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[2021] WASC 314
General information, not legal advice.
Supreme Court of WA
2021-09-16
Hill J
Original judgment source is linked above.
1 The plaintiff, Galaxy Resources Ltd (Galaxy), applies for orders approving a proposed scheme of arrangement (Scheme). The background to the matter is set out in the judgment I delivered following the first court hearing.[1] At the first court hearing on 2 July 2021, I made orders for the Scheme meeting to be convened (Orders). The Scheme meeting was scheduled to be held on 6 August 2021.
2 The Scheme meeting was convened and held on 6 August 2021, both in person and electronically. At the meeting, the resolution was passed by the requisite statutory majorities.
3 1,926 shareholders were present at the Scheme meeting in person and by proxy, comprising approximately 7.31% of shareholders by number. 96.94% of shareholders who voted at the meeting were in favour of the resolution. 98.69% of votes cast on the Scheme resolution were cast in favour of the resolution.
4 This matter came back before me for the second court hearing on 13 August 2021.
5 In addition to the affidavits that were relied upon at the first court hearing, Galaxy relied on the following additional affidavits:
(a) a fourth affidavit of Jacob Ronald Carmody filed 9 August 2021, a solicitor employed by Ashurst, the solicitors for Galaxy, attaching the final Scheme booklet, confirming the lodgement of court documents with ASIC and annexing the advertisements of the second court hearing published in The Australian and The West Australian newspapers;
(b) an affidavit of Phoebe Jye Lee filed 10 August 2021, the investor relations and corporate affairs manager of Galaxy, regarding the availability of the Scheme booklet and notice of meeting for inspection by shareholders on Galaxy's website;
(c) a second affidavit of Martin Ronald Rowley filed 10 August 2021, the chairperson of the Scheme meeting, providing a report on the conduct and results of the Scheme meeting;
(d) an affidavit of Oliver James Bampfield filed 10 August 2021, the managing director of Lumi Technologies Pty Ltd (Lumi), who provided the online platform for the Scheme meeting, in respect of the conduct of the meeting on the online platform;
(e) an affidavit of Joe-an Valenzuela Sarmiento filed 11 August 2021, a mail operator at Computershare Communication Services Pty Ltd (Computershare), the share registry for the plaintiff, in relation to the preparation of Shareholder packs (comprising personalised materials for the Scheme meeting and a reply prepaid envelope) for postal despatch to shareholders;
(f) an affidavit of Andrew Jonathon Ahyee filed 11 August 2021, a day shift mail team leader at Computershare, in relation to the preparation and mailing of hardcopy Shareholder packs to shareholders who had not elected to receive the Scheme materials by email;
(g) an affidavit of Lalit Singla filed 11 August 2021, a lodgement clerk at Computershare, in relation to the physical despatch of the Shareholder packs to shareholders, including those shareholders where electronic despatch resulted in a bounce-back;
(h) an affidavit of Siriwan Wehbe filed 11 August 2021, a mail operator employed by Computershare, in relation to the assembly of Shareholder packs;
(i) an affidavit of Aasish Joshi filed 11 August, an afternoon mail team leader at Computershare, regarding the preparation of Shareholder packs;
(j) an affidavit of Wendy Turner filed 11 August 2021, a relationship manager at Computershare, in respect of the role of Computershare in the Scheme meeting and the calls received by the technical support line;
(k) an affidavit of Emilia Varga filed 11 August 2021, client support - issuer service at Computershare, in relation to the electronic and hardcopy despatch of Scheme materials to shareholders and the reports generated by Computershare in relation to shareholders where electronic despatch resulted in a bounce-back and shareholders who purchased shares in Galaxy after Shareholder packs were despatched. Ms Varga also gave evidence regarding the appointment of proxies and the processing of proxy forms by Computershare;
(l) a fifth affidavit of Mr Carmody filed 11 August 2021. Mr Carmody's fifth affidavit attached a letter deed dated 29 July 2021 amending the Merger Implementation Deed (MID) between Galaxy and Orocobre;
(m) an affidavit of Catherine Jane Napper filed 12 August 2021, an account director at Georgeson Shareholder Communications Australia Pty Ltd (Georgeson), relating to the role of Georgeson in managing the Galaxy Scheme website, the information line for Galaxy shareholders and the communications program which proactively contacted shareholders about the Scheme; and
(n) a sixth affidavit of Mr Carmody filed 13 August 2021, attaching various ASX announcements, a letter from ASIC confirming ASIC had no objection to the proposed Scheme under s 411(7)(b) of the Act and the certificates executed by Galaxy and Orocobre respectively confirming each of the conditions precedent had been satisfied or waived in respect of the Scheme (apart from the orders sought at the second court hearing).
6 These additional affidavits address the matters Galaxy was required to establish at the second court hearing.
Legal Principles in respect of the Scheme Approval
7 The approval of the proposed Scheme pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), or the second court hearing, is the third stage of approval for a scheme of arrangement. The second stage is the approval of the Scheme by the requisite statutory majorities, which occurred at the Scheme meeting.
8 At the second court hearing, the court has two tasks:[5]
(a) to ensure that all statutory and procedural requirements have been satisfied. This includes confirming that:[6]
(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.[7] 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.[8]
10 The factors that inform the court's discretion whether or not to approve a scheme are:[9]
(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;
(g) whether ASIC has an objection to the scheme; and
Disposition Compliance with statutory and procedural requirements
11 I am and was satisfied, on the basis of the additional affidavits that were filed by Galaxy, that:
(a) a copy of the Orders were lodged with ASIC on 2 July 2021;[10]
(b) a copy of the Scheme booklet that was approved for distribution by the court at the first court hearing was lodged with ASIC and registered on 2 July 2021;[11]
(c) the Scheme booklet was despatched to shareholders in accordance with the Orders;[12]
(d) the Scheme meeting was convened and held on 6 August 2021 in accordance with the Orders;[13]
(e) the Scheme was approved by the requisite statutory majorities;[14]
(f) notice of the second court hearing was given by way of advertisement in The Australian and The West Australian newspapers on 4 August 2021;[15] and
(g) ASIC informed Galaxy on 12 August 2021, pursuant to s 411(17)(b) of the Act, that is has no objection to the proposed Scheme.[16]
12 Counsel for the plaintiff drew my attention to four matters in relation to the Scheme meeting.
13 First, counsel drew my attention to the platform used by Galaxy for conducting the Scheme meeting. Shareholders could attend the Scheme meeting in person or virtually. The online component of the meeting was hosted through the 'Lumi Online AGM System'. Mr Bampfield, the managing director of Lumi, gave evidence regarding the operation of the Lumi Online AGM System and how the system allowed shareholders to attend the Scheme meeting virtually and vote.[17]
14 42 shareholders attended the Scheme meeting virtually through the Lumi Online AGM System.[18] The Lumi and Computershare systems were utilised to tabulate the votes and manage the poll requirements for the Scheme meeting. No issues arose in relation to the Scheme meeting on the Lumi platform.
15 The second matter was the voter turnout at the Scheme meeting. Of the total 505,669,628 Galaxy shares on issue, 272,385,428 shares were voted at the Scheme meeting, comprising approximately 53.87% of the Galaxy shares on issue.[19] However, only 1,926 of Galaxy's 26,351 eligible shareholders voted at the Scheme meeting, representing only 7.31% of eligible shareholders by number.[20]
16 As was stated by Farrell J in Re TriAusMin Limited [No 2]:[21]
It is inappropriate to assume (in the absence of complaint) that shareholders who did not vote either did not have notice of the meeting or were silent in protest of the scheme; apathy should not be presumed to be antagonism.
Nonetheless it does call for consideration to ensure that the vote [was] not unrepresentative, since the court retains the discretion to withhold its approval in that case. It is relevant to consider whether members have been deterred from attending or voting at the meeting. (footnotes omitted)
17 Relatively low shareholder turnout does not prevent the court from making orders approving a scheme of arrangement.[22]
18 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 shareholders, in itself, suggested there had been an error in the despatch of the Scheme booklet nor the Supplementary Scheme booklet, nor that this should prevent the court from making orders under s 411(4)(b) of the Act. In this respect, I have had regard to the following matters:
(a) the numbers of shareholders with unmarketable parcels of shares is not insignificant. As at 23 June 2021, 4.02% of shareholders held less than $500 worth of shares.[23] It is a reasonable inference that for many of these shareholders, the Scheme was of relatively minor commercial interest;
(c) the shareholders who voted at the Scheme meeting overwhelmingly voted in favour of the Scheme;
(d) there was no evidence which suggested any irregularity in the despatch of the Scheme booklet; and
(e) there was no evidence of any issue which would have deterred shareholders from voting at or attending the Scheme meeting.
19 Third, counsel drew to my attention the result of the poll conducted at the Scheme meeting, specifically the issue that the results were announced after the meeting was closed. Mr Rowley was the Chairperson of the Scheme meeting. Mr Rowley deposed that at the meeting, he advised that the results of the poll would be published online via an announcement made on the ASX platform and published on Galaxy's website once the votes were counted after the meeting.[26] He then declared the meeting closed (at approximately 10.15 am), subject to the conclusion of the poll.[27]
21 The question of whether a scheme resolution is passed at a meeting of shareholders when the result of the poll is not announced at the meeting but the meeting is told the result will be the subject of an ASX announcement, which subsequently occurs, was considered by Barrett J in Re MAC Services Group Ltd. Barrett J concluded at [22]:[29]
... Rather, it should be accepted that the process of a poll, of its nature, may extend beyond the time at which the persons making up the meeting at which it is demanded and directed cease to be together and, if the poll has been directed in such a way that the result can only crystallise after that time, the meeting is to be regarded as continuing until the result does crystallise. In using the word 'crystallise', I deliberately avoid the choice between ascertainment of the result and formal declaration of the result (see, as to this distinction in the case of election of officers, R v Coaks [1854] EngR 137; (1854) 3 El & Bl 249; 118 ER 1133; Lynch v McGrane (1965) 7 FLR 188). Ascertainment will always precede declaration but the important factor is, to my mind, completion of the process, as directed, so that the result is manifested in a way appropriate to the circumstances. Romer LJ, in his concurring judgment in Holmes v Keyes, said (at 217) that the tenure of the directors elected did not begin 'until the result of the poll has been made known', this being the form of words also preferred by Holland J in Ryan v South Sydney Junior Rugby League Club Ltd (1974) 3 ACLR 486 at 490.
22 I agree with his Honour's reasoning. No issue arises in the present case concerning the manner in which the poll was conducted or announced.
24 Accordingly, I was and am satisfied that all statutory pre-conditions have been met. I now turn to consider the discretionary considerations.
25 There is no evidence that the shareholders voted for an improper purpose. I am satisfied on the evidence that has been filed by Galaxy 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 Orocobre of all Galaxy shares on issue, a transaction of a kind ordinarily approved by the court. It does not involve any novel treatment of rights;
(b) the independent expert opined that in the absence of an alternate proposal (and none has since emerged), the Scheme is in the best interests of shareholders; and
(c) neither ASIC nor any shareholder appeared at the second court hearing to object to approval of the proposed Scheme.
26 At the first hearing, based on the evidence before the court, 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.
27 Nothing has occurred since the date of the first hearing to change this view. The shareholders who voted at the meeting overwhelmingly supported the proposed Scheme. No shareholder appeared to oppose the orders sought at the second court hearing. 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 shareholders.
All relevant matters brought to the court's attention
28 At the first court hearing, counsel for Galaxy drew my attention to a number of matters. These are summarised in Re Galaxy Resources Ltd at [43] - [80].
29 There were three further matters that counsel drew my attention to at the second court hearing.
30 First, the despatch of the Scheme materials to those shareholders who acquired Galaxy Shares after the cut-off date. Arrangements were made for Computershare to despatch the Scheme materials to these shareholders. Scheme materials were despatched to 844 shareholders in tranches on 14 July 2021,[32] 21 July 2021,[33] and 28 July 2021.[34]
31 Second, the shareholder information line run by Georgeson. The information line was used not only to answer calls from shareholders or other parties about the proposed Scheme, but also to make calls to shareholders to ensure they were aware of the Scheme meeting and the relevant dates for lodging proxy forms.[35] Georgeson employees used canvassing scripts for both answering calls and making calls to shareholders.[36] The scripts were consistent with the information in the Scheme booklet and it was stressed that the scripts should not be departed from.
32 Counsel who appeared for Galaxy indicated that a motivation for the canvassing of shareholders was to encourage shareholders to vote at the Scheme meeting.[37] Given the extremely low attendance at the previous general meetings of shareholders,[38] this is both understandable and, given the turnout at the Scheme meeting as compared to attendance at previous meetings, ultimately successful.
33 I have reviewed the scripts used to make calls to shareholders of Galaxy. There is nothing in the content of these scripts that causes me any concern. The scripts are consistent with the disclosure in the Scheme booklet and do not contain any new information or any information that is misleading. However, in my view, it would be preferable for any intention or proposal to canvass shareholders to be drawn to the attention of the court at the first court hearing and approval sought as to the proposed script.[39] This is consistent with the views previously expressed by the courts that where a meeting is convened under s 411 of the Act, only information approved by the court should be provided to members.[40] In this case, given the scripts used by Georgeson are consistent with the information disclosed in the Scheme booklet, I do not consider this is a reason to refuse approval of the Scheme.
34 Third, for a short time, there was an issue with accessing the online Scheme materials on the Galaxy website. On 3 August 2021, the plaintiff became aware the link to the online Scheme materials on Galaxy's website no longer appeared.[41] Galaxy investigated the matter, determined the link was inadvertently removed on 2 August 2021[42] and immediately reinstated the link.[43]
35 I accept the online Scheme materials were unavailable on the Galaxy website for only a short period and that in the interim, the Scheme booklet could be separately accessed online via the ASX announcements page on the Galaxy website and Galaxy Scheme website.[44] On this basis, I do not consider there could be any prejudice to shareholders, and there is no evidence of this, or that this is a reason to refuse approval of the Scheme.
36 At the first court hearing, based on the evidence before the court, I was satisfied the draft Scheme booklet would provide full and fair disclosure to shareholders.
37 The additional affidavit evidence filed by Galaxy establishes that the Scheme booklet despatched to shareholders was in the form approved for distribution by the court. Nothing has arisen to suggest there has not been full and fair disclosure of all information which was material to the decision of shareholders prior to them voting on the Scheme.
38 There was no evidence that any minority has been oppressed.
Satisfaction of s 411(17) of the Act and ASIC's view
39 ASIC has provided a written statement to the effect that it does not object to the Scheme pursuant to s 411(17)(b) of the Act.[45] As a result, the requirements of s 411(17) have been satisfied. In any event, having regard to the nature of the proposed transaction, it cannot be said the Scheme was proposed to avoid the operation of ch 6 of the Act.
40 There is no evidence before the Court that the proposed Scheme offends any aspect of public policy. Given the nature of the proposed Scheme, it is my view that it could not be sensibly suggested that the Scheme offends public policy.
41 At the hearing before me, I was satisfied that the substantive and procedural requirements under s 411(1) of the Act had been satisfied and that I should approve the proposed Scheme.
42 For these reasons, at the conclusion of the hearing on 5 May 2021, I made orders in terms of 'Annexure A' to this judgment in respect of the Scheme.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
[1] Re Galaxy Resources Ltd [2021] WASC 277.
[2] Second affidavit of Martin Ronald Rowley filed 10 August 2021 [34].
[3] Second affidavit of Martin Ronald Rowley filed 10 August 2021 [32].
[4] Second affidavit of Martin Ronald Rowley filed 10 August 2021 [32].
[5] Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [2018] WASC 357 [12].
[6] Re International Goldfields Ltd [2004] WASC 112 [7].
[7] Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [13]; Re Seven Network Ltd [No 3] [2010] FCA 400; (2010) 267 ALR 583 [31].
[8] Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [13]; Re Seven Network Ltd [No 3] [32] - [33].
[9] Re Seven Network Ltd [No 3] [35] - [40], [50], [52].
[10] Fourth affidavit of Jacob Ronald Carmody filed 9 August 2021 [6].
[11] Fourth affidavit of Jacob Ronald Carmody filed 9 August 2021 [6], 'JRC-33'.
[12] Affidavit of Emilia Varga filed 11 August 2021 [20] - [29]; Affidavit of Aasish Joshi filed 11 August 2021 [6] - [18]; Affidavit of Andrew Jonathon Ahyee filed 11 August 2021 [6] - [13]; Affidavit of Siriwan Wehbe filed 11 August 2021 [6] - [8]; Affidavit of Lalit Singla filed 11 August 2021 [6] - [8]; Affidavit of Joe-an Valenzuela Sarmiento filed 11 August 2021 [6].
[13] Second affidavit of Martin Ronald Rowley filed 10 August 2021 [10] - [11]; Affidavit of Wendy Turner filed 11 August 2021 [9]; Affidavit of Oliver James Bampfield filed 10 August 2021 [6].
[14] Second affidavit of Martin Ronald Rowley filed 10 August 2021 [32].
[15] Fourth affidavit of Jacob Ronald Carmody filed 9 August 2021 [17] - [19], 'JRC-39', 'JRC-40'.
[16] Sixth affidavit of Jacob Ronald Carmody filed 13 August 2021 [13] - [14], 'JRC-45'.
[17] Affidavit of Oliver James Bampfield filed 10 August 2021.
[18] Affidavit of Oliver James Bampfield filed 10 August 2021 [34].
[19] Second affidavit of Martin Ronald Rowley filed 10 August 2021 [34].
[20] Second affidavit of Martin Ronald Rowley filed 10 August 2021 [34].
[21] Re TriAusMin Limited [No 2] [2014] FCA 833 [10] - [11].
[22] 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] [9] (10.94% of shareholders holding 52.9% of shares); Re Decimal Software Limited [No 2] [2018] FCA 2040 [15] - [16] (5.21% of shareholders holding 52.85% of shares); Re Pensana Metals Limited [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).
[23] First affidavit of Martin Ronald Rowley filed 25 June 2021 [41], 'MMR-2'; Submissions for first court hearing [35], [42].
[24] Second affidavit of Martin Ronald Rowley filed 10 August 2021 [34].
[25] Being approximately 0.25% at the 2020 annual general meeting and 0.039% at the 2021 annual general meeting; Affidavit of Wendy Turner filed 11 August 2021 [6].
[26] Second affidavit of Martin Ronald Rowley filed 10 August 2021 [27].
[27] Second affidavit of Martin Ronald Rowley filed 10 August 2021 [28]; Affidavit of Oliver James Bampfield filed 10 August 2021 [43].
[28] Re Asaleo Care Limited (No 2) [2021] FCA 636 [26] - [28]; Re CSG Limited (No 2) [2020] NSWSC 39 [6] - [8]; Re National Australia Bank Ltd [2016] VSC 62 [56]; Re MAC Services Group Ltd [2010] NSWSC 1474.
[30] Affidavit of Wendy Turner filed 11 August 2021 [17].
[31] Affidavit of Wendy Turner filed 11 August 2021 [17] - [20], 'WT-7'.
[32] Affidavit of Aasish Joshi filed 11 August 2021 [24] - [28]; Affidavit of Lalit Singla filed 11 August 2021 [12] - [14].
[33] Affidavit of Aasish Joshi filed 11 August 2021 [29] - [33]; Affidavit of Lalit Singla filed 11 August 2021 [15] - [17].
[34] Affidavit of Aasish Joshi filed 11 August 2021 [34] - [38]; Affidavit of Lalit Singla filed 11 August 2021 [18] - [20].
[35] Affidavit of Catherine Jane Napper filed 12 August 2021 [16] - [21].
[36] Affidavit of Catherine Jane Napper filed 12 August 2021 [21] - [23], 'CJN-5', 'CJN-6', 'CJN-7', 'CJN-8', 'CJN-9'.
[38] Being approximately 0.25% at the 2020 annual general meeting and 0.039% at the 2021 annual general meeting; Affidavit of Wendy Turner filed 11 August 2021 [6].
[39] As was the case in Re Dragontail Systems Ltd [2021] FCA 834, Order 6 and 7.
[40] Re Amcom Telecommunications Ltd [No 3] [2015] FCA 596 [15].
[41] Affidavit of Phoebe Jye Lee filed 10 August 2021 [12].
[42] Affidavit of Phoebe Jye Lee filed 10 August 2021 [12].
[43] Affidavit of Phoebe Jye Lee filed 10 August 2021 [12] - [14].
[44] Affidavit of Phoebe Jye Lee filed 10 August 2021 [9].
[45] Sixth affidavit of Jacob Ronald Carmody filed 12 August 2021 'JRC-45'.
(1965) 7 FLR 188
(2010) 267 ALR 583