Sino Gas & Energy Holdings, in the matter of Sino Gas & Energy Holdings Limited (No 2) [2018] FCA 1423

legal principles 4 In Medical Australia Ltd, in the matter of Medical Australia Ltd (No 2) [2017] FCA 1429 at [4] I said the following about the exercise of the discretion under s 411(4) of the Act: The Court has a discretion whether to approve a scheme and is not bound to approve it merely because it previously made orders for the convening of a meeting or because the statutory majorities have been achieved: see Re Seven Network Ltd (ACN 052 816 789) (No 3) (2010) 267 ALR 583; [2010] FCA 400 (Seven Network) at [31] (per Jacobson J). The Court will usually approach the task on the basis that members are better judges of what is in their own commercial interests than the Court: Seven Network at [32]. 5 The matters which the Court will need to be satisfied of when determining whether to approve a scheme at the second court hearing include that: (1) the orders of the Court convening the scheme meeting were complied with; (2) the resolution to approve the scheme was passed by the requisite majorities and that other statutory requirements have been satisfied; (3) all conditions to which the scheme is subject (other than Court approval and lodgement of the Court's orders with the Australian Securities and Investments Commission (ASIC)) have been met or waived; (4) the scheme is fair and reasonable so that an intelligent and honest shareholder, properly informed and acting alone, might approve it. In considering this question, it is not the role of the Court to usurp the decision of shareholders by imposing its own commercial judgment on the scheme or to consider whether a better scheme might have been proposed; (5) all matters that could be considered relevant to the exercise of the Court's discretion have been brought to its attention; and (6) there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme. See Signature Capital Investments Limited, in the matter of Signature Capital Investments Limited (No 2) [2016] FCA 385 at [4] (per Farrell J) and the cases cited therein.

Compliance with the Court's orders 6 I was satisfied that there had been compliance with the Orders. 7 The evidence established that: (1) subject to the issue referred to at [8]-[10] below, copies of the scheme booklet in substantially the same form as exhibit IW-2 together with its annexures were distributed to all holders of ordinary shares in Sino Gas on 1 August 2018; (2) the scheme booklet was despatched in accordance with the Orders; (3) the scheme meeting was held at the time and place specified in the Orders and Philip Bainbridge acted as chairperson of the meeting; and (4) a notice of hearing in the form of Annexure A to the Orders was published in The Australian newspaper on 30 August 2018. 8 The issue that arose in relation to compliance with the Orders concerned the time of identification of the members who were to receive the scheme booklet. The evidence established that the initial despatch of the scheme booklet was to each member recorded on the share registry of Sino Gas at the close of business on 25 July 2018 rather than as at 7.00 pm (Sydney time) on 27 July 2018 as required by Order 8 of the Orders. 9 In order to address that issue, Kesone Sunphantry, a client relationship manager at Link Market Services who was responsible for overseeing the despatch of the scheme booklet to members on behalf of Sino Gas, reviewed the share registry on 8 August 2018. In doing so, she identified 12 new shareholders who had acquired Sino Gas shares between the close of business on 25 July 2018 and 7.00 pm (Sydney time) on 27 July 2018. Of those new members, one member had nominated an electronic address and the remaining 11 members had nominated postal addresses in Australia for the purpose of receiving communications from Sino Gas. On 8 and 9 August 2018 Mr Sunphantry arranged for each of those 12 new members to be sent a copy of the scheme booklet and its annexures by email or post as applicable. 10 Given the number of affected shareholders, that the scheme booklet was despatched some three and a half weeks prior to the Scheme Meeting and that no complaint was made by any of the affected shareholders, I was satisfied, despite what had occurred, that there had been sufficient compliance with the orders made for despatch of the scheme booklet.

Approval of Scheme by members 11 The evidence, as summarised at [2] above, established that the statutory majorities in s 411(4)(a)(ii)(A) and (B) had been satisfied.

Statutory and other requirements otherwise satisfied 12 By letter dated 10 September 2018 ASIC informed Sino Gas that, pursuant to s 411(17)(b) of the Act, it had no objection to the Scheme. 13 All statutory preconditions to the Court's approval were therefore satisfied. 14 At the hearing, Sino Gas tendered evidence in the form of a deed signed in counterparts by it and LSF10 Summertime Investments, Ltd confirming that as at 8.00 am on the second Court date, each of the conditions precedent in cl 3.1 of the scheme implementation agreement had been satisfied or waived in accordance with cl 3.4 of that agreement, except for those conditions relating to Court approval of the Scheme.

The Scheme is fair and reasonable 15 At the first Court hearing, the Court was "satisfied that the proposed scheme is of such a nature and is cast in such terms that, if it were to receive the requisite statutory majority, the Court would be likely to approve the scheme on the hearing of an unopposed application": Sino Gas & Energy (No 1) at [39]. 16 I was satisfied that nothing had occurred since the first Court hearing which warranted a departure from that conclusion. In particular: no one had come forward to Sino Gas or the Court to oppose the Scheme and no contentious issues were raised by members at the Scheme Meeting; and the Scheme was overwhelmingly supported by those shareholders who attended the meeting in person or by proxy.

All necessary matters brought to the attention of the Court 17 At the first Court hearing Sino Gas notified the Court of four matters warranting the attention of the Court. Those matters were not considered by the Court to be of concern to it in determining whether the Scheme should receive the Court's approval if the requisite number of votes was achieved: see Sino Gas & Energy (No 1) at [39]-[53]. None of those matters led me to conclude that I should refuse approval of the Scheme at the second Court hearing. I was satisfied that Sino Gas had brought all necessary matters to the Court's attention.

Full and fair disclosure 18 At the first Court hearing, the Court was satisfied that the scheme booklet would provide proper disclosure to members: see Sino Gas & Energy (No 1) at [27]-[30]. The scheme booklet provided to members was substantially in the form approved for dispatch by the Court. I was satisfied that the scheme booklet met the requirements of s 411(3) and s 412(1) of the Act.

conclusion 19 For those reasons I was satisfied that I should approve the Scheme and made the orders sought by Sino Gas. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic.