RE BARDOC GOLD LTD; EX PARTE BARDOC GOLD LTD [No 2] [2022] WASC 113 (7 April 2022)

4 The reasons which ground the orders made at the first court hearing are set out in Re Bardoc Gold Ltd; Ex parte Bardoc Gold Ltd [2022] WASC 94. These reasons should be read with and as if they incorporate the earlier reasons.

5 On 30 March 2022, the meeting was convened to consider the proposed scheme of arrangement whereby St Barbara Ltd would acquire 100% of the share capital of Bardoc. Bardoc shareholders were asked to vote on the following resolution:[1]

That pursuant to and in accordance with section 411 of the Corporations Act, the scheme of arrangement proposed between Bardoc and Bardoc Scheme Shareholders, as contained in and more particularly described in the document of which the notice convening this meeting forms part is approved (with or without modifications as approved by the Supreme Court of Western Australia).

6 At the meeting, the resolution was passed by the requisite statutory majorities for the purposes of s 411(4)(a)(ii) of the Corporations Act.

7 384 shareholders were present at the scheme meeting in person and by proxy. 95.77% of shareholders who voted at the meeting were in favour of the resolution. 98% of votes cast on the scheme resolution were cast in favour of the resolution.[2]

8 The second court hearing took place on 1 April 2022. Counsel for St Barbara appeared in support of the application. The Australian Securities and Investments Commission (ASIC) did not seek to be heard.

9 After hearing from counsel, I made orders in accordance with s 411(4) of the Corporations Act to approve the scheme. My reasons are set out below.

10 In addition to the affidavits that were read at the first court hearing, Bardoc filed seven affidavits prior to the second court hearing and all were read in support of the application. They were as follows.

11 First, the affidavit of Suzanne Thelma Zollo sworn on 24 March 2022 which attached documents SZ‑1 to SZ‑15. Ms Zollo is the manager of Specialist Mail Services and deposed to overseeing the preparation and postal distribution of packs of personalised materials for the scheme meeting to Bardoc shareholders. Ms Zollo also supervised the postal dispatch of materials to new Bardoc shareholders, and to shareholders where electronic dispatch had bounced back. The attachments included email communications from Mr Russell Hardwick, company secretary of Bardoc, concerning the final scheme booklet; email communications from Ms Zollo approving printing of the materials for the scheme meeting; email communications concerning distribution of scheme materials to new Bardoc shareholders and to shareholders in circumstances where electronic dispatch had bounced back; and Australia Post 'e‑LMS' mailing statements.

12 The second was the affidavit of Anais Marie Colas sworn on 25 March 2022 which attached documents AC‑1 to AC‑17. Ms Colas is an operations assistant at Specialist Mail Services and deposed to the preparation and distribution of packs of personalised materials for the scheme meeting to Bardoc shareholders, new Bardoc shareholders, and shareholders where electronic dispatch had bounced back. The attachments included email communications regarding distribution of materials to new Bardoc shareholders and to shareholders where electronic dispatch had bounced back; and Australia Post 'e‑LMS' mailing statements.

13 The third was the affidavit of Danielle Maree Janette Petch affirmed on 25 March 2022 which attached documents DP‑1 to DP‑9. Ms Petch is a project coordinator of issuer services at Computershare Investor Services Pty Ltd (Computershare), the share registry of Bardoc, and deposed to the electronic dispatch of notices of access, proxy forms and opt-in notices to existing and new Bardoc shareholders. The attachments included an email communication from Mr Russell Hardwick, company secretary of Bardoc, confirming instructions to compile and dispatch electronic materials for the scheme meeting; a sample copy of the formatted version of the email notification sent to Bardoc shareholders; a copy of the email received post‑dispatch confirming the number of email notifications received; a bounce back report; email correspondence between Computershare and Specialist Mail Services; and new Bardoc shareholder reports.

14 The fourth was the third affidavit of Russell Paul Hardwick, company secretary of Bardoc, sworn on 31 March 2022 which attached documents RPH‑1 to RPH‑11. Mr Hardwick's third affidavit concerned the publication of the notice of the second court hearing, the receipt and recording of proxies, requests for documents, and arrangements for the scheme meeting. The attachments included copies of the notices placed in The West Australia and The Australian; screenshots of the virtual meeting and the meeting slides; a copy of Bardoc's ASX announcement detailing various documents sent to shareholders; and a copy of Bardoc's ASX announcement detailing the results of the scheme meeting.

15 The fifth was the second affidavit of Derek Noel La Ferla, lawyer and partner of Lavan, affirmed on 31 March 2022 which attached documents DF‑1 to DF‑3. Mr La Ferla's second affidavit outlined the conduct of the scheme meeting in his capacity as chairperson. A copy of the minutes of the scheme meeting and the scheme poll report were attached to his affidavit.

16 The sixth was the affidavit of Nicole Brooke Lewis affirmed on 31 March 2022 which attached documents NL‑1 to NL‑6. Ms Lewis is relationship manager at Computershare and deposed to the dispatch of electronic opt‑in notices to unmarketable parcel shareholders, the receipt of proxies and the result of the scheme meeting poll. The attachments to Ms Lewis' affidavit included a sample copy of the email concerning the opt‑in notice to unmarketable parcel shareholders; a copy of the proxy report of the scheme meeting dated 30 March 2022; a copy of the shareholders report dated 28 March 2022; and a copy of the poll report.

17 The seventh was the third affidavit of James Ian Ferguson, lawyer and associate at Steinepreis Paganin, sworn on 1 April 2022 which attached documents JIF-1 to JIF‑10. Mr Ferguson deposed to the service of court documents on ASIC, receipt of a communication from ASIC pursuant to s 411(17)(b) of the Corporations Act, and the satisfaction or waiver of the conditions precedent to the implementation of the scheme. Mr Ferguson also confirmed that he had not received any objections to the scheme, nor was he aware of any objections having been raised. The attachments included a copy of conditions precedent certificates executed by Bardoc and St Barbara; a copy of the lodgment confirmations received from ASIC following filing of the orders from the first court hearing; communication from ASIC confirming registration of the scheme booklet; and communication from ASIC for the purposes of s 411(17)(b) of the Corporations Act.

18 These additional affidavits address the matters Bardoc was required to establish at the second court hearing.

19 As noted above, approval of the proposed scheme pursuant to s 411(4)(b) of the Corporations Act at the second court hearing is the third stage of approval for a scheme of arrangement. Justice Hill in Re Petronor E&P Ltd; Ex parte Petronor E&P Ltd [No 2] [2022] WASC 81 recently summarised the legal principles relevant at the second court hearing, which I reproduce below and applied in determining Bardoc's application:

[8] At the second court hearing, the court has two tasks:

(a) to ensure that all statutory and procedural requirements have been satisfied. This includes confirming that:

(i) the meeting was convened and held in accordance with the court's earlier orders;

(ii) the resolutions were passed with the requisite statutory majorities; and

(iii) the plaintiff otherwise complied with the court's earlier orders;

(b) to determine, in the exercise of the court's discretion, whether to approve the proposed arrangement.

[9] The court has a discretion to approve a scheme under s 411(4)(b) of the Act and is not bound to approve a scheme just because the court previously made orders for the convening of a meeting or because the statutory majorities have been achieved. That said, the court will usually approach the task on the basis that shareholders are better judges of what is in their commercial interests than the court.

[10] The factors that inform the court's discretion whether or not to approve a scheme are:

(a) whether the members have voted in good faith and not for an improper purpose;

(b) whether the proposal 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;

(c) 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;

(d) whether there has been full and frank disclosure of all information material to the members' decision;

(e) whether minority shareholders would be oppressed by the scheme;

(f) whether the court is satisfied that the scheme has not been proposed to avoid ch 6 of the Act;

(e) whether ASIC has an objection to the scheme; and

(f) whether the scheme offends public policy.

(footnotes omitted)

Disposition Compliance with statutory and procedural requirements

20 On the basis of the additional affidavits filed by Bardoc, I was and am satisfied that:

(a) a copy of the orders from the first court hearing was formally lodged with ASIC on 22 February 2022;[3]

(b) a copy of the scheme booklet as approved for distribution by the court at the first court hearing was lodged with ASIC and registered on 23 February 2022;[4]

(c) the scheme booklet was dispatched to shareholders in accordance with the orders from the first court hearing.[5] Bardoc provided a detailed outline of this process;

(d) the scheme meeting was convened and held on 30 March 2022, in accordance with the orders of the first court hearing;[6]

(e) Derek Noel La Ferla acted as Chairperson of the scheme meeting;[7]

(f) the proposed scheme was approved by the requisite statutory majorities by Bardoc shareholders;[8]

(g) notice of the second court hearing was given by way of advertisement in The West Australian newspaper on 10 March 2022 and The Australian newspaper on 10 March 2022;[9]

(h) the scheme booklet and notice of the meeting was available for inspection by Bardoc shareholders on Bardoc's website and at Bardoc's registered office;[10] and

(i) pursuant to s 411(17)(b) of the Corporations Act, ASIC informed Bardoc on 1 April 2022 that it has no objection to the proposed scheme.[11]

21 In written and oral submissions, counsel for Bardoc drew my attention to two matters in relation to the scheme meeting.

22 First, the affidavit of Ms Lewis outlined the omission of the inclusion of opt‑in notices in email notifications sent on 28 February 2022 to Bardoc shareholders classified as unmarketable parcel shareholders. Ms Lewis deposed that she became aware of this issue on 17 March 2022 and instructed employees of Computershare to cause an email containing a personalised link to the opt‑in‑notice to be sent to all relevant email recipients. These emails were dispatched on 18 March 2022. A copy of a sample email containing the opt-in notice and the email dispatch confirmation were before the court at the second court hearing.[12]

23 The second matter was the voter turnout of the scheme meeting. Of the 289,119,938 total Bardoc shares on issue, 107,262,645 shares were voted at the scheme meeting, representing approximately 37.10% of the total number of voting shares.[13] However, only approximately 8.03% of all eligible Bardoc shareholders by number voted at the scheme meeting.[14]

24 As noted by counsel for Bardoc, Farrell J in GetSwift Ltd [2020] FCA 1733 considered low voter turnout in respect to a scheme meeting, stating:[15]

While the turn-out at the scheme meeting by number of shareholders was low, the Court is satisfied that all necessary measures were taken to draw the scheme booklet and notice of the scheme meeting to the attention of GetSwift shareholders and there is nothing in the evidence that suggests that there was any error in the printing or despatch of the scheme booklet which might have caused voter turnout to be low. There is no reason to infer that there was a protest vote and such apathy should not be presumed to be antagonism. (footnotes omitted)

25 It is well accepted that low shareholder turnout does not prevent the court from making orders approving a scheme of arrangement.[16]

26 I was and am satisfied that there was sufficient turnout at the scheme meeting. I do not consider that the low voter turnout by number of Bardoc shareholders suggested there has been an error in the dispatch of the scheme booklet, nor that this should prevent the court from making orders under s 411(4)(b) of the Corporations Act. In so concluding, I have had regard to the following:

(a) the number of Bardoc shareholders who voted at the scheme meeting, being approximately 8.03% of all eligible shareholders, exceeded the number of shareholders who voted at the two preceding annual general meetings of Bardoc;[17]

(b) a significant majority of shareholders (by number) who voted at the scheme meeting voted in favour of the scheme resolution;

(c) there was no evidence which suggested any irregularity in the dispatch of the scheme booklet that would have affected voter turnout;[18] and

(d) there was no evidence of any issue which would have deterred Bardoc shareholders from voting at or attending the scheme meeting.

27 Accordingly, I was and am satisfied that all statutory pre-conditions have been met. I now turn to consider the discretionary considerations.

28 There is no evidence that the Bardoc shareholders voted for an improper purpose. Further, I am satisfied on the evidence that the members voted in good faith and for a proper purpose as:

(a) the purpose of the proposed scheme is to effect the acquisition by St Barbara of all Bardoc shares on issue (with the Bardoc loan shares to be dealt with outside of the scheme), a transaction of a kind ordinarily approved by the court. The transaction does not involve any novel treatment of shareholder rights;

(b) the independent expert report opined that in the absence of an alternate proposal (and none has since emerged), the scheme is in the best interests of Bardoc shareholders; and

(c) neither ASIC nor any shareholder appeared at the second court hearing to object to approval of the proposed scheme.

29 Based on the evidence before the court at the first court hearing, I was satisfied that the proposed scheme was of such a nature that there was no apparent reason that it should not receive approval if the requisite voting majorities were achieved at the scheme meeting.[19]

30 Nothing has occurred since the date of the first hearing to change this view. The independent expert report opined that in the absence of an alternate proposal, the scheme is in the best interests of Bardoc shareholders. No alternate proposal emerged. The shareholders of Bardoc who voted at the scheme meeting overwhelmingly supported the proposed scheme and no Bardoc shareholder appeared to oppose the orders sought at the second court hearing.

31 I was and am satisfied that the proposed scheme is fair and reasonable and is a scheme that sensible business people might consider to be of benefit to the shareholders of Bardoc.

All relevant matters brought to the court's attention

32 At the first court hearing, counsel for Bardoc drew my attention to a number of matters, including conditions precedent of the scheme; potential performance risk; exclusivity provisions; a break fee provision; a warranty provision; director recommendations; and liability when acting in good faith. These are summarised in Re Bardoc Gold Ltd; Ex parte Bardoc Gold Ltd at [95] ‑ [137].

33 The implementation of the scheme was subject to the satisfaction or waiver of various conditions precedent prescribed in cl 3.1 of the scheme implementation deed.[20] By the provision of conditions precedent certificates executed by both Bardoc and St Barbara and by the grant of court approval I was and am satisfied all conditions precedent have been met.

34 Based on the evidence before the court at the first court hearing, I was satisfied the proposed scheme booklet contained the prescribed information and provided proper disclosure to Bardoc shareholders.[21]

35 The additional affidavit evidence read by Bardoc established that the scheme booklet dispatched to shareholders was in the form approved for distribution by the court. Nothing has arisen to suggest there has not been proper disclosure of all information which was material to the decision of Bardoc shareholders prior to voting on the scheme.

36 There was no evidence before the court that any minority has been oppressed.

Section 411(17) of the Corporations Act

37 Section 411(17) of the Corporations Act makes the court's approval conditional on satisfaction of one of two alternative conditions. Section 411(17) provides as follows:

(17) The Court must not approve a compromise or arrangement under this section unless:

(a) it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6; or

(b) there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement;

but the Court need not approve a compromise or arrangement merely because a statement by ASIC stating that ASIC has no objection to the compromise or arrangement has been produced to the Court as mentioned in paragraph (b).

38 As observed by Vaughan J in Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [2018] WASC 357, production of a 'no objection' letter from ASIC pursuant to s 411(17)(b) is usually the end of the issue; the court then does not need to consider the s 411(17)(a) issue. However, a 'no objection' letter does not bring to the end the court's discretion.[22] His Honour observed that if for example the court were to find that a scheme had been proposed for the purpose of avoiding the operation of provisions within ch 6 of the Corporations Act, that might be considered in the exercise of the discretion to approve the scheme under s 411(4)(b).[23]

39 It is well accepted that significance ought to be attached to the ASIC 'no objection' letter given in the terms of ASIC Regulatory Guide 60 Schemes of Arrangement. The Regulatory Guide confirms that a primary consideration for ASIC is whether, having regard to the principles in s 602 of the Corporations Act, shareholders are adversely affected by the takeover being implemented by a scheme of arrangement rather than a takeover bid.[24] ASIC will only issue a 'no objection' letter if satisfied as to the disclosure and that there are no other reasons to oppose the scheme.[25]

40 ASIC provided a written statement on 1 April 2022 that it did not object to the scheme pursuant to s 411(17)(b) of the Corporations Act and did not intend to appear and make submissions at the second court hearing. A copy of that communication was before the court.[26]

41 As a result, the requirements of s 411(17) were satisfied. In any event, having regard to the nature of the proposed transaction, I was and am satisfied that it cannot be said the scheme was proposed to avoid the operation of ch 6 of the Corporations Act.

42 There was no evidence before the court that the proposed scheme offends any aspect of public policy. Given the nature of the proposed scheme, it was and is my view that it could not be sensibly suggested that the scheme offends public policy.

43 Finally, I note that Bardoc sought an exemption from s 411(11) of the Corporations Act.[27] This exemption has become ordinary practice for transactions of this kind.[28] Overall, I was and am satisfied there is no utility in requiring the court's orders approving the scheme to be annexed to Bardoc's constitution. It was and is appropriate in the circumstances to make the orders sought under s 411(12) of the Corporations Act.

44 Upon considering the additional affidavit evidence filed and read in support of the application, and upon considering the submissions made by counsel, I was satisfied that the substantive and procedural requirements of s 411(4) of the Corporations Act had been satisfied and that I should approve the proposed scheme.

45 The orders made at the conclusion of the second court hearing on 1 April 2022 are reproduced at sch A to these reasons.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[2] Second La Ferla affidavit par 18, DF-3; Lewis affidavit par 23, NL-6. See also the third Hardwick affidavit, RPH-11; Bardoc's submissions pars 3 - 4.

[3] Third Ferguson affidavit par 8, JIF-3.

[4] Third Ferguson affidavit par 9, JIF-4.

[5] Bardoc's submissions pars 31-37. See also the Zollo affidavit; the Colas affidavit; the Petch affidavit.

[6] Second La Ferla affidavit par 5; Bardoc's submissions pars 26-30.

[7] Second La Ferla affidavit par 6; Bardoc's submissions par 27.

[8] Second La Ferla affidavit par 18, DF-3; Bardoc's submissions par 3.

[9] Third Hardwick affidavit par 3, RPH-1.

[10] Third Hardwick affidavit par 3, RPH-1.

[11] Third Ferguson affidavit par 12, JIF-7.

[12] Lewis affidavit pars 5 - 8, NL-1, NL-2.

[13] Second La Ferla affidavit par 18, DF-3; Lewis affidavit par 23, NL-6.

[14] Third Ferguson affidavit pars 13 - 14; ts 21 (1 April 2022).

[16] See for example Re Foundation Healthcare Ltd [No 2] [2002] FCA 973; (2002) 43 ACSR 680 [22] (44.23% of shareholders voting); Re Rebel Sport Ltd [No 2] [2007] FCA 458 [6] (24.99% of shareholders holding 83.59% of shares) Re Avoca Resources Ltd [2011] FCA 208 [25] (11.49% of shareholders holding 72.38% of shares); Re Great Artesian Oil and Gas Ltd [No 2] [2008] FCA 1169 [3] (24.6% of shareholders voting); Re Straits Resources Ltd [No 2] [2011] FCA 47 [12] (10.8% of shareholders holding 74% of shares); Re Cortona Resources Ltd [No 2] [2013] FCA 302 [12] (17.5% of shareholders holding 45.2% of shares); Re Auzex Resources Ltd [No 2] [2012] QSC 101 [18] (9.75% of shareholders representing 42.3% of votes); Re TriAusMin Limited [No 2] [2014] FCA 833 [9] (10.94% of shareholders holding 52.9% of shares); Re Decimal Software Ltd [No 2] [2018] FCA 2040 [15] - [16] (5.21% of shareholders holding 52.85% of shares); Re Pensana Metals Ltd [2020] WASC 17 [12] (6.41% of shareholders holding 37.08% of shares); Re Zenith Energy Ltd [No 3] [2020] WASC 289 [18] (39% of shareholders holding 89.25% of shares); Re Saracen Mineral Holdings Ltd [No 2] [2021] WASC 32 [47] (9.50% of shareholders holding 75.46% of shares); Re CannPal Animal Therapeutics Ltd [No 2] [2021] WASC 83 [32] (6.63% of shareholders holding 55.46% of shares); Re Piedmont Lithium Ltd [No 3] [2021] WASC 173 (8.44% of shareholders holding 26.74% of shares); Re Galaxy Resources Ltd [No 2] [2021] WASC 314 (7.31% of shareholders holding 53.87% of shares); Re Nusantara Resources Ltd [2021] WASC 334 (29.79% of shareholders holding 59.16% of shares); Re Valmec Ltd [2021] WASC 420 (17.62% of shareholders holding 74.22% of shares); Re Swick Mining Services Ltd [2022] WASC 79 (6% of shareholders holding 60.23% of shares).

[17] Third Ferguson affidavit par 15, JIF-9; ts 21 (1 April 2022).

[18] This view was formed noting the dispatch error of opt-in notices, addressed in the Lewis affidavit.

[19] Re Bardoc Gold Ltd; Ex parte Bardoc Gold Ltd [140].

[20] Scheme implementation deed cl 3.1, annexed to the first Hardwick affidavit, RPH-1.

[21] Re Bardoc Gold Ltd; Ex parte Bardoc Gold Ltd [81] ‑ [90].

[22] Re Macquarie Private Capital A Ltd [2008] NSWSC 323; (2008) 26 ACLC 366 [29] - [30], as referenced in Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [18].

[23] Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [18], citing Re Coles Group (No 2) [2007] VSC 523; (2007) 215 FLR 411 [75] - [78].

[24] ASIC Regulatory Guide 60 Schemes of Arrangement [RG 60.16]; as noted in Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [19].

[25] ASIC Regulatory Guide 60 Schemes of Arrangement [RG 60.104]; as noted in Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [19].

[26] Third Ferguson affidavit par 12, JIF-7.

[28] Re Nusantara Resources Ltd [103].