whether all the conditions required by s 411 CA have been complied with; (b) whether the majority of members or creditors (in this case, the Optionholders), though acting regularly, have acted in good faith and not in pursuit of some illegitimate purpose; and (c) whether the proposal was sufficiently fair and reasonable for an intelligent honest person, able to do so, to approve it (to paraphrase somewhat what was said by Fry LJ in Re Alabama, New Orleans, Texas and Pacific Junction Railway Co (1891) 1 Ch 213 at 247). 4 As observed in a number of cases (including Re Stockbridge Ltd (1993) 9 ACSR 637 (at 646-648) per Murray J), the jurisdiction is fundamentally supervisory with the Court being concerned to satisfy itself that there has been an absence of oppression and that the compromise or arrangement is one which is reasonably capable of being accepted. 5 It is unnecessary to repeat the reasons for making the orders in Peak Coal No 1. From a practical perspective, the remaining issues specific to Peak Coal on which it is necessary to be satisfied are that before making orders under s 411(4)(b) CA: (a) the meetings convened by Peak Coal were convened and held in accordance with the orders made at the 'convening' hearing on 21 December 2009 in Peak Coal No 1; (b) the resolutions required to be passed were passed at those meetings by the majorities required by s 411(4)(a) CA; (c) Peak Coal otherwise complied with the orders in Peak Coal No 1; and (d) the Australian Securities and Investments Commission (ASIC) has had a reasonable opportunity to examine Peak Coal's Explanatory Statement and to make submissions to the Court in relation to thereto (s 412(7) CA). 6 Dealing with the first three matters, Peak Coal is not a company listed on the Australian Securities Exchange. Pursuant to s 249H(1) CA, at least 21 days notice is to be given of a meeting of members of an unlisted company. Each member is to be given written notice (s 249J(1) CA) and a meeting may be given by any means that the company's constitution (if any) permits (s 249J(3)(d) CA). There is substantial affidavit material relating to the method by which and the time within which notice of the meeting and the content was given. As to the content, an Explanatory Statement is required to be given with every notice convening a s 411 meeting (s 412(1) CA). 7 It is not necessary to record the minute detail of that evidence. Suffice it to say that I am satisfied that adequate and proper notice of the meeting was given. At the members' meeting held on 28 January 2010, the sole resolution to be put to the members was passed by an overwhelming majority in accordance with the requirements of s 411(4)(a) CA. On the same date, a meeting of the Optionholders was held in a manner in which I am satisfied fulfils the requirement of the CA, and at the Optionholders meeting the sole resolution to be put to the Optionholders was also passed by the majority as required by statute (s 411(4)(a) CA). There is also detailed evidence as to the advertising of the specified notices of the shareholders' meeting and the Optionholders' meeting and the dates and circumstances upon which such notice was given. 8 As to the notice given to ASIC, ASIC did not wish to attend the convening application giving rise to the orders in Peak Coal No 1. ASIC has received, on 29 January 2010, certified copies of the minutes of each of the two meetings. While the timeframe is not generous, I am satisfied, in light of the content of the material, that ASIC has had a reasonable time to examine the terms of the proposed scheme and to make submissions to the Court in accordance with the requirements of s 411(2) CA. In that regard I am particularly mindful that ASIC has provided written notice that it does not intend to appear at this second hearing and, moreover and more importantly, that it has no objection to the scheme of arrangement proposed by Peak Coal. As Robson J observed in Re Coles Group Ltd (No 2) (2007) 215 FLR 411 (at [75]-[77]), the statement from ASIC normally carries with it the implication that ASIC is satisfied that the members have received all material information they need for their decision; that they have received reasonable and equal opportunity to share in the benefits under the scheme; and that members are not being adversely affected by the takeover proceeding by a scheme of arrangement. 9 The statement of non-objection by ASIC is important but regardless of that statement, I can see no indication that the purpose of the Scheme is to avoid the mechanisms of Ch 6 CA dealing with takeovers. Whilst the result of the Scheme could be characterised as a 'takeover' and could have been implemented under Ch 6 CA, the fact that it was proposed under Ch 5 does not imply that it was proposed for the purpose of avoiding the operation of Ch 6 CA. There is no legislative preference for implementing a 'takeover' under Ch 6 CA as opposed to Ch 5 CA. As to the level of disclosure, in any event, as observed in Peak Coal No 1, the Explanatory Statement does give the level of disclosure and information required under the provisions of Ch 6 CA so that in substantial effect, the primary risk of mischief to which Ch 6 CA is directed will not arise. The two chapters compliment one another: s 411(17) CA (Re ACM Gold Ltd (1992) 34 FCR 530 at 538. 10 There is no evidence to suggest that the Scheme has been proposed other than in good faith and for a proper purpose. There appears to be nothing in Peak Coal's Constitution which is contrary to any term of Scheme. In the present case there is disclosure that the Scheme was proposed as a means of guaranteeing Wildhorse Energy Limited one hundred per cent ownership of Peak Coal without the delay, cost, expense and uncertainty associated with a Ch 6 CA takeover. I do not consider that the entire ownership of Peak Coal being resolved at the one time is an illegitimate commercial interest: Re Stockbridge at 653 and Re International Goldfields Ltd [2004] WASC 112 per Barker J (at [32]). 11 In all the circumstances the Scheme is fair and reasonable. The shareholders and Optionholders at each of the meetings both voted overwhelmingly in favour of the schemes with one abstention only but no votes being cast against either of the schemes. 12 For the foregoing reasons, I make the following orders: 1. The Schemes of Arrangement between the plaintiff and its: (a) members; and (b) optionholders of options to acquire ordinary fully paid shares of the plaintiff exercisable at $0.20 on or before 31 December 2011, being Appendix 2 and 3 respectively to the Scheme Booklet (which incorporates the Explanatory Statement) which is included in Annexure "GL-6" to the affidavit of George Lasarou sworn on 15 October 2009 and substituted with the Scheme Booklet filed on 18 December 2009 as well as agreed to by resolutions of the members and optionholders of the plaintiff at meetings of its members and optionholders on 28 January 2010, be approved. 2. That, in accordance with s 411(12) of the Corporations Act 2001 (Cth) ("CA"), the plaintiff is exempt from compliance with s 411(11) CA. 3. An office copy of this order be lodged with the Australian Securities and Investments Commission within 14 days. 4. That, pursuant to s 411(1) CA, these orders have effect from the date of this order. 5. Liberty to apply. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.