Re Strategic Energy Resources Ltd (No 2 ) [2012] VSC 75 (17 February 2012)

2 On 17 February 2012, SER sought an order for the reconvening of the meeting on

22 March 2012. In light of the fact that there are still a substantial number of Static Shareholders, SER sought dispensation from the requirement to send the scheme booklet, proxy form and notice of adjourned meeting to those shareholders. SER proposed that it be required in lieu:

(a) to publish in the Australian and Financial Review newspapers, and on the websites of the ASX and SER, a notice containing the date and place for the adjourned scheme meeting, a brief explanation of the demerger scheme and contact details to obtain further information; and

(b) to send Static Shareholders with an address in the SER Register a letter notifying them:

(i) that their address in the SER register is believed to be incorrect and asking them to update or confirm their address;

(iii) that the scheme booklet, proxy form and notice of meeting will be sent to them upon confirmation or update of address; and

(iv) of the availability of the scheme booklet also on the SER website.

Static Shareholders with no address in the SER register, or that are deregistered companies or companies not recognised in ASIC's records, will not receive the material or letter unless requested by the shareholder.

3 SER shareholders with correct addresses will be sent a copy of the notice of adjourned meeting, a new proxy form and a covering letter explaining the adjournment and the changes since the booklet was published. Former Static Shareholders, and any persons whom have become shareholders since the scheme booklet was first served, will be sent the scheme booklet, proxy form, notice of adjourned meeting and covering letter explaining the changes since the scheme book was published. Former Static Shareholders who are receiving these materials at an address which is different to the address recorded in the SER Register will also receive a written explanation of why these materials have been sent.

4 I pronounced orders in form sought which are attached and these are my reasons.

5 This not the first occasion where the Court has been asked to make orders to like effect where shareholders do not have a current address in the company's register. In Re Coles Group Limited[2] Robson J gave dispensation to the company to send the scheme booklet and proxy form to shareholders without a current address. Re Coles Group Limited concerned the scheme between Coles Group Limited and its members (other than Wesfarmers Limited) for the purpose of considering Wesfarmers Limited's proposal to acquire Coles Limited. There were 5680 "return mail holders" who were Coles shareholders in respect of whom written communications dispatched by Coles had been returned on the basis that the addressee was not known at the person's address as recorded in the Coles Register.[3] The 5680 "return mail holders" represented 1.73% of Coles' by number and 0.002% by value.[4] The approach approved by the Court in that case was for Coles to send to each of those shareholders a "card" notifying that it was Coles' belief that the relevant shareholder was not known at the address recorded in the Coles register and to publish once in various Australian newspapers, an advertisement giving notice of the meeting.

6 In Re AWB Limited[5] there were 2192 returned mail holders representing approximately 5% by number and 1% by value.[6] AWB sought an order that AWB not be required to mail to the returned mail holders a scheme booklet or proxy form. AWB instead sought Court permission to mail a letter to the address of the returned mail holder notifying the shareholder of the scheme meeting, but that AWB believed that the shareholder's address in AWB's register was not current and inviting the shareholder to update the address in the AWB register. AWB also intended to place the scheme booklet on the ASX and AWB website. Ferguson J considered that this process was adequate.[7]

7 The source of the power exercised by the Court in Re Coles Group Limited[8] and Re AWB Limited[9] was s 411(1) and s 1319 of the Act. The Court is empowered by those sections to give procedural directions for the convening of the meeting which may not correspond with the procedural requirements of Part 2G.2 of the Act and the company's constitution (which would otherwise govern the meeting).[10] In Re Australian Consolidated Press Ltd[11] McLelland CJ in Eq stated:

The power of the court under s 411 is limited by the terms of that section, and the constitutional source of the power of any meeting convened under that section is the section itself, activated by the order of the court. Such a meeting is not a general meeting of the company, even if it happens that all the persons and the only persons entitled to attend it are the members of the company. It is a meeting which is convened for a specific statutory purpose and which is subject to provisions different from those to which a general meeting of the company convened under its articles of association is subject. The court can, pursuant to s 1319 of the Corporations Law, give procedural directions in relation to such a meeting which may not correspond with the procedural requirements of a general meeting of the company convened under its articles of association.[12]

The company seeking the convening of the meeting under s 411(1) of the Act should be attuned in advance of making the application to matters that may necessitate appropriate procedural orders from the Court. This is an occasion where such orders are justified because of the significant numbers of Static Shareholders.

8 There is a reasonable basis for SER's apprehension that the Static Shareholders will not receive the notice of meeting and scheme booklet if sent by post to their addresses in the SER register. In that circumstance there would be little or no utility in giving notice by postal delivery because that method would be unlikely to achieve its intended purpose, and issues of expense and practicality are relevant considerations. However, it is important that any substitute mode of giving of notice should have a greater prospect of bringing the meeting to the attention of those shareholders who do not have current contact details. I am satisfied with the approach proposed by SER, which I made the subject of orders (attached to these reasons).

9 It is regrettable that SER was not alert to the problem at an earlier point in time. However, SER properly sought an adjournment when it became aware of the significant numbers of shareholders not able to be served. SER has filed comprehensive affidavits with the Court explaining how the issue arose, the steps it has subsequently taken to clean up and rectify the register, and the further steps it proposes to take to put itself in a position to utilise s 1343 of the Act. These steps have been taken in consultation with ASIC, which was appraised of the proposed orders sought by SER on 17 February 2012 and which has not opposed those orders.

10 The fact that there are shareholders with no current address on the SER register also necessitates proposed changes to the demerger scheme in the following way:

(a) upon demerger, all shareholders (except Ineligible Foreign Shareholders) will receive one Tarcoola share for every SER share held at the demerger date;

(b) SER does not propose to mail the share certificate to the address of Static Shareholders until such time as those shareholders contact SER to update or confirm their address;

(c) the Tarcoola shares of Ineligible Foreign Shareholders will be issued to a Demerger Nominee who will hold them for the benefit of the relevant Shareholder. Ultimately the Demerger Nominee will sell the shares and remit the net proceeds of the sale to the Ineligible Foreign Shareholder;

(d) in the case of Ineligible Foreign Shareholders who are also Static Shareholders (potentially 13 shareholders), the net proceeds of the sale of the Tarcoola shares will be remitted to a bank account in the name of Tarcoola. These funds can then be claimed by shareholders in due course or dealt with pursuant to the unclaimed moneys legislation.

The proposed changes are necessitated by the concern that sending a share certificate or a cheque to addresses which are known or suspected to be incorrect could be dealt with in a fraudulent manner. ASIC was informed of the proposed scheme amendment on 9 February 2012 and on 13 February 2012 informed SER's solicitors that they had no further comments.

11 SER proposes to put two resolutions before the scheme meeting. The first resolution will be to consider and, if thought fit, to pass the amendments to the scheme. The second resolution will be to consider and, if thought fit, to pass the scheme as amended. In Citect Corporation Ltd[13] Barrett J accepted that an amendment to the scheme formulated in the original s 411(1) orders could be put to the meeting of members in this way. His Honour said that:

[13] In the course of argument on 30 January, I expressed the view, to which I adhere, that a meeting convened pursuant to an order under s.411(1) to consider a particular compromise or arrangement cannot, simply at the behest of the company, consider some different compromise or arrangement. It is not open to the company simply to invite members or creditors to vote at such a meeting on some different compromise or arrangement. The meeting must have before it the compromise or arrangement that the court has directed should be submitted for consideration of members or creditors. Nor can the court, except upon a renewed application for orders under s.411(1), order that a different compromise or arrangement be placed before a meeting of members or creditors. But once the compromise or arrangement identified in an order under s.411(1) comes before the meeting that the court has required be convened, the meeting itself may address the question of modification of the compromise or arrangement. This is particularly so where, as here, the notice convening the meeting states the meeting's purpose as being "to consider and, if thought fit, to agree (with or without modification) to" the proposed compromise or arrangement.

[16] The correct approach to a situation of the kind that arose in this case is, it seems to me, for the meeting to have before it the scheme as originally formulated and referred to in the s.411(1) orders, together with information about the updated position that will enable the meeting to make an informed decision on several questions, namely, acceptance or rejection of that original formulation, alteration of the original formulation (provided of course that any alteration is one that the company itself supports and accepts so as to accommodate the fundamental principle recognised in Re Savoy Hotel Ltd [1981] Ch 351) and, if some alteration is favoured, approval or rejection of the compromise or arrangement in the altered form the meeting itself has seen fit to debate.

SER will give those shareholders who have a valid address recorded in the SER register notice of the proposed amendments and an explanation of those amendments in excess of 28 days before the scheme meeting.[14] Those shareholders with an address on the register which is believed to be incorrect will be notified at their last known address about the proposed demerger and asked to contact SER to receive further information. In addition, the proposed amendments will be on the ASX and the SER web sites. I am satisfied with this approach.

[1] Re Strategic Energy Resources Ltd [2011] VSC 645.

[2] [2007] VSC 389.

[3] Affidavit of Ben Tzvi Elbaum sworn 15 February 2012, Exhibit BTE-8.

[5] [2010] VSC 456.

[6] Affidavit of Ben Tzvi Elbaum sworn 15 February 2012, Exhibit BTE-8.

[7] Re AWB Limited [2010] VSC 456 at [22].

[8] [2007] VSC 389.

[9] [2010] VSC 456.

[10] See Federal Court (Corporations) Rules 2000 (Cth), Rule 3.3(2) and Supreme Court (Corporations) Rules 2003 (Vic), Rule 3.3(2).

[11] (1994) 14 ACSR 639

[12] Re Australian Consolidated Press Ltd (1994) 14 ACSR 639, 640.

[13] [2006] NSWSC 143.

[14] Re Adams International Food Traders Pty Ltd and the Companies Code (1988) 13 NSWLR 282.