Zenyth Thereapeutics Ltd v Smith

SIOPIS J: 1 This is the second hearing of an application for the approval of a scheme of arrangement under s 411(1) of the Corporations Act 2001 (Cth) (Act). 2 The Court made orders on 24 May 2017 for the convening of a meeting of shareholders of Blackgold International Holdings Limited (Blackgold) to consider, and if thought fit, approve, the scheme of arrangement. The scheme provides for the acquisition by a company, Vibrant Group Limited (Vibrant), which is a Singaporean domiciled company, of all the shares in Blackgold. 3 The meeting of Blackgold shareholders to consider the scheme of arrangement was duly held on 26 June 2017. There is evidence that at the meeting the scheme was approved by 99.89% of the votes cast; and by 94% of the shareholders who attended in person or by proxy. Accordingly, the requisite majorities in favour of approving the scheme prescribed by s 411(4) of the Act were obtained at the meeting. 4 There is also evidence that the conditions precedent in the scheme implementation deed have been met or waived. 5 Further, there is evidence that there has been compliance with the Court orders made on 24 May 2017. In this regard, Mr Healy took me to some affidavits which were filed earlier today and read in Court, to deal with an issue which had been raised by the Australian Securities and Investments Commission (ASIC) prior to ASIC issuing its no objection letter under s 411(17)(b) of the Act. The issue raised by ASIC related to whether there was sufficiently probative evidence that the Court orders relating to the dispatch of the scheme booklet had been complied with. The evidence which was adduced today was direct evidence from the persons who were involved in the dispatch of the scheme booklet. I am satisfied, on the basis of that evidence that there was compliance with the Court orders. 6 One of the matters to which the Court has regard at the second hearing for the approval of a scheme of arrangement, is whether the scheme is fair and reasonable such that an honest and independent shareholder might rightly approve it. 7 Mr Healy has raised with me the fact that, as mentioned in the reasons delivered on 24 May 2017, in their expert report which had been included in the scheme booklet, the experts had opined that the scheme was not fair but was reasonable, and that, in the absence of any better offer being made, it was in the best interests of shareholders to approve the scheme of arrangement. 8 There have been a number of occasions where the courts have at the second hearing, approved a scheme of arrangement in those circumstances (Zenyth Thereapeutics Ltd v Smith (2006) 60 ACSR 548; Re Sierra Mining Ltd [2014] FCA 694; Re Westgold Resources Ltd (No 2) [2012] WASC 395; GRD Ltd, in the matter of GRD Ltd [2009] FCA 1595; Re Cytopia Ltd (No 2) [2010] VSC 4 and Re CIC Australia Ltd (No 2) [2015] NSWSC 1314). 9 I found the observations of Brereton J in the case of Re CIC Australia Limited [2015] NSWSC 557 at [8]-[17] to be helpful in this regard, although those observations were made at the first hearing of the approval process. 10 At [17], Brereton J observed: Ultimately, so long as they are properly appraised that the independent expert considers the scheme not to be fair and why, it is for the scheme shareholders to decide whether it is an offer that they should accept. 11 I observed at [18] and [19] in my reasons in the first hearing (Blackgold International Holdings Limited, in the matter of Blackgold International Holdings Limited [2017] FCA 601), that it would be for the shareholders to make of the expert report what they make; and that it would always be open to any one or more of them to come to the hearing today to oppose the making of the final orders. 12 One can infer from the overwhelming majorities in favour of approving the scheme, that notwithstanding the content of the expert report, the shareholders were of the view that it was in their best interests to approve the scheme. 13 Further, as it has transpired, no one has appeared today to oppose the making of the orders approving the scheme. 14 So, in my view, the experts' opinion does not constitute an obstacle to the final approval of the scheme. 15 As to s 411(17)(b) of the Act, Mr Healy has read an affidavit from Mr McMullan, dated 28 June 2017, which attaches the usual no objection letter from ASIC. Further, there is no reason why the Court should exercise its residual discretion not to approve the scheme, notwithstanding the non-objection which has been provided under s 411(17)(b). 16 In addition, Mr Healy has asked for an order under s 411(12) of the Act, exempting compliance with s 411(11) which requires Blackgold to annex these orders to every copy of its constitution issued after the orders are made. 17 I will make that order because once the scheme of arrangement is implemented, Blackgold will be a wholly owned subsidiary of Vibrant and no utility would be served by annexing the orders to any further copies of the constitution issued. 18 Accordingly, I will make the orders in terms of the minute of proposed orders. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.