RE WESTERN AREAS LTD; EX PARTE WESTERN AREAS LTD [No 2] [2022] WASC 198 (10 June 2022)

4 This matter came back before me for the second court hearing on 7 June 2022.

5 In addition to the affidavits that were relied upon at the first court hearing, Western Areas relied on an additional 18 affidavits filed prior to the second court hearing. These were:

(a) a seventh affidavit of Jacob Ronald Carmody filed 29 April 2022, a senior associate employed by Ashurst Australia (Ashurst), the solicitors for the plaintiff. Mr Carmody confirmed the Orders and the final version of the Scheme booklet had been lodged with ASIC on 27 April 2022 and annexed a copy of the final Scheme booklet, as well as relevant correspondence with ASIC;

(b) an affidavit of Yuansong Gu filed 31 May 2022, a lodgment clerk at Computershare Communication Services Pty Ltd (Computershare), in relation to the collection of printed shareholder packs containing personalised Scheme meeting materials (Shareholder Packs) by Australia Post for delivery to shareholders, including shareholders who came onto the register after 26 April 2022;

(c) an affidavit of Brae Damon Allen filed 31 May 2022, a national print and procurement consultant at Computershare, in relation to the printing of the Scheme booklet, which formed part of the Shareholder Packs for non-email shareholders;

(d) an affidavit of Aasish Joshi filed 31 May 2022, an afternoon mail team leader at Computershare, in relation to the printing of the Shareholder Packs;

(e) an affidavit of Andrew Jonathon Ahyee filed 31 May 2022, a day shift mail team leader at Computershare, in relation to the packaging of the Shareholder Packs and their despatch;

(f) an affidavit of Michael Milan Milivojac filed 31 May 2022, the owner of Minuteman Press Melbourne (Minuteman Press) who was retained to print copies of the Scheme booklet;

(g) an affidavit of Jessica Sayers filed 31 May 2022, a day shift mail team leader at Computershare, in relation to the postal despatch of Shareholder Packs to nine shareholders who came onto the register after the initial despatch;

(h) an affidavit of Timothy James Filmer Mason filed 31 May 2022, a machine manager at Direct Mail Corporation, who was retained by Computershare to provide plastic wrapping services of the Shareholder Packs;

(i) an affidavit of Viktor Dedic filed 31 May 2022, a warehouse team leader at Computershare, in relation to the collection of the Shareholder Packs for despatch to shareholders;

(j) an affidavit of Benjamin Noel Horne filed 1 June 2022, an account director of Georgeson Shareholder Communications Australia Pty Ltd (Georgeson), who was engaged to operate an information line for shareholders in relation to the Scheme. Mr Horne detailed the management and coordination of Georgeson employees who operated the shareholder information line in relation to the Scheme, and annexed a report on the telephone calls received;

(k) an affidavit of Brendan Patrick Henry filed 1 June 2022, a director, client services at Morrow Sodali Pty Ltd (Morrow), who was engaged to operate an outbound shareholder communications program to shareholders of Western Areas, focussing on shareholders with more than 5,000 shares, and collect voting information on behalf of Western Areas;

(l) a fourth affidavit of Joseph Charles Belladonna filed 2 June 2022, the company secretary and chief financial officer of Western Areas. Mr Belladonna confirmed hard copies of the Scheme booklet were available for inspection at the offices of Western Areas and detailed correspondence Western Areas received from shareholders in relation to the Scheme;

(m) a third affidavit of Ian Alexander Macliver filed 2 June 2022, the independent non-executive chairman of Western Areas and the appointed chairperson of the Scheme meeting. Mr Macliver provided a report on the conduct and results of the Scheme meeting and annexed copies of the minutes, the poll report, and the scrutineer's report for the Scheme meeting;

(n) an affidavit of Emilia Varga filed 2 June 2022, who is employed as a client support, issuer services at Computershare. Ms Varga detailed the despatch of Scheme materials to shareholders by email or post (including to email shareholders where bouncebacks were received and shareholders who came onto the register after 26 April 2022), and the generation of reports and records arising from the Scheme meeting. Annexed to her affidavit were, among other things, the Scheme meeting results and attendance reports;

(o) an affidavit of Saul Collins filed 2 June 2022, a meeting coordinator at Computershare, who deposed to the process of the virtual Scheme meeting conducted by Computershare;

(p) an affidavit of Nicole Brooke Lewis filed 2 June 2022, who is employed as a relationship manager, issuer services at Computershare. Ms Lewis was the returning officer of the poll conducted at the Scheme meeting. Ms Lewis detailed the turnouts at the 2020 and 2021 annual general meetings of Western Areas as well as the polls of the Scheme meeting;

(q) an affidavit of Brandon Lee McEvoy filed 3 June 2022, a lawyer at Ashurst. Mr McEvoy confirmed service of further court documents on ASIC and attached a copy of the advertisement of the second court hearing in The Australian newspaper and The West Australian newspaper on 31 May 2022; and

(r) a second affidavit of Mr McEvoy filed 7 June 2022, which confirmed no objection to the Scheme had been received by any shareholder and attached the certificates executed by Western Areas and IGO Nickel confirming that each of the conditions precedent of the Scheme had been satisfied or waived, as well as a letter from ASIC confirming ASIC had no objection to the proposed Scheme under s 411(17) of the Act.

6 These additional affidavits address the matters Western Areas 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:[6]

(a) to ensure that all statutory and procedural requirements have been satisfied. This includes confirming that:[7]

(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.[8] 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.[9]

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

(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

(h) whether the scheme offends public policy.

Disposition Compliance with statutory and procedural requirements

11 I was and am satisfied, on the basis of the additional affidavits that were filed by Western Areas, that:

(a) a copy of the Orders was lodged with ASIC on 27 April 2022;[11]

(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 27 April 2022;[12]

(c) the Scheme booklet was despatched to shareholders in accordance with the Orders;[13]

(d) in accordance with the Orders, the Scheme booklet, as well as the notice of meeting, were available for inspection on Western Areas' website and at its registered office both before, and during, the Scheme meeting;[14]

(e) the Scheme meeting was convened and held on 1 June 2022 in accordance with the Orders;[15]

(f) the Scheme was approved by the requisite statutory majorities;[16]

(g) notice of the second court hearing was given by way of advertisement in The West Australian newspaper and The Australian newspaper on 31 May 2022;[17] and

(h) ASIC informed Western Areas on 6 June 2022, pursuant to s 411(17)(b) of the Act, that it has no objection to the proposed Scheme.[18]

12 In written and oral submissions, counsel for the plaintiff drew my attention to three matters in relation to the Scheme meeting.

13 First, as noted at the court hearing, Western Areas agreed to tag the votes of Wyloo at the Scheme meeting. As set out above at [3], even if these votes were excluded, the Scheme received sufficient votes to satisfy the requisite majorities and the resolution was properly passed.

14 Second, following my query at the first court hearing, the time within which shareholders could obtain login details for the Scheme meeting was extended and proxy holders were able to contact Computershare to obtain these details from midday on the day before the Scheme meeting.[19]

15 The third matter was the voter turnout at the Scheme meeting. Of the 321,643,155 total Western Areas shares on issue, 173,925,831 shares were voted at the Scheme meeting, comprising approximately 54.07% of the Western Areas shares on issue.[20] However, only 671 out of 7,467 eligible Western Areas shareholders voted at the Scheme meeting, representing approximately only 8.99% of eligible shareholders by number.

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 the low voter turnout by number of shareholders suggested there had been an error in the despatch of the 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 number of shareholders who voted at the Scheme meeting, being approximately 8.99% of all eligible shareholders, exceeded the number of shareholders who voted at the two preceding general meetings of Western Areas;[23]

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

(c) there was no evidence which suggested any irregularity in the despatch of the Scheme booklet; and

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

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

20 There is no evidence that the Western Areas shareholders voted for an improper purpose. I am satisfied on the evidence filed by Western Areas that its members voted in good faith and for a proper purpose as:

(a) the purpose of the proposed Scheme is to effect the acquisition by IGO Nickel of all Western Areas 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.

21 At the first court hearing, based on the evidence before the court, I was satisfied 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.

22 Prior to the Scheme meeting, three shareholders of Western Areas emailed Western Areas about the Scheme.[24] These emails raised questions about the disclosures in the Scheme booklet and the recommendation of the Western Areas board of directors that shareholders vote in favour of the Scheme given the opinion of the independent expert. The responses of the managing director of Western Areas have also been provided to me.[25]

23 Courts have previously approved schemes where the independent expert has opined that the scheme is not fair but is reasonable, and therefore in the best interest of shareholders.[26] As I noted in my reasons in Re Western Areas Ltd at [52], at the second court hearing, the court looks to whether scheme shareholders are provided with sufficient information to make an informed vote. At the first court hearing, I was satisfied that sufficient information would be provided to shareholders to give them an opportunity to understand and assess for themselves the basis of the independent expert's opinion. 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 a scheme that sensible business people might consider to be of benefit to shareholders.

All relevant matters brought to the court's attention

24 At the first court hearing, senior counsel for the plaintiff drew my attention to a number of matters. These were summarised at [44] - [85] of Re Western Areas Ltd.

25 There were three further matters that senior counsel drew to my attention at the second court hearing.

26 First, the satisfaction of the conditions precedent to the implementation of the Scheme. The remaining conditions precedent (apart from court approval at the second court hearing) were satisfied or waived as evidenced by the certificates put before me.[27]

27 Second, compliance with inbound and outbound scripts for shareholder communication. In accordance with order 16 of the Orders, senior counsel confirmed that the communications program run on behalf of the plaintiff was conducted in accordance with the form of the scripts approved at the first court hearing.[28]

28 Third, senior counsel corrected a statement made at the first court hearing regarding the then-current shareholding of Perpetual Investment Management Limited (Perpetual) in Western Areas.[29] Senior counsel informed the court that the shareholding of Perpetual as at the date of the first court hearing was in fact approximately 1.02% and not 2% as previously indicated.[30] Senior counsel confirmed that the correct figure was included in the final Scheme booklet despatched to shareholders.[31]

29 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.

30 The additional affidavit evidence filed by Western Areas establishes 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.

31 There was no evidence that any minority has been oppressed.

Satisfaction of s 411(17) of the Act and ASIC's view

32 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.[32] 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.

33 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.

Exemption from s 411(11) of the Act

34 Western Areas seeks exemption from s 411(11) of the Act. In my view, there is no utility in requiring the court's orders approving the Scheme to be annexed to Western Areas' constitution as the orders do not effect any change to the constitution. This exemption has become ordinary practice for transactions of this kind.

35 At the second court hearing before me, I was satisfied the substantive and procedural requirements under s 411(4) of the Act had been satisfied and that I should approve the proposed Scheme.

36 For these reasons, at the conclusion of the hearing on 7 June 2022, I made orders in terms of Annexure A 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 Western Areas Ltd [2022] WASC 193.

[2] Third affidavit of Ian Alexander Macliver filed 2 June 2022 [34], [36], 'IAM-30', 'IAM-31'.

[3] Third affidavit of Ian Alexander Macliver filed 2 June 2022 [34], 'IAM-30', 'IAM-31'; Affidavit of Emilia Varga filed 2 June 2022, 'EV-14'; Affidavit of Nicole Brooke Lewis filed 2 June 2022 [18].

[4] Third affidavit of Ian Alexander Macliver filed 2 June 2022 [34], 'IAM-30', 'IAM-31'; Affidavit of Emilia Varga filed 2 June 2022, 'EV-14'; Affidavit of Nicole Brooke Lewis filed 2 June 2022 [18].

[5] Submissions [28]; Third affidavit of Ian Alexander Macliver filed 2 June 2022 [34], 'IAM-30', 'IAM-31'; Affidavit of Nicole Brooke Lewis filed 2 June 2022 [9] - [10]; Affidavit of Brendan Patrick Henry filed 1 June 2022 [15] - [19], 'BPH-3', 'BPH-4'.

[6] Re Wesfarmers Ltd [No 2] [2018] WASC 357 [12].

[7] Re International Goldfields Ltd [2004] WASC 112 [7].

[8] Re Wesfarmers Ltd [No 2] [13]; Re Seven Network Ltd [No 3] [2010] FCA 400; (2010) 267 ALR 583 [31].

[9] Re Wesfarmers Ltd [No 2] [13]; Re Seven Network Ltd [No 3] [32] - [33].

[10] Re Seven Network Ltd [No 3] [35] - [40], [50], [52].

[11]Seventh affidavit of Jacob Ronald Carmody filed 29 April 2022 [7(a)].

[12] Seventh affidavit of Jacob Ronald Carmody filed 29 April 2022 [7(b)].

[13] Affidavit of Emilia Varga filed 2 June 2022; Affidavit of Aasish Joshi filed 31 May 2022; Affidavit of Yuansong Gu filed 31 May 2022; Affidavit of Andrew Jonathon Ahyee filed 31 May 2022; Affidavit of Brae Damon Allen filed 31 May 2022; Affidavit of Viktor Dedic filed 31 May 2022; Affidavit of Michael Milan Milivojac filed 31 May 2022; Affidavit of Timothy James Filmer Mason filed 31 May 2022; Affidavit of Jessica Sayers filed 31 May 2022.

[14] Fourth affidavit of Joseph Charles Belladonna filed 2 June 2022 [11] - [16].

[15]Third affidavit of Ian Alexander Macliver filed 2 June 2022 [12] - [13], [18]; Affidavit of Saul Collins filed 2 June 2022 [6], [12] - [17], [25], [42], [43].

[16] Third affidavit of Ian Alexander Macliver filed 2 June 2022, 'IAM-30', 'IAM-31'.

[17] Affidavit of Brandon Lee McEvoy filed 3 June 2022, 'BLM-13', 'BLM-14'.

[18] Second affidavit of Brandon Lee McEvoy filed 7 June 2022, 'BLM-16'.

[19] Affidavit of Emilia Varga filed 2 June 2022 [94].

[20] Third affidavit of Ian Alexander Macliver filed 2 June 2022 [36].

[21] Re TriAusMin Limited [No 2] [2014] FCA 833 [10] - [11].

[22] See, for example, Re Ozgrowth Ltd [No 2] [2022] WASC 167 [18] (14.03% of shareholders holding 56.07% of shares) (for COR 27 of 2022) and the authorities cited at fn 28.

[23] Being approximately 3.84% at the 2020 annual general meeting and 4.22% at the 2021 annual general meeting: Affidavit of Nicole Brooke Lewis filed 2 June 2022 [7].

[24] Fourth affidavit of Joseph Charles Belladonna filed 2 June 2022 [7] - [10], 'JCB-16', 'JCB-17', 'JCB-18'.

[25] Fourth affidavit of Joseph Charles Belladonna filed 2 June 2022 [7] - [10], 'JCB-16', 'JCB-17', 'JCB-18'.

[26] See, for example, Re Westgold Resources Ltd [No 2] [2012] WASC 395 [41].

[27] Second affidavit of Brandon Lee McEvoy filed 7 June 2022, 'BLM-17'.

[28] Affidavit of Brendan Patrick Henry filed 1 June 2022 [9], [11]; Affidavit of Benjamin Noel Horne filed 1 June 2022 [10], [11].

[30] Fourth affidavit of Joseph Charles Belladonna filed 2 June 2022 [6], 'JBC-15'.

[31] Seventh affidavit of Jacob Ronald Carmody filed 29 April 2022, 'JRC-65'.

[32] Second affidavit of Brandon Lee McEvoy filed 7 June 2022, 'BLM-16'.