Tamboran Resources Limited, in the matter of Tamboran Resources Limited [2023] FCA 1331

Federal Court of Australia|2023-11-02|Before: Shariff J

Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (Act), the Plaintiff convene a meeting (Scheme Meeting) of the holders of fully paid ordinary shares in the Plaintiff (Shareholders) for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement between the Plaintiff and the Shareholders in the terms set out in Exhibit 1 (Scheme).
Pursuant to section 1319 of the Act: a. the Scheme Meeting be held on Friday, 1 December 2023 commencing at 10:00am (Sydney time) in person at Cliftons Sydney, Level 13, 60 Margaret Street, Sydney in the State of New South Wales and virtually through the online meeting platform at https://web.lumiagm.com/331824008 (as to virtual access, the meeting to be accessed substantially in accordance with the instructions contained in the Notice of Scheme Meeting set out in Annexure E of the scheme booklet); and b. the Scheme Meeting be convened, held and conducted in accordance with the provisions of Part 2G.2 of the Act that apply to members of a company, and the provisions of the Plaintiff's constitution that are not inconsistent with the Act and these orders.
The following documents be approved for distribution to Shareholders: a. the scheme booklet, substantially in the form of Exhibit RAV1 pages 277 - 565 (inclusive) which is hereby approved as the explanatory statement for the purposes of section 412(1)(a) of the Act (Scheme Booklet); b. a proxy form substantially in the form appearing in Exhibit RAV1, pages 564 and 565 (Proxy Form); c. an email broadcast substantially in the form of Annexure A to these orders providing electronic links to the Scheme Booklet and the Proxy Form (Email Broadcast); and d. a letter substantially in the form of Annexure B to these orders providing instructions on how to access the Scheme Booklet electronically (Letter Notification), (together, the Scheme Materials).
The Scheme Meeting be convened by sending the following documents on or before 2 November 2023 to each Shareholder whose name is recorded in the Plaintiff's register of members as being a Shareholder as at 7:00pm (Sydney time) on Wednesday, 29 November 2023: a. those Shareholders who have provided an email address to the Plaintiff for shareholder communications (Email Shareholders) are to be sent the Email Broadcast by email to their nominated email address; b. those Shareholders who have not provided an email address to the Plaintiff for shareholder communications, who have a postal address shown on the register of members of the Plaintiff as being within Australia are to be sent, by prepaid ordinary post to their postal address, the Letter Notification, a Proxy Form and a reply-paid envelope; c. those Shareholders who have not provided an email address to the Plaintiff for shareholder communications and whose postal address is shown on the register of members of the Plaintiff as being outside Australia are to be sent the Letter Notification, a Proxy Form and an unstamped envelope return addressed to the Plaintiff's company registry by prepaid airmail to their postal address; and d. if the Plaintiff, through its share registry services provider, receives an automatic electronic "bounce back" notification that the Email Broadcast was unable to be delivered to the nominated email address of any of the Shareholders (Undelivered Email Recipients), the Letter Notification, the Proxy Form and a reply-paid envelope are to be sent by pre-paid ordinary post (in the case of Shareholders within Australia), or the Letter Notification, the Proxy Form and an unstamped envelope return addressed to the Plaintiff's company registry are to be sent by pre-paid airmail (in the case of Shareholders outside Australia), to the Undelivered Email Recipients' respective postal addresses.

A. Introduction 1 The Plaintiff, Tamboran Resources Limited (Tamboran), seeks orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) (the Act) for the convening of a meeting of its shareholders (Scheme Shareholders) for the purpose of considering and voting on the approval of a scheme of arrangement proposed to be made between Tamboran and the Scheme Shareholders (Scheme). 2 On 27 October 2023, I made the orders that were sought by Tamboran (reflecting the substance of the relief claimed in prayers 1 to 5 of the Originating Process filed on 13 October 2012). 3 These are my reasons for making those orders.

B. BACKGROUND 4 Tamboran is an Australian public company limited by shares. Its shares are quoted for trading in the financial market operated by ASX Limited (the ASX). 5 Tamboran is an on-shore gas company with exploration permits in the Northern Territory's Beetaloo Sub-basin. Tamboran's natural gas portfolio comprises Northern Territory petroleum exploration permits. Those exploration permits are either wholly or partially held by Tamboran's subsidiaries and comprise Northern Territory Exploration Permits (EP): EP 76, EP 98, EP 117, EP 136, EP 143, EP 161 and EP(A) 197. 6 The Scheme is known as a "redomiciliation scheme" or a "top-hatting scheme" and involves the superimposition of a new holding company at the apex of Tamboran's corporate structure by the transfer of all the issued shares in Tamboran to Tamboran Resources Corporation (incorporated in the State of Delaware, United States of America (United States)) (Delaware Company File Number 7640969) (Tamboran US HoldCo). The Scheme does not involve any alteration to the location of Tamboran's subsidiaries, or any of their assets or liabilities. 7 The Scheme, if approved and implemented, will involve Scheme Shareholders receiving one "Tamboran US HoldCo CDI" for each share they hold in Tamboran as at the time of the scheme being implemented. A Tamboran US HoldCo CDI is a CHESS depositary interest (CDI) that confers a beneficial interest in 1/200th of a Tamboran US HoldCo Share and is able to be traded on the ASX. This is intended to be an interest equivalent to the economic interest that Scheme Shareholders presently hold. 8 Tamboran's application was supported by: (a) the Affidavit of Mr Ashley Julian Rose dated 13 October 2023. Mr Rose is a Partner of Tamboran's Australian lawyers, Squire Patton Boggs (AU); (b) the Affidavit of Mr Rohan Andre Vardaro dated 26 October 2023. Mr Vardaro is Tamboran's in-house Counsel and Company secretary; and (c) the Affidavit of Mr Jonathan Fitzgerald Clarke Baker dated 27 October 2023. Mr Baker is a solicitor employed by Squire Patton Boggs (AU). 9 The evidence that I received included the Scheme Booklet and its attachments, the Scheme Implementation Deed, the terms of the Scheme, the Deed Poll executed by Tamboran US HoldCo, evidence about the matters required by rr 3.2(b)(ii) and 3.2(b)(iii) of the Federal Court (Corporations) Rules 2000 (Cth) (Rules) and draft announcements to the ASX. The evidence also set out the steps taken by Tamboran to verify the information contained in the Scheme Booklet, as well as the steps that Tamboran has taken to identify its shareholders and drafts of proposed communications with shareholders (such as the notice of the proposed Scheme meeting). I also received evidence that the Australian Securities and Investments Commission (ASIC) did not oppose the Scheme or the making of the orders sought by Tamboran. 10 The application and evidence prepared by and on behalf of Tamboran accorded with the Court's Schemes of Arrangement Practice Note (GPN-SOA) (Practice Note). The Practice Note implements the Practice Note - Harmonisation in schemes of arrangement that was developed by the Committee for the Harmonisation of Rules of the Council of Chief Justices of Australia and New Zealand. The Practice Note at [3] states that: The Court recognises that the process for approval of schemes of arrangement is intended to be as simple as possible and the Court is supportive of simplification so far as it is consistent with the Court's statutory responsibilities and binding authority. 11 Tamboran and its legal representatives, including Mr Oakes of Senior Counsel, who appeared at the hearing on 27 October 2023, adhered to the Practice Note. The evidentiary materials were presented in a cohesive manner, and I was not burdened with unnecessary documents or information. Mr Oakes presented the case efficiently and with utmost candour consistent with his obligations and the character of the proceedings being ex parte in nature. 12 Consistent with the Practice Note, I made orders pursuant to r 1.3 of the Rules that compliance with the following Rules be dispensed with: (a) r 3.2(b)(ii) on the basis that these matters (to the extent relevant) were addressed in the Affidavit of Mr Vardaro; and (b) r 3.4 and Form 6. In this regard, I was satisfied that it was appropriate to order that Tamboran publish an announcement on the ASX containing the substance of the matters set out in Form 6 of the Rules. 13 Prior to the hearing, I had in substance dispensed with compliance with r 2.4(1) of the Rules, as to the form and content of the Affidavit filed in support of Tamboran's Originating Application.

C. THE ROLE OF THE COURT 14 The principles applicable to the role of the Court in approving the holding of scheme meetings are well settled: see Capilano Honey Limited, in the matter of Capilano Honey Limited [2018] FCA 1568; (2018) 131 ACSR 9 at [32]-[34] per Farrell J; Boart Longyear Limited, in the matter of Boart Longyear Limited [2019] FCA 62; (2019) 134 ACSR 591 at [26] per Farrell J. 15 These principles have been outlined in a number of recent decisions of this Court: Dealt Holdings Ltd, in the matter of Dealt Holdings Ltd [2022] FCA 1104 at [22]-[26] per Halley J; MOQ Limited, in the matter of MOQ Limited [2022] FCA 1160 per Halley J; Blackmores Limited, in the matter of Blackmores Limited [2023] FCA 624 per Jackman J; DDH1 Limited, in the matter of DDH1 Limited [2023] FCA 982 per Colvin J; Newcrest Mining Limited, in the matter of Newcrest Mining Limited [2023] FCA 1080 per Beach J; Essential Metals Limited, in the matter of Essential Metals Limited [2023] FCA 1101 per Jackson J; Mithril Resources Ltd, in the matter of Mithril Resources Ltd [2023] FCA 1177 per Derrington J. 16 These authorities establish that the Court must be satisfied of a number of preconditions to the exercise of its discretion. The preconditions include that: (a) the proposed scheme must be an "arrangement"; (b) the proposed scheme must be in respect of a Part 5.1 body and as between that body and its creditors or members; (c) an application for an order pursuant to s 411(1) must be made to the Court in a summary way by the Part 5.1 body, or any creditor or member; (d) 14 days' notice of the Court hearing at which the order is sought, or such lesser period as ASIC or the Court permits, must be given to ASIC; (e) the Court must be satisfied that ASIC has had a reasonable opportunity: (i) to examine the terms of the proposed scheme to which the application relates and a draft explanatory statement relating to the proposed scheme; and (ii) to make submissions to the Court in relation to the proposed scheme and the draft explanatory statement. (f) the proposed scheme is bona fide and properly proposed; (g) the requirements in ss 411(3) and 412 of the Act, and reg 5.1.01 and Sch 8 to the Corporations Regulations 2001 (Cth) (Regulations), regarding the information that is to be sent to creditors or members about the scheme have been met, such that the explanatory statement relating to the proposed scheme will provide sufficient disclosure to creditors or members; (h) all other procedural requirements have been met, including those in the Rules; and (i) the proposed scheme is "fit for consideration" at the meeting, in the sense that there is no apparent reason why the scheme should not, in due course, receive the Court's approval if the necessary majority of members' or creditors' votes is achieved. 17 In relation to the last of the above matters, the authorities state that it is not necessary for the Court to descend into the commercial merits of the proposed scheme and that the proposed arrangement is one that is fit for consideration by a meeting of members if it is likely to gain the Court's approval if passed by the necessary majority: see Essential Metals Limited, in the matter of Essential Metals Ltd [2023] FCA 240 at [24] per Banks-Smith J.

D. OVERVIEW OF THE SCHEME 18 As noted above, the Scheme involves the "redomiciliation" of the ultimate holding company in a group of companies from Australia to the United States. 19 At present, Tamboran has 1,716,672,571 full paid ordinary shares. In total, there are 2,363 shareholders (with 2,221 of them having an Australian address and 142 of them having an address outside Australia). There are no ineligible foreign shareholders. 20 Tamboran has also granted 54,501,251 unlisted options which all expire on 20 May 2026. These options were granted pursuant to Tamboran's employee equity incentive plan. Tamboran has prepared an Option Amendment Deed to deal with the interests of the option holders if the Scheme is approved. 21 If approved and implemented, the Scheme will have the effect that Tamboran US HoldCo will become the holding company in the group. Tamboran US HoldCo will have the same directors as Tamboran. Although Tamboran HoldCo was incorporated on 3 October 2023 in the State of Delaware, it does not presently have any assets or liabilities and it has only entered into two agreements, being the Scheme Implementation Deed and a Deed Poll (to which I will return). Upon implementation, Tamboran US HoldCo will become the ultimate holding company of Tamboran's subsidiaries. It is these subsidiaries that wholly or partially hold Tamboran's exploration permits and other assets. There will be no change to the location, assets, or liabilities of any of these subsidiaries. 22 As noted above, the Scheme involves each of the Scheme Shareholders receiving one "Tamboran US HoldCo CDI" for each Tamboran share they hold. "CDIs" are financial products quoted on the ASX that confer the beneficial ownership in the underlying security of a foreign company to the holder. The legal title is held by the Australian depositary. This allows investors to trade interests in foreign securities by trading CDIs on the ASX. Tamboran US HoldCo will appoint CHESS Depositary Nominees Pty Ltd (CDN) to act as its Australian depositary. CDN is a wholly owned subsidiary of the ASX that was created to fulfill the functions of a depositary nominee. 23 Each "Tamboran US HoldCo CDI" will represent a beneficial interest in 1/200th of a Tamboran US HoldCo Share. The "Tamboran US HoldCo CDIs" are an interest equivalent to the economic interest that Scheme Shareholders presently hold. Any "Tamboran US HoldCo CDI" holder who wishes to convert the CDI to a share in Tambora US HoldCo will be able to do so by instructing Tamboran US HoldCo's Australian share registry. 24 As holders of CDIs are not registered shareholders of Tamboran US HoldCo, the rights attaching to the shares which underlie the CDIs must be exercised by CDN as the relevant depository. A holder of the CDIs may instruct the depository to exercise those rights on their behalf. "Tamboran US HoldCo CDI" holders will be sent notices of general meetings of Tamboran US HoldCo, but as they are not shareholders, they will not be automatically entitled to vote at any such meetings. The CDI holders can, however, direct CDN to have votes cast in a particular manner on their behalf. 25 These, and other aspects of the Scheme, have been set out in detail in the Scheme Booklet. Annexure A to the Scheme Booklet contains an independent expert's report authored by Mr Adam Myers and Mr Sherif Andrawes of BDO Corporate Finance (WA) Pty Ltd. The expert report expresses the opinion that the advantages of the Scheme outweigh its disadvantages and is in the best interests of the Scheme Shareholders as a whole in the absence of an alternative proposal or further information. 26 If approved, the Scheme will be implemented in accordance with the terms of the Scheme Implementation Deed and the terms of the Scheme itself. A Deed Poll has been executed Tamboran US HoldCo. Amongst other things, these arrangements mitigate against performance risk. In due course, there will be a legal opinion that the Deed Poll is legally binding and enforceable under the laws of the United Stated as against Tamboran US HoldCo. The Practice Note at [5(a)] indicates that recent case law has not required foreign law evidence of the enforceability of the Deed Poll in a foreign jurisdiction unless there is some uncertainty or other necessity. I did not, and do not, require such evidence in this matter at this stage.

E.1. The preconditions for the exercise of power 27 The Court's power under s 411(1) of the Act may be exercised if certain preconditions have been satisfied that are considered necessary for the exercise of that power: see MOQ Limited, in the matter of MOQ Limited [2022] FCA 1160 per Halley J citing Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited [2015] FCA 341 at [12] per McKerracher J. 28 On the evidence before me, I was satisfied that: (a) Tamboran is a Pt 5.1 body; (b) the Scheme Shareholders are members of Tamboran; (c) a company search of Tamboran from the records of ASIC was conducted on 12 October 2023, being no earlier than 7 days before the Originating Process was filed on 13 October 2013, in compliance with r 2.4(2) of the Rules; (d) the Scheme Meeting will be convened between members of the same class and the Scheme gives rise to a proposed arrangement between Tamboran and the Scheme Shareholders; (e) the Scheme can properly be described as an arrangement; (f) the Scheme is bona fide and properly proposed; (g) the 14-day notice period to ASIC under s 411(2)(a) of the Act of the first court hearing has been satisfied; (h) the Scheme Booklet provides adequate disclosure and contains the prescribed information. This information and other matters pertaining to Tamboran and its shareholders have been properly verified. The Scheme Booklet also discloses the information specifically required to be disclosed by s 412(1)(a) of the Act and reg 5.1.01 of the Corporations Regulations 2001 (Cth); (i) ASIC has had a reasonable opportunity to examine the terms of the Scheme and the Scheme Booklet, and to make any submissions to the Court. ASIC does not oppose the Scheme; (j) I received evidence in a manner consistent with the Practice Note at [3(d)] that on the information and belief of Mr Vardaro, each of the proposed chair and alternative chair of the Scheme Meeting have adequately and satisfactorily addressed the matters required by r 3.2 of the Rules; (k) I received evidence of the Deed Poll executed by Tamboran US HoldCo; (l) the proposed draft order for the convening of the Scheme Meeting identified the Scheme as required by r 3.3(1) of the Rules; and (m) as further addressed below, the Scheme is of such a nature and cast in such terms that, if it receives the necessary majority of votes, the Court would be likely to approve it. 29 Accordingly, I was satisfied that the necessary conditions existed such that I had the power to make the orders sought under ss 411(1) and 1319 of the Act.

E.2. Discretionary reasons favour the making of the orders 30 I was satisfied that I should exercise my discretion to make the orders sought. In brief, these are my reasons for doing so. 31 First, the Scheme Book adequately and fairly sets out the terms of the Scheme, as well as its advantages and disadvantages. This has been done not only by way of summary, but also by additional detailed reasoning and is supported by helpful postulations of "Frequently Asked Questions" and answers to them. 32 The Scheme Booklet helpfully explains the nature of CDIs and the interests that Tamboran's shareholders will come to hold if the Scheme is approved. The Scheme Booklet sets out a comparison between the legal and financial reporting regimes respectively in Australia and the United States that will affect those interests and rights. 33 By reason of these matters, I am satisfied that Scheme Shareholders will be in a position to make an informed choice about the merits of the Scheme and whether to approve it. 34 Second, the Scheme has been unanimously recommended by Tamboran's directors. The directors' interests have been fairly and adequately disclosed in the Scheme Booklet. The directors do not stand to obtain any benefit over and above the Scheme Shareholders. The recommendation of the directors in the absence of them obtaining any separate or additional benefit is a matter to which I gave favourable weight in the exercise of my discretion. 35 Third, the independent expert's opinion is that the Scheme is fair and reasonable and in the best interests of the Scheme Shareholders. In expressing this opinion, the independent expert has evaluated the advantages and disadvantages of the Scheme. In doing so, the authors of the opinion have brought to bear a considerable depth of knowledge about the industry and the marketplace. This too was a matter to which I gave favourable weight in the exercise of my discretion. 36 Fourth, Mr Oakes SC properly disclosed a number of matters that he considered were worthy of my careful attention (consistent with the faithful discharge of his duty to the Court). These matters included the interests of option holders and the operation of the Securities Act of 1933 (US). 37 In relation to the first matter, I was taken to evidence that it is Tamboran's intention that the rights of the option holders will be rolled over to become rights as against Tamboran US HoldCo pursuant to Option Amendment Deeds. I was satisfied that this was an appropriate means of dealing with the interests of the option holders. 38 In relation to the second matter, it was drawn to my attention that Tamboran US HoldCo intends to issue CDIs under the Scheme to shareholders in the United States in reliance upon exemptions contained the Securities Act of 1933 (US). The effect of this is that the Court's approval of the Scheme in these proceedings will be relied upon by Tamboran US HoldCo to support exemptions applicable in the United States: see, generally, Re Central Pacific Minerals NL [2002] FCA 239 at [28] - [34] per Emmett J; Re Simeon Wines Ltd [2002] SASC 204; (2002) 42 ACSR 454; Re Permanent Trustee Co Ltd [2002] NSWSC 1177; (2002) 43 ACSR 601; and Solution 6 Holdings Limited ACN 003 264 006, in the matter of Solution 6 Holdings Limited ACN 003 264 006 [2004] FCA 1049; (2004) 50 ACSR at [37] per Jacobson J. 39 Recently, in Re Newcrest Mining Ltd [2023] FCA 1080, Beach J observed at [68]-[69]: As was said in Damian, T and Rich, A, Schemes, Takeovers and Himalayan Peaks (4th ed, 2021) (at [13.2.7]): … it is generally accepted that securities can be issued to target members in, or who are citizens or residents of, the United States pursuant to an Australian scheme of arrangement without compliance with the US registration and prospectus requirements as a result of the exemption provided by section 3(a)(10). Accordingly, if the conditions of the s 3(a)(10) exemption are satisfied, 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 to persons who are citizens or residents of, the United States pursuant to the scheme of arrangement. 40 In order for Tamboran US HoldCo to rely upon the exemption, a number of conditions will need to be satisfied: see Re Newcrest Mining Ltd [2023] FCA 1080 at [70]-[73] per Beach J. These conditions include that this Court must be advised that Tamboran US HoldCo will seek to rely upon such an exemption in the United States and that this Court make a finding, before approving the transaction, that the terms and conditions of the Scheme are fair, both procedurally and substantively, to those to whom the securities will be issued. In the present case, Tamboran has drawn to my attention the intention of Tamboran US HoldCo to seek such an exemption and I am satisfied that the Scheme is both procedurally and substantively fair to the Scheme Shareholders who will come to hold Tamboran US HoldCo CDIs. 41 Sixth, as noted above, although I received evidence of a Deed Poll executed by Tamboran US HoldCo, I did not require foreign law evidence as to the enforceability of the Deed Poll in the United States as I did not consider that any uncertainty arose from its execution or that there was any other necessity at this stage. The approach I have taken is consistent with the Practice Note at [5(a)]. It is also consistent with the observations made by Jackman J in Blackmores Limited, in the matter of Blackmores Limited [2023] FCA 624 at [16]-[22], with which I agree. 42 Seventh, I was satisfied that the proposed communications to the ASX and to the Scheme Members were appropriate. 43 Finally, as noted above, I was satisfied that the Scheme was bona fide and, that, if it receives the necessary majority of votes, it is a Scheme that I would likely approve.

F. CONCLUSION 44 For the foregoing reasons, I was satisfied that the orders that were sought should be made, and, accordingly, exercised my discretion to make those orders. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Shariff.

Corporations Act 2001(Cth)ss 411, 411(1), 411(2)(a), 411(3), 412, 412(1)(a)

Federal Court (Corporations) Rules 2000(Cth)rr 1.3, 2.4(1), 2.4(2), 3.2, 3.2(b)(ii), 3.2(b)(iii), 3.3(1), 3.4

At a glance

Court

Decision date

Before

Source

Judgment (8 paragraphs)

Legislation Cited (3)

Cases Cited (15)

Cited By (1)