RE NZURI COPPER LTD; EX PARTE NZURI COPPER LTD [2019] WASC 189 (5 June 2019)

1. Nzuri relied on 12 affidavits from nine deponents. Annexure 'A' to these reasons summarises the deponents, their relationship with Nzuri and Xuchen and the nature of the evidence in the affidavits. Based on that affidavit evidence I record the following matters.
2. Nzuri, formerly Regal Resources Ltd, was incorporated on 11 September 2003 and was admitted to the official list of the ASX on 23 June 2005. Nzuri's ordinary shares are listed for quotation. As at 21 May 2019 Nzuri had 295,905,492 ordinary shares on issue and 12,274,230 unlisted options.
3. Nzuri is a mining exploration company that focuses on the identification, acquisition, exploration and potential development of copper and cobalt projects in the Katangan copper belt of the Democratic Republic of the Congo (DRC).
4. Currently Nzuri has two major projects:

(1) the Kalongwe Copper-Cobalt Project - Nzuri's flagship development project located in the Lualaba province of the DRC; and

(2) the Fold and Thrust Belt Joint Venture Project (FTBJV) - this consists of five tenements contiguous to the Kalongwe coppercobalt deposit.

1. Xuchen is a wholly owned subsidiary of Chengtun.
2. Xuchen is a special purpose vehicle incorporated in the British Virgin Islands (BVI) for the sole purpose of acquiring the Nzuri shares. Chengtun is a diversified metal mining, trading and industrial group listed on the Shanghai Stock Exchange. Chengtun has existing operations in the DRC.
3. On 26 February 2019 Nzuri and Xuchen entered into the SID (attachment 'DJC-2' to the Second Carpenter Affidavit).
4. The consideration to be provided to Nzuri shareholders in accordance with the proposed scheme is 37 cents for each Nzuri share. The scheme thus represents a transaction valued at approximately $109 million.
5. As mentioned, the terms of the SID were announced on 27 February 2019. The announcement disclosed that Nzuri's management team had been in discussions with a number of parties to progress a funding structure for development of the Kalongwe Project. The acquisition proposal had come out of those discussions. The discussions dated back to 2017 and had included potential offtake, funding and other opportunities for strategic cooperation.
6. The materials before me record that the offer price of 37 cents per share represents a premium over the trading price for Nzuri shares on the ASX before 26 February 2019. The offer price is a 42% premium to the closing price on 26 February 2019. It is a 93% premium to the 30day volume weighted average price to 26 February 2019 and a 64% premium to the three month volume weighted average price to 26 February 2019.
7. Nzuri's directors unanimously recommend that its shareholders vote in favour of the scheme in the absence of a superior proposal. No superior proposal has emerged. In his first affidavit Mr Arnesen deposes that he is not aware of any basis to believe that any superior proposal will be forthcoming. The directors' recommendation is, however, subject to an independent expert opining that the scheme is in the best interest of the Nzuri shareholders. As will be seen, this has occurred.

1. By the proposed scheme Xuchen will acquire all the Nzuri shares on issue as at the date that the scheme is implemented (Scheme, cl 4.2, cl 5.1). The consideration for the acquisition of the shares is 37 cents per Nzuri share. The unlisted options stand outside the proposed scheme and are to be dealt with by private arrangement with each of the option holders (Scheme Booklet, pars 5.4, 9.3).
2. Nzuri and Xuchen have already entered into option cancellation deeds with each of the option holders of Nzuri options. Each Nzuri option holder has agreed to cancel its Nzuri options in exchange for a cash payment equal to the difference between the exercise price per option and the scheme consideration or, where the exercise price per option exceeds the scheme consideration, a nominal consideration of $1.
3. The option cancellation arrangements involve Xuchen making an additional payment of approximately $1.2 million.
4. If the scheme is implemented then Nzuri will become a wholly owned subsidiary of Xuchen and will be delisted from the ASX. However, the scheme will not become effective unless and until a number of conditions precedent are satisfied (Scheme, cl 2.1). This includes the satisfaction or waiver of numerous conditions precedent in cl 3.1 of the SID. Those conditions include the completed transfer of certain exploration permits of the FTBJV project and, if required, Australian, DRC and People's Replublic of China regulatory approvals (SID, cl 3.1(e), (f) and (g)). The nature of the various conditions precedent remaining to be satisfied are fully disclosed in the scheme booklet (Scheme Booklet, par 8.1).
5. Mr Arnesen has deposed that he is not aware of any basis to believe that any condition precedent will not be satisfied or waived by the necessary time.
6. The SID contemplates that Nzuri will obtain an independent expert report (IER). The IER has been prepared by BDO Corporate Finance Pty Ltd and verified by Mr Andrawes. In part the IER relies on a Technical Assessment and Valuation Report prepared by SRK Consulting Ltd in respect of the Kalongwe Project. Otherwise the IER employs a 'Sum-of-Parts' methodology.
7. Mr Andrawes opines that, in the absence of a superior proposal, the proposed scheme is fair and reasonable to Nzuri shareholders. Therefore, Mr Andrawes concludes that the scheme is in the best interests of the shareholders. In coming to that conclusion Mr Andrawes determines the valuation range for a Nzuri share on a controlling interest basis as being between 21.6 cents per share (low) to 30.9 cents per share (high). Accordingly, the scheme consideration of 37 cents is above the assessed valuation range as determined.
8. The basis of the valuation, and the methodology employed, is set out comprehensively in the IER.
9. I was provided with the draft scheme booklet as submitted to the Australian Securities and Investments Commission (ASIC) on 10 May 2019 (attachment 'MRA-1' to the First Arnesen Affidavit) and the various amendments that have been made to the document since then (attachment 'DJC-21' to the Second Carpenter Affidavit and attachment 'DJC-3' to the Third Carpenter Affidavit). At the hearing Nzuri relied on a final version of the draft scheme booklet dated 31 May 2019 (attachment 'DJC-20' to the Second Carpenter Affidavit) with minor additional alterations thereto.
10. The scheme booklet itself comprises sections as follows:
    • Important information.
    • Corporate directory.
    • Important dates and times.
    • Chairperson's letter.
    • How to vote.
    • Key considerations relevant to exercising your vote.
    • Frequently asked questions.
    • Overview of the scheme.
    • Information about Nzuri.
    • Information about BidCo (Xuchen).
    • Risks.
    • Taxation implications.
    • Key terms of the SID.
    • Additional information.
    • Glossary of defined terms.
    • Directors' authorisation.
11. The scheme booklet will be accompanied by substantial attachments which form part of the scheme booklet. These will include the final IER, the terms of the scheme of arrangement, a copy of the executed deed poll (see pars 51 to 53 below) and the notice of meeting to the Nzuri shareholders. The SID will not be included as an attachment. However, as previously mentioned, a section of the scheme booklet summarises the material terms of the SID.

1. I described the applicable legal framework for an application of the nature brought by Nzuri in Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd.[1] I do not intend to repeat what I stated in Re Wesfarmers Ltd. I adopt and will apply what I stated in Re Wesfarmers Ltd.
2. There is usually said to be six matters to be proved at this first stage of the process under s 411 of the Act. Those matters are that:

(1) The plaintiff is a part 5.1 body.

(2) The proposed scheme is a compromise or arrangement within the meaning of s 411 of the Act. Here, relevantly, the question is whether the proposed scheme is an 'arrangement'.

(3) The proposed scheme booklet will provide proper disclosure.

(5) The ASIC has had at least 14 days' notice of the proposed hearing date and has had a reasonable opportunity to examine the terms of the scheme and the scheme booklet and to make submissions.

(6) The various procedural requirements of the Act and the Supreme Court (Corporations)(WA) Rules 2004 (WA) have been met.

1. It is also necessary that the court is satisfied that the scheme is of such a nature and cast in such terms that, if it receives a statutory majority at the scheme meeting, the court would be likely to approve the scheme at a hearing of an application which is unopposed. This does not require me to descend into the commercial merits or demerits of Nzuri's proposed scheme. It is enough if the scheme is such that it would be open to the members of Nzuri to adopt. I need only consider whether the proposed scheme is one that sensible business people might consider to be of benefit to the members.

1. The formal matters that Nzuri had to prove are largely satisfied.
2. Nzuri is a company; it is therefore a pt 5.1 body. The proposed scheme constitutes an 'arrangement'. This type of share acquisition scheme has been approved by courts as an arrangement on numerous occasions.
3. By letter dated 29 May 2019 (attachment 'DJC-4' to the Third Carpenter Affidavit) the ASIC confirmed satisfaction of the service requirement and that it had been provided with the reasonable opportunity required under s 411(2). The ASIC also gave notice that it did not propose to appear to make submissions or intervene to oppose the scheme at the first hearing.
4. For reasons that I come to, I did not make orders appointing a chairperson or alternate chairperson of the scheme meeting. Formal requirements in that regard remain outstanding. Otherwise the various procedural requirements for making the orders were all attended to in evidence.

1. On the materials there is nothing to suggest that the proposed scheme is unlawful or not properly proposed. There are no obvious flaws in the scheme such that it would be inappropriate for it to be submitted to Nzuri's shareholders for their consideration.
2. No class issue arose. All shareholders are being treated equally and comprise a single class. To the extent that, as will be seen, two executive directors - Mr Arnesen and Mr Smits - obtain a collateral benefit should the members approve the scheme, that arises outside their (Messrs Arnesen's and Smits') rights and entitlements as members and does not, in my view, mean that those two directors comprise a separate class qua shareholders.

1. I have read through the initial draft of the scheme booklet (as provided to the ASIC) and considered the various amendments made to the draft which are now reflected in the final scheme booklet. I was and am satisfied, to the necessary prima facie level given the interlocutory nature of the application before me, that there will be proper disclosure as to the effect of the proposed scheme and the material considerations to which shareholders ought to have regard.
2. I have been provided with the communications between the ASIC and Nzuri's legal representatives consequential upon the ASIC's review of the draft scheme booklet. This resulted in a number of changes to the scheme booklet to enhance disclosure.
3. In particular, the ASIC sought, and Nzuri made, additional disclosures as to:
   • the nature and quantum of directors' benefits;
   • the loan agreement between Nzuri and Xuchen; and
   • the independent expert's assessment of the value of the Kalongwe Project.
4. Additionally, following my initial review of the draft scheme booklet, I raised - through my Associate - other disclosure issues. This too saw a number of changes to the draft scheme booklet (predominantly in the chairperson's letter and the FAQs section). While the contents of the scheme booklet remain a matter for Nzuri, I am satisfied that Nzuri has sought to supplement, and provide full disclosure, of matters within the scheme booklet that were of concern to me following my initial review of the draft scheme booklet.
5. As to the due diligence and verification process undertaken by Nzuri and Xuchen, I had regard to, and accept, the evidence given by Mr Arnesen (at pars 48 to 62 of his first affidavit) and Ms Zhong (at pars 10 to 24 of her affidavit). In substance:

(1) Nzuri has undertaken a process of due diligence and verification to verify the accuracy of statements attributable to Nzuri in the scheme booklet.

(2) A similar process has been undertaken to verify the statements attributable to Xuchen and Chengtun.

(3) Appropriate steps have been taken to satisfy Nzuri and Xuchen (and by extension Chengtun) that the scheme booklet does not omit any material information.

1. The directors of Nzuri have resolved to approve the scheme booklet in its final form.
2. Otherwise, as to disclosure, based on the checklist provided by counsel for Nzuri I was satisfied that the scheme booklet contained the prescribed information in accordance with s 412(1)(a)(ii) of the Act and Sch 8 of the Corporations Regulations 2001 (Cth) (as modified by the ASIC's letter dated 29 May 2019 in attachment 'DJC-4' to the Third Carpenter Affidavit).

1. In written and oral submissions counsel for Nzuri drew a number of matters to my attention. These are addressed below.

1. I was and am satisfied that the nature and terms of the proposed scheme are such that the members are adequately protected against the risk that Xuchen will not perform its obligations under the scheme.
2. In that respect I have had regard to:
   • the statements made, and verified, as to Xuchen's available funding (from Chengtun) to satisfy the scheme consideration;
   • the terms of the scheme; and
   • the terms of a deed poll (attachment 'MRA-2' to the First Arnesen Affidavit) and a guarantee (attachment 'MRA-7' to the First Arnesen Affidavit) as executed.
3. The scheme contemplates that the transfer of the members' shares to Xuchen is first 'subject to' the provision of the scheme consideration in accordance with the scheme and the deed poll (Scheme, cl 4.2(b)). Insofar as the scheme consideration is to be paid in cash, provision is made to ensure payment. The scheme provides for the creation of a trust account of which Nzuri is to be the trustee (Scheme, cl 5.2(a)). The total of the cash consideration is to be paid into the trust account by no later than the business day before the implementation date (Scheme, cl 5.2(a)). Nzuri is to pay out the cash consideration on the implementation date (Scheme, cl 5.2(b)).
4. Xuchen will not become beneficially entitled to the Nzuri shares until provision of the scheme consideration to the Nzuri shareholders (Scheme, cl 8.6(a)).
5. The SID contemplates that the resignation of the current Nzuri directors and appointment of the Xuchen nominees to the board is subject to and conditional upon the scheme consideration having been paid out to the Nzuri shareholders (SID, cl 8.1). The evidence records that both Nzuri and Xuchen accept that the replacement of the board is conditioned by the payment to the shareholders of the scheme consideration. Accordingly, there is no concern that an incoming board of Xuchen may interfere with the scheme implementation.
6. The arrangements under the terms of the scheme as proposed are supported by a deed poll dated 21 May 2019 as executed by Xuchen (attachment 'MRA-2' to the First Arnesen Affidavit).
7. By the deed poll Xuchen covenants in favour of the Nzuri shareholders that Xuchen will perform all actions attributed to it under the scheme (Deed Poll, cl 3). There is also an acknowledgement that the deed may be relied on and enforced by any scheme shareholder (Deed Poll, cl 1.3(a)) and that Nzuri and each of its directors may act as agent and attorney to enforce the deed poll on behalf of the shareholders (Deed Poll, cl 1.3(b)).
8. The deed poll will be enforceable by the Nzuri members as they are sufficiently identified within the deed poll.
9. As Xuchen is a special purpose vehicle, and presumably has limited available assets in the absence of funding being made available by Chengtun, Chengtun has entered into a deed of guarantee dated 24 April 2019 in favour of Nzuri (attachment 'MRA-7' to the First Arnesen Affidavit). Chengtun irrevocably guarantees the performance and observance of Xuchen's obligations under the SID, deed poll and the option cancellation deeds. By the guarantee Chengtun will be liable for the performance of Xuchen's obligations as if Chengtun itself were a party to the SID, deed poll and the option cancellation deeds (Guarantee, cl 3.1).
10. Appropriate affidavit evidence - including expert evidence as to matters of BVI and Chinese law - was filed to address the legal efficacy of the execution of the deed poll and the guarantee.

1. The SID contains various standard exclusivity terms (SID, cl 10). These include 'no-shop' and 'no-talk' provisions (SID, cl 10.1 - 10.3), a 'no-due-diligence' clause (SID, cl 10.4), a 'notification' obligation (SID, cl 10.5) and a 'matching' right (SID, cl 10.6). Provision is also made for a reciprocal 'break fee' of $1.09 million (SID, cl 11).
2. The 'no-talk' and 'no due-diligence' provisions are subject to a standard directors' duty carve-out (SID, cl 10.7).
3. In considering the propriety of exclusivity arrangements the authorities suggest that:
   • The exclusivity period should be certain and of reasonable duration.
   • The exclusivity arrangements should be subject to a directors' duty carve-out, ie the directors should be able to consider an alternative proposal if it may result in a potentially superior transaction that will better serve the members' interests.
   • The arrangements should be adequately disclosed in the explanatory statement.
   • Appropriate affidavit evidence should be adduced to justify the exclusivity arrangements.
4. The exclusivity period under the SID potentially extends to 26 November 2019, ie a duration of 9 months. That is at the upper end of what is commonly considered acceptable. Given the need to address regulatory and approval requirements in both China and the DRC, I am satisfied that the exclusivity period is not unreasonable.
5. There is an appropriate directors' duty exception to the exclusivity arrangements.
6. The scheme booklet specifically discloses that failure to approve the scheme will not trigger an obligation to the pay the break fee (Scheme Booklet, FAQs). There is otherwise adequate disclosure of the exclusivity arrangements and the break fee as a whole (Scheme Booklet, pars 1.3(f), 8.4).
7. Mr Arnesen's affidavit of 21 May 2019 provides commercial justification for the exclusivity provisions (pars 66 - 84). Mr Arnesen's evidence, which I accept, is that he believes the exclusivity provisions are reasonable and appropriate (par 83). The provisions followed arm's length commercial negotiations in which both parties were separately advised and represented by external legal advisers.
8. The amount of the break fee represents 1 per cent of the implied value of the scheme consideration. It is thus within generally accepted commercial parameters.

1. Counsel for Nzuri drew my attention to the fact that at the time of execution of the SID Nzuri entered into two loan agreements.
2. The first is a secured loan agreement dated 26 February 2019 pursuant to which Xuchen agreed to advance Nzuri an amount of $5 million (attachment 'MRA-12' to the First Arnesen Affidavit). The loan is to provide Nzuri with interim funding to support ongoing predevelopment activities at the Kalongwe Copper-Cobalt Project. At the time of the first hearing $4.5 million had been drawn down under the Xuchen loan facility.
3. The second is an unsecured loan agreement dated 26 February 2019 pursuant to which Tembo Capital Mining Fund LP (Nzuri's major shareholder) agreed to advance Nzuri an amount of $3 million (attachment 'MRA-15' to the First Arnesen Affidavit). The Tembo loan will be used to partially repay the Xuchen loan should the scheme not be implemented. As at the hearing there had been no drawdown under the Tembo loan.
4. There are authorities in which the court has been concerned to ensure that a loan between bidder and target does not operate as a lockup device. For example, in Re Cortona Resources Ltd,[2] a loan term sheet was entered into on the morning of the first hearing. The loan was a drawdown facility and was not repayable on demand. If the scheme was not implemented the target would be provided to give security. Barker J stated:

There is nothing obvious in that transaction, in my view, to suggest that it is a 'lock up' device or in the nature of a break fee by a side wind, which might prevent the free consideration by members of the scheme proposal.

...

I do not consider that the term sheet transaction identified is a reason not to make the orders convening a meeting of members. It too is a matter that the members may properly consider at the meeting in light of the disclosure made.[3]

1. In Re Anatolia Energy Ltd McKerracher J also adopted the touchstone of whether the loan agreement would prevent free consideration of the proposed scheme by members.[4]
2. I was satisfied, on a prima facie basis, that the Xuchen loan agreement ought not to act as a de facto lock-up device that had a coercive effect impairing a free consideration of the scheme.
3. Should Nzuri's shareholders not approve the proposed scheme, the current drawn amount will not be repayable immediately. The Xuchen loan becomes repayable 9 months after the date it was entered into or 45 days after receipt of notice that a change of control event has occurred (a change of control event does not include where the Nzuri shareholders vote against the scheme proposal). Based on Mr Arnesen's additional affidavit evidence this leaves Nzuri with sufficient time to seek alternative financing arrangements.
4. In any case, as was mentioned in Re Anatolia Energy Ltd, any issue of actual unfairness or coercion can be addressed at the second court hearing if the members approve the proposed scheme by the statutory majorities.[5]

1. Two executive directors of Nzuri will obtain a collateral benefit should Nzuri shareholders vote to approve the scheme of arrangement.
2. Messrs Arnesen (Nzuri's Chief Executive Officer) and Smits (Nzuri's Chief Operating Officer) each stand to receive a bonus of $240,000 on shareholder approval of the scheme. Clause 14(a) of their respective Executive Services Agreement refers to a bonus payment of a lump sum gross payment equivalent to 12 months' salary on a 'change of control' (attachment 'MRA-10' to the First Arnesen Affidavit and attachment 'AGS-2' to the Smits Affidavit). As defined this will occur on shareholder approval of the scheme.
3. Messrs Arnesen's and Smits' interest was disclosed in the scheme booklet (Scheme Booklet, pars 5.6(d), 9.4(a)). The disclosure was made in a more prominent way following the interchange between my chambers and Nzuri's legal representatives (Scheme Booklet, chairperson's letter and FAQs).
4. Nzuri had proposed that Mr Arnesen be appointed as chairperson of the scheme meeting. Mr Smits was proposed as alternate. Messrs Arnesen and Smits were proposed as chairperson and alternate chairperson respectively as the independent chair of the board of Nzuri will be out of Western Australia on the day of the proposed scheme meeting.
5. Prior to the first hearing I raised with Nzuri's legal representatives, through my chambers, whether it was appropriate that Messrs Arnesen and Smits be the chairperson and alternate chairperson of the scheme meeting having regard to their additional interest in the proposed scheme's approval.
6. The issue is not one of actual apprehension that Messrs Arnesen and Smits may be influenced by their additional interest so as to bring about the passing of a shareholders' resolution to approve the proposed scheme. There is nothing to suggest that Messrs Arnesen and Smits have been, or will be, influenced by the collateral benefit. To the contrary Messrs Arnesen and Smits have conducted themselves with propriety in ensuring that the additional interest has been properly (and fully) disclosed to the court and to shareholders. The issue is one of perception. Might shareholders have a reasonable apprehension, based on the disclosed conflict, that Messrs Arnesen and Smits might not act impartially and independently as a chairperson of the scheme meeting?
7. I decided that, in all the circumstances, the more prudent course was to insist that the chairperson and alternate chairperson of the scheme meeting be appointees other than Messrs Arnesen and Smits.
8. The office of chairperson of the scheme meeting is an appointment by the court. The chairperson has an important role in reporting to the court. The chairperson controls the scheme meeting in accordance with the court's orders. He or she maintains oversight of the conduct of the meeting and the vote on the scheme resolution. The chairperson may have to rule on particular matters. Often the chairperson will receive proxies. Sometimes the proxies will not be directed (although, in those circumstances, it is common in a scheme context to inform members that the proxy will be used to vote in favour of the scheme). The chairperson is usually granted an absolute discretion to adjourn the scheme meeting.
9. My insistence that the chairperson of the scheme meeting be a person other than one of Mr Arnesen or Mr Smits could be seen as overly cautious. However, the test for apprehended bias is an objective test of possibility as distinct from probability. In my view it was prudent to remove any doubt on the issue. That was all the more so when the services of a skilled and experienced professional could be obtained to serve as independent chair of the scheme meeting at a relatively minor cost.
10. Accordingly, I declined to make orders providing for Mr Arnesen to be the chairperson of the scheme meeting; and for Mr Smits to be Mr Arnesen's alternate.
11. This issue did not require that I withhold orders providing for the convening of the scheme meeting or approval for distribution of the scheme booklet. There are many available professionals who can act as independent chair of the scheme meeting in place of Messrs Arnesen and Smits. The identity of the chairperson will be dealt with administratively by supplementary orders well before the date of the proposed scheme meeting.
12. In considering the appropriateness of Messrs Arnesen and Smits as chairperson or alternate chairperson of the scheme meeting, and the bonus issue more generally, I also had regard to Farrell J's recent observations in Re Gazal Corporation Ltd.[6]
13. There Farrell J assessed the appropriateness of a recommendation by directors with an interest in the outcome of a scheme. One of the executive directors was to receive a $1.7 million bonus if the scheme became effective. Her Honour stated:

[D]irectors who are interested in the outcome of the scheme because they stand to receive a bonus or benefit (other than as a shareholder) only if the scheme proceeds should exercise caution in making recommendations and, in my view, generally should not do so.[7]

1. Farrell J had earlier observed that it would have been better practice for the executive director to adopt the 'common practice' of declining to make a recommendation and to explain that the reason for this was that he stood to receive a substantial benefit (depending on the outcome of the scheme) that other shareholders would not receive.[8] As to the practical necessity for such a recommendation - the circumstance that the scheme implementation agreement required it - Farrell J observed that the question of whether it is appropriate for all directors to make a voting recommendation should be considered at the time that the agreement was negotiated and conditions crafted appropriately.[9] I respectfully agree.
2. In Re Gazal Corporation Ltd Farrell J approved the scheme, despite the interested director's recommendation, but offered the caution that scheme proponents cannot count on that always being the outcome when an interested director elects to make a recommendation.[10]
3. I was prepared to make orders convening the scheme meeting, and approve the scheme booklet for distribution, despite the fact that Messrs Arnesen and Smits joined in the directors' recommendation to shareholders to vote in favour of the scheme proposal. I did so as:
   • The additional and different interest held by the executive directors was not out of the ordinary and within the scope of what might be considered commercially not unreasonable, ie one year's salary.
   • The additional and different interest held by the executive directors arose under pre-existing contracts executed well before the SID.
   • The additional and different interest held by the executive directors was linked to the possibility that their employment might be terminated immediately after the scheme becomes effective: the executive directors are not entitled to notice of termination or payment in lieu of notice if terminated within six months after the change in control. Accordingly, there is a not unreasonable commercial rationale for the bonus payment.
4. Most importantly, however, the scheme booklet made fulsome and prominent disclosure of Messrs Arnesen's and Smits' additional and different interests. That disclosure was amplified after I, through chambers, brought the decision of Farrell J in Re Gazal Corporation Ltd to the attention of Nzuri's legal representatives.
5. In the future it would be better practice for scheme proponents to take heed of the observations of Farrell J in Re Gazal Corporation Ltd. I acknowledge, however, that Nzuri entered into the SID well before the decision in Re Gazal Corporation Ltd. There is likely to be some lag in adoption of her Honour's observations. In the meantime, in the present case the matters I have referred to - and in particular the disclosures in the scheme booklet as to the bonus to be payable to Messrs Arnesen and Smits - meant that I was satisfied that I should make orders convening the scheme meeting despite the executive directors joining in the board's recommendation to the shareholders.

1. Counsel for Nzuri drew my attention to the 'deemed warranty' provision in the proposed scheme of arrangement (Scheme, cl 8.5). The presence of the warranty provision is disclosed in the scheme booklet (Scheme Booklet, par 3.5). Such deemed warranty clauses are not unusual and are acceptable provided that, as here, their presence is adequately disclosed.
2. In addition the scheme provides that, to the extent permitted by law, the Nzuri shares will transfer free from encumbrances and restrictions on transfer of any kind (Scheme, cl 8.6). That sort of clause is also permissible.
3. Additionally, Nzuri sought orders for electronic dispatch of the scheme booklet. Such orders are now commonplace. Details were provided as to the terms of the proposed electronic notification (attachment 'DJC-22' to the Second Carpenter Affidavit). I was satisfied, having read the terms of the proposed email communication to shareholders, that an order for electronic dispatch of the scheme booklet was appropriate in relation to Nzuri's proposed scheme.

1. On the evidence presented, and after hearing from counsel for Nzuri, I was satisfied that it was appropriate to make orders convening a scheme meeting to consider whether to approve the proposed scheme. The scheme is one that is fit for consideration by Nzuri's members in the sense that sensible business people might consider the scheme will be of benefit to those members. That is particularly the case given the opinion expressed in the IER.
2. I have, however, deferred making orders to appoint a chairperson for the scheme meeting. That will be dealt with administratively on the papers - before the scheme meeting.
3. Given the matters I have mentioned as to being satisfied that the scheme booklet prima facie provides proper disclosure to Nzuri's members, I also considered it appropriate to approve the final draft scheme booklet for distribution.
4. Accordingly, for these reasons, I made orders in the following terms:
   1. Pursuant to section 411(1) of the Corporations Act 2001 (Cth) the plaintiff convene a meeting of holders of fully paid ordinary shares in the capital of the plaintiff to be held at The Subiaco Hotel, Mezzanine Level, 465 Hay Street, Subiaco, Western Australia, on 8 July 2019 at 3.00pm (WST) (scheme meeting), for the purpose of considering and, if thought fit, approving (with or without modifications) the proposed scheme of arrangement (scheme) being the document contained in Annexure DJC-3 (pages 99-110) to the affidavit of Deanna Jayne Carpenter affirmed on 10 May 2019.
   2. The scheme booklet contained in Annexure DJC-20 (pages 88348) to the affidavit of Deanna Jayne Carpenter affirmed on 27 May 2019 (including all annexures and the notice of scheme meeting), which contains the explanatory statement required by section 412(1)(a) of the Corporations Act 2001 (Cth), be and is approved for distribution to members, subject to:

(a) the deed poll annexed at pages 338-343 of Annexure DJC-20 being replaced with the deed poll annexed as Annexure XFC-1 at pages 4-9 of the affidavit of Xiaofei Chen affirmed on 29 May 2019;

(b) the amendments contemplated in the affidavit of Deanna Jayne Carpenter affirmed on 29 May 2019 at Annexure DJC-3 at pages 21 and 22;

(c) the amendment contemplated by par 3(c) below;

(d) correction of any minor typographical or grammatical errors;

(e) final typesetting, formatting and page numbering;

(f) any minor amendments required or approved by the ASIC for registration under section 412(6) of the Corporations Act; and

(g) correction or update of, or as a result of, any relevant date or market price reference.

1. Subject to these orders, the scheme meeting is to be:

(a) convened, held and conducted in accordance with the plaintiff's constitution and to the extent not inconsistent with the constitution, the provisions of Part 2G.2 of the Corporations Act that apply to members of a company and in particular the provisions that apply to meetings of members;

(b) convened, held and conducted as if rule 2.15 of the Supreme Court (Corporations) Rules 2004 (WA) does not apply, but that Rule 75-15(2) of the Insolvency Practice Rules (Corporations) 2016 (Cth) does apply; and

(c) convened using the notice of meeting substantially in the form of the notice contained in Annexure DJC-20 (pages 344-348) to the affidavit of Deanna Jayne Carpenter affirmed on 27 May 2019; but omitting therefrom the second paragraph on page 344.

1. Subject to registration of the scheme booklet with ASIC, pursuant to section 412(6) of the Corporations Act, the plaintiff is to dispatch, on or before 6 June 2019, a document substantially in the form of the scheme booklet (approved for distribution at order 2 above) and any applicable proxy form (or a link to a website for any electronic proxy lodgement) to members of the plaintiff as follows:

(a) to each member who has nominated an electronic address for the purposes of receiving notices of meeting from the plaintiff, an email to such address with a covering email text substantially in the form of Annexure DJC-22 (page 613) of the affidavit of Deanna Jayne Carpenter affirmed on 27 May 2019; and

(b) to each other member, by pre-paid or ordinary post, mail or courier to the address as set out in the register of the plaintiff's members.

1. Dispatch in accordance with order 4 on or before 6 June 2019 is taken to be sufficient notice of the scheme meeting.
2. If it after comes to the attention of the plaintiff that any email dispatched in accordance with order 4(a) above has returned an undeliverable or undelivered receipt for a member's nominated email address then, in respect of that member, the plaintiff is to dispatch, within a reasonable time thereafter, a document substantially in the form of the scheme booklet and any applicable proxy form in accordance with order 4(b).
3. The plaintiff has liberty to apply as to the identity of the person who is to be authorised to act as chairperson of the scheme meeting.
4. The chairperson may adjourn the scheme meeting in his or her absolute discretion to such time, date and place as he or she considers appropriate.
5. Two members present in person or by proxy, corporate representative or attorney under power and entitled to vote will constitute a quorum for the scheme meeting.
6. At the scheme meeting, each shareholder present and entitled to vote, will be entitled to one vote for each fully paid ordinary share in the capital of the plaintiff that the shareholder is registered as holding at 3:00pm (WST) on 6 July 2019.
7. Voting on the resolutions to approve the scheme at the scheme meeting is to be conducted by way of poll.
8. The time by which proxy forms must be returned or lodged online in accordance with any instructions given on the proxy form is 3:00pm (AWST) on 6 July 2019.
9. If this matter is to be relisted, then after 8 July and on or before 10 July 2019 the plaintiff is to publish a completed notice of hearing substantially in the form of Annexure 'A' to these orders once in The Australian newspaper, and the plaintiff is otherwise, to the extent necessary, relieved from compliance with rule 3.4 of the Supreme Court (Corporations) (WA) Rules 2004 (WA).
10. The proceedings be stood over to 10.00am (AWST) on 15 July 2019 for the hearing of any application to approve the proposed scheme.
11. A copy of these orders be lodged with ASIC as soon as practicable after issue.
12. These orders be entered forthwith.

Annexure A

Nzuri Copper Limited (ACN 106 294 106)

Notice of hearing to approve arrangement

TO all the members of Nzuri Copper Limited (ACN 106 294 106) (Nzuri).

TAKE NOTICE that at 10.00am (AWST) on 15 July 2019 the Supreme Court of Western Australia (situated at the David Malcolm Justice Centre, 28 Barrack Street, Perth, Western Australia) will hear an application by Nzuri seeking the approval of an arrangement between Nzuri and its members, as agreed to by resolution by the members of Nzuri at a meeting of such members held at The Subiaco Hotel, Mezzanine Level, 465 Hay Street, Subiaco, Western Australia at 3.00pm (AWST).

If you wish to oppose approval of the arrangement, you must file and serve on Nzuri a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on Nzuri at its address for service at least one day before the date fixed for the hearing of the application.

The address for service on Nzuri is, c/o Bellanhouse, Level 19, Alluvion, 58 Mounts Bay Road, Perth, Western Australia 6000 (Reference: Deanna Carpenter).

Hannah Hudson

Company Secretary, Nzuri Copper Limited

Partner at Bellanhouse, solicitors for the plaintiff, with conduct of the proposed transaction.

Background to the scheme proposal; description of the SID; scheme terms; ASX announcement; ASIC company search.

Chief Executive Officer and an executive director of Nzuri.

Background to Nzuri; formal matters: constitution; registration.

Draft scheme booklet; disclosure as to conditions precedent; board resolution to adopt and issue scheme booklet.

Proposed procedures for the convening and conduct of the scheme meeting.

Directors' recommendation that shareholders vote in favour of the scheme.

No basis to believe that a superior proposal will be forthcoming.

Disclosure of interests: (1) to receive consideration for option cancellation; (2) lump sum bonus of 12 months' salary on shareholder approval ($240,000).

Chief Operating Officer and an executive director of Nzuri.

Consent to act as chair of the scheme meeting if Mr Arnesen is unable to do so.

Disclosure of interests: (1) to receive consideration for option cancellation; (2) lump sum bonus of 12 months' salary on share on shareholder approval ($240,000).

Project Manager in the overseas investment department of Chengtun.

Background to Xuchen and Chengtun; formal matters including certificate of incorporation; confirmation of the verification process undertaken for information attributable to Xuchen and Chengtun; Chengtun board consideration of scheme.

Partner at Carey Olsen Singapore LLP, engaged by Xuchen to provide BVI law advice.

Legal opinion regarding the execution of contracts in the BVI (applicable to the execution of the Deed Poll by Xuchen as a BVI incorporated entity).

Partner at Jungtin & Gongcheng, engaged by Xuchen to provide Chinese law advice.

Legal opinion regarding the execution of guarantees in the PRC (applicable to the execution of the Guarantee by Chengtun).

Provided copies of verified documents translated from Chinese to English attached to the affidavits of Ms Zhong and Ms Li.

Final draft scheme booklet; description of conferral with the ASIC and provision of amended scheme documents to the ASIC; description of conferral with Gilbert + Tobin (Xuchen's legal advisers).

Chief Executive Officer and an executive director of Nzuri.

Additional information as to the Xuchen loan agreement and ability to bring about repayment in the event that the scheme of arrangement is not approved.

Description of further conferral with the ASIC; notification that ASIC not intending to appear or oppose; ASIC relief from certain disclosure requirements.

Solicitor at Gilbert + Tobin (Xuchen's legal advisers).

Correction of document compilation error in L Li affidavit affirmed 22 May 2019.

Solicitor at Gilbert + Tobin (Xuchen's legal advisers).

Confirmation that Chengtun shareholders' approval not required.

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

[1] Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [2018] WASC 308 [46] [78] (Re Wesfarmers Ltd).

[2] Re Cortona Resources Ltd [2012] FCA 1295.

[3] Re Cortona Resources Ltd [43], [45].

[4] Re Anatolia Energy Ltd [2015] FCA 1134 [44] - [45].

[6] Re Gazal Corporation Ltd [2019] FCA 701.