Snowside Pty Ltd as trustee for the Snowside Trust v Boart Longyear Ltd

The order entered is available on the Commonwealth Courts Portal, which attaches the Scheme of Arrangement (with amendments tracked)

The order entered is available on the Commonwealth Courts Portal, which attaches the Scheme of Arrangement (clean version)

BEACH J: 1 On 7 September 2023, I made orders requiring Newcrest Mining Limited to convene and hold a meeting of its shareholders on 13 October 2023 to consider a proposed scheme of arrangement (Re Newcrest Mining Limited [2023] FCA 1080). 2 At the scheme meeting, the resolution to agree to the scheme was passed by 92.63% of the votes cast and by 84.74% of the shareholders present and voting in person or by proxy. A scheme of arrangement is binding if it is passed by a majority of members present and voting in person or by proxy and by 75% of the votes cast, and it is subsequently approved by court order. 3 Yesterday I made orders approving the scheme under s 411(4) of the Corporations Act 2001 (Cth). 4 For this second court hearing Newcrest filed a short affidavit annexing the results of the poll taken at the scheme meeting and the ASX announcement advising of the details of the second court hearing, and demonstrating that the board of Newcrest had declared the permitted dividend. At the hearing Newcrest also tendered a conditions precedent certificate to the effect that relevant conditions precedent had been satisfied or waived, and a letter from ASIC pursuant to s 411(17)(b) stating that it had no objection to the scheme. 5 On this application to approve the scheme, I was satisfied that all statutory and procedural requirements in relation to the convening and conduct of the scheme meeting had been observed. The scheme meeting was properly convened and held in accordance with my convening orders. The resolution to agree to the scheme was duly passed. Further, all other relevant requirements of the Act and the Federal Court (Corporations) Rules 2000 (Cth) had been complied with. 6 Now given that I was satisfied as to these matters, I then had a discretion to approve the scheme pursuant to s 411(4)(b). In that respect, the considerations relevant to the exercise of the Court's discretion are well established (see Re Amcor Ltd (No 2) [2019] FCA 842 at [7] to [11]). I do not need to repeat them. 7 Let me deal with some matters of particular interest.

US Securities Act exemption 8 If the scheme becomes effective, Newmont Corporation will be required to issue new Newmont shares, putting to one side for the moment Newmont CDIs or Newmont PDIs, to some Newcrest shareholders. 9 But unless an exemption applies, all Newmont shares offered in the United States must satisfy the registration requirements of the Securities Act of 1933 (US) involving the US Securities and Exchange Commission. However, s 3(a)(10) of the Securities Act contains an exemption to these registration requirements in the case of securities issued in exchange for other securities, and where the terms and conditions of the issue are approved by a court after a hearing upon the fairness of such terms and conditions. 10 Accordingly, Newcrest and Newmont intend to rely upon my approval of the scheme to qualify for the exemption in s 3(a)(10). 11 Now this issue was discussed in my earlier reasons. I noted: Now before an issuer can rely on the exemption, a number of conditions must be satisfied. These conditions arise from the combined effect of the matters set out in s 3(a)(10) of the Securities Act as well as the Staff Legal Bulletin No. 3A (CF), Division of Corporation Finance, SEC, 18 June 2008. 12 Now in Re Atlantic Gold NL (No 2) [2014] FCA 869 at [8], Jacobson J set out an approach to dealing with these conditions. In my earlier reasons, I referred to this approach and noted that at the second court hearing in this case I was likely to adopt this approach. Jacobson J's approach was to address the various conditions of qualifying for the s 3(a)(10) exemption in his reasons, and to record whether or not they had been satisfied. In this respect, his Honour said (at [8]): In accordance with that approach, it is appropriate to note the following: • the scheme contemplates the issue of Spur securities as a scheme consideration; • the Court was advised before commencement of the approval hearing that Atlantic and Spur would rely on the s 3(a)(10) of the US Securities Act exemption on the basis of the Court's approval of the scheme; • the Court was informed of the manner in which the scheme consideration will be calculated and was informed of the securities to be offered as scheme consideration. An independent expert report sworn by the expert concluded that the proposal is in the best interests of Atlantic shareholders. The Court has taken that evidence into account in determining whether the scheme is fair and thus should be approved; • the Court, as it is statutorily required to do, held a hearing to consider the fairness and reasonableness of the proposed scheme; and • that hearing has been open to the public and any person to whom Spur Securities are to be issued has standing to appear. Notice of the date of the hearing was included in the scheme booklet sent to all shareholders of Atlantic prior to the proposal being considered by the meeting of those shareholders and was advertised in a daily newspaper circulating throughout the country. There was no appearance by any shareholder. 13 I have followed the same approach. In the present case each of the conditions of qualifying for the s 3(a)(10) exemption has been satisfied. 14 First, I was advised before the commencement of the approval hearing that reliance would be placed on the s 3(a)(10) exemption on the basis of my approval of the scheme. 15 Second, I have been informed of the securities to be offered as scheme consideration, and an independent expert report has valued those securities and concluded that the proposal is in the best interests of shareholders. 16 Third, the hearing before me was open to the public and any person to whom new Newmont shares were to be issued had standing to appear. Notice of the date of the hearing was included in the scheme booklet sent to all shareholders, as well as on the ASX market announcements platform on 10 October 2023. No shareholder gave notice of any intention to appear at the second court hearing to oppose the approval of the scheme and none appeared before me. 17 Fourth, I held a hearing to consider the fairness and reasonableness of the scheme. And in my view the scheme was both procedurally and substantively fair to Newcrest shareholders who were entitled to receive the scheme consideration, whether in the form of Newmont shares, Newmont CDIs or Newmont PDIs. 18 Let me now say something about the conditions precedent.

Conditions precedent 19 Now I ordinarily require at the stage at which my approval is sought that all conditions precedent to the scheme, other than my approval of the scheme and the scheme coming into effect, have been satisfied or waived. But there was a glitch in the present context relating to the Securities Act exemption. 20 At yesterday's hearing, Newcrest and Newmont relied upon a conditions precedent certificate regarding the satisfaction or waiver of the conditions precedent. The conditions precedent certificate confirmed that all relevant conditions precedent to the scheme had been satisfied or waived, other than the conditions relating to court approval of the scheme and, relevantly to the present discussion, the Securities Act exemption. Let me elaborate on this latter aspect. 21 The condition precedent in relation to the Securities Act exemption is contained in clause 3.1(t) of the Scheme Implementation Deed (SID), and is incorporated by reference into clause 3.1(a) of the scheme. Clause 3.1(a) of the scheme is in the following terms: all the conditions in clause 3.1 of the Implementation Deed (other than the condition in clause 3.1(1) of the Implementation Deed relating to Court approval of this Scheme) having been satisfied or waived in accordance with the terms of the Implementation Deed; 22 Clause 3.1 of the SID provides that the respective obligations of the parties in regards to implementation of the scheme are not binding until each of the conditions precedent listed in clause 3.1 of the SID is satisfied or waived. Clause 3.1(t) of the SID is in the following terms: Securities Act Exemption: The New Newmont Shares to be issued pursuant to the Scheme shall be exempt from the registration requirements of the Securities Act pursuant to section 3(a)(10) thereof. 23 The upshot is that the exemption from the Securities Act registration requirements is a condition precedent to the scheme. But there are two issues which arise in relation to this condition precedent. First, the manner in which this condition precedent is satisfied. Second, the time at which this condition precedent will be satisfied. 24 As to the first issue, unlike regulatory approval conditions precedent such as ACCC approval, the SEC does not grant any exemption or other approval in relation to s 3(a)(10) of the Securities Act. Rather, as I have explained in my earlier reasons, if all conditions of qualifying for the exemption are met, then the exemption applies, and there is no need to file a registration statement with the SEC in respect of the offer and sale of the securities to be issued. So, it follows that the condition precedent relating to the Securities Act approval in 3.1(t) of the SID will be satisfied once all conditions of qualifying for the exemption are met. 25 As to the second issue, the condition precedent cannot be met until after the approval hearing has taken place. This is because one of the conditions of qualifying for the exemption in s 3(a)(10) is that the Court has held a hearing to consider the fairness of the scheme. Moreover, the terms of s 3(a)(10) refer to "the terms and conditions of such issuance and exchange [being] approved", which condition cannot be satisfied until the Court approves the scheme. But once approved, Newmont at that point qualifies for the exemption in s 3(a)(10), and the condition precedent is satisfied. 26 But in such circumstances, the timing of the satisfaction of this condition precedent did not provide any reason for me to withhold my approval of the scheme. 27 Let me now say something concerning proposed amendments to the scheme and the exercise of power under s 411(6).

Amendments to the scheme 28 Now the proposed scheme of arrangement was provided to Newcrest shareholders as an attachment to the scheme booklet dated 7 September 2023. 29 But on 12 October 2023, which was the day before the scheme meeting, the parties to the SID, being Newcrest, Newmont and Newmont Overseas Holdings Pty Ltd, agreed to amend the proposed scheme of arrangement in various respects. The amendments addressed the following matters. 30 First, as to the timing of the issue of the scheme consideration, the scheme originally provided that the new Newmont shares to be issued as scheme consideration had to be issued on the implementation date, which was anticipated to be Monday 6 November 2023, to scheme shareholders who held their scheme shares on the Canadian Register, or to the relevant depositary nominee for scheme shareholders who held their scheme shares on the Australian Register or the PNG Register. The scheme then provided that also on the implementation date, scheme shareholders on the Australian Register had to be issued new Newmont CDIs, and scheme shareholders on the PNG Register had to be issued new Newmont PDIs. But in order to ensure that the scheme consideration including the new Newmont CDIs and the new Newmont PDIs could in fact be issued on the implementation date, it was necessary that the new Newmont shares be issued on the business day prior to the implementation date, that is, on Friday 3 November 2023 (New York time). Accordingly, the parties agreed to amend the scheme so that the new Newmont shares to be issued as scheme consideration had to be issued on or before the implementation date. 31 Second, clarification was added such that the new Newmont shares will commence trading on the business day after their issue, being Monday 6 November 2023 (New York time). 32 Third, a change was made to the definition of "Business Day" to ensure that the Newmont CDIs and Newmont PDIs commenced normal T+2 trading on Tuesday 7 November 2023, being the day after they were issued, as contemplated by the timetable published in the scheme booklet. 33 Fourth, there was a change to clause 5.2 of the scheme to reflect an agreed process with the depositary under Newcrest's American depositary receipt program, whereby the depositary was expected to become the registered shareholder in its own right on the Australian Register prior to the scheme record date, but wished to receive its scheme consideration in the form of new Newmont shares rather than CDIs. The relevant text is: … provided that where the Scheme Shareholder is Bank of New York Mellon in its capacity as the depositary of Newcrest's American depositary receipt (ADR) program (BNYM) or HSBC Custody Nominees (Australia) Limited (as custodian for BNYM) the Scheme Consideration will be issued to BNYM in the form of New Newmont Shares, and the obligation of Newmont to provide such Scheme Consideration will be satisfied by Newmont issuing New Newmont Shares in accordance with clause 5.2(a). 34 Fifth, there was a bringing forward of the time in clause 9.5(b) of the scheme by which scheme shareholders appointed Newcrest as their attorney for the purposes of executing the scheme transfer or any other necessary document. In particular, the amendment changed the time from "on the Implementation Date" to "the Business Day before the Implementation Date." This change was required by the Canadian Registry to address logistical and time zone considerations to ensure that signed transfer documents were received prior to the implementation date. 35 But I note that none of these amendments gave rise to any concern in relation to performance risk. Clause 4.2 of the scheme continues to provide that the obligation to transfer the scheme shares to Newmont Overseas is "subject to the provision of the Scheme Consideration in the manner contemplated by clause 5.2". This is to be effected by Newcrest delivering to Newmont Overseas duly completed scheme transfers executed on behalf of the scheme shareholders by Newcrest. 36 Now Newcrest published an announcement on the ASX market announcements platform shortly prior to the scheme meeting which referred to the amended scheme and included a brief summary of these amendments. The amendments to the scheme were also addressed at the scheme meeting. 37 Further, at the scheme meeting, Newcrest shareholders voted on the following resolution, which was set out in the notice of scheme meeting included with the scheme booklet: That, pursuant to and in accordance with section 411 of the Corporations Act 2001 (Cth), the scheme of arrangement proposed between Newcrest Mining Limited and the holders of its fully paid ordinary shares as contained in and more precisely described in the Scheme Booklet of which the notice convening this meeting forms part, is agreed to (with or without modification as approved by the Federal Court of Australia to which Newcrest and Newmont agree). (my emphasis) 38 Accordingly, whilst the terms of the resolution agreed to at the scheme meeting referred to the scheme of arrangement attached to the scheme booklet, shareholders voted with knowledge of the amendments. Further, the resolution agreed to at the scheme meeting was that the scheme is "agreed to (with or without modification as approved by the Federal Court of Australia to which Newcrest and Newmont agree)." Newcrest and Newmont have agreed to the modifications, and Newcrest sought an order under s 411(6) that I approve the scheme with the amendments referred to. 39 Now the Court's power under s 411(6) to approve a scheme subject to amendment is a broad power, and it is not limited to alterations which are immaterial, insubstantial or insignificant. It is only circumscribed by the requirement that the Court thinks the alteration is one that is just (Snowside Pty Ltd as trustee for the Snowside Trust v Boart Longyear Ltd (2017) 122 ACSR 291 per Bathurst CJ, Beazley P and Leeming JA at [26]; Re Billabong International Limited (No 2) [2018] FCA 496 at [13] to [16] per Yates J). 40 In my view, given the minor nature of the amendments and the fact that shareholders voted with knowledge of these amendments, the alterations are just. 41 Now in some cases where the need for amendments to a scheme becomes apparent in sufficient time prior to a scheme meeting, one available approach is to seek shareholder approval of new resolutions at the scheme meeting, namely, a resolution amending the terms of the scheme, and then a resolution agreeing to the terms of the amended scheme. This is an alternative to using s 411(6). 42 But in the present case, the amendments were only agreed (as between Newcrest, Newmont and Newmont Overseas) on the day prior to the scheme meeting, which did not allow sufficient time for this alternative approach. 43 In any event, the approach that Newcrest adopted, which was to seek a s 411(6) order, is the more efficient approach, at least in the circumstances of this case. 44 I recently adopted the same approach in similar circumstances in Re Carbon Revolution Limited (No 2) [2023] FCA 1173 where I said (at [97]): Now although shareholders may vote on the original scheme as proposed, they will be doing so in the knowledge that the Court's approval will be sought for an amended form of the scheme. Moreover, at the time that they will vote they will know of the proposed amendments. In such circumstances, at the second court hearing, orders approving the scheme in its modified form pursuant to s 411(6) can then be made on the assumption that shareholders were aware of the proposed amendments and took that into consideration in voting in favour. I should say that this manner of proceeding is not without precedent (see, for example, Re Billabong International Limited (No 2) [2018] FCA 496 although the context was of course different). 45 In all the circumstances, it was appropriate to proceed by making a s 411(6) order.

Section 411(17) 46 Now the Court's power to approve a members' scheme of arrangement is restricted by s 411(17). At the approval stage, the Court must be satisfied there is no proscribed purpose as described in s 411(17)(a), or there must be provided to the Court a statement in writing by ASIC that it has no objection to the arrangement (see s 411(17)(b)). 47 Now a "no objection" letter was provided by ASIC. Such a letter satisfied the requirements of s 411(17)(b), and consequently the potential impediment under s 411(17) to the approval of the scheme was removed. Moreover, it is well established that the Court should not otherwise refuse approval of a scheme of arrangement merely because it could also have been effected utilising the mechanisms under Chapter 6.

Court approval 48 In exercising my discretion whether to approve the scheme as modified, I have considered whether the scheme is fair and reasonable so that an intelligent and honest shareholder, properly informed and acting alone, might approve it. I was satisfied as to this. The following matters are relevant. 49 First, there is overwhelming support of the Newcrest shareholders as reflected in the voting results of the scheme meeting. Proof of the relevant statutory majorities establishes that prima facie the scheme is fair. Moreover, shareholders are in the best position to judge whether an arrangement is in their commercial interests, and the Court should be reluctant to make a decision contrary to the views expressed by those shareholders. 50 Second, there is the recommendation from the directors that shareholders vote in favour of the scheme, for the reasons given in the scheme booklet. 51 Third, there is the opinion of the independent expert that the scheme is in the best interests of Newcrest shareholders. 52 Fourth, there are the disclosures in the scheme booklet which set out a detailed description of the scheme, including the potential benefits and disadvantages of the scheme. 53 Fifth, the scheme contains measures to protect shareholders against performance risk. 54 Accordingly it was appropriate to exercise my discretion in favour of approving the scheme as modified.

Conclusion 55 For the foregoing reasons, I granted the necessary approval and made the orders sought. I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Beach.