A-CAP Resources Ltd, An application - [2007] VSC 223

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST

No. 5215 of 2007

A-CAP RESOURCES LIMITED (ACN 104 028 542)	Corporation
A-CAP RESOURCES LIMITED (ACN 104 028 542)	Plaintiff

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JUDGE:	DODDS-STREETON J
WHERE HELD:	Melbourne
DATE OF HEARING:	22 June 2007
DATE OF JUDGMENT:	22 June 2007
CASE MAY BE CITED AS:	In the matter of an application by A-CAP Resources Ltd
MEDIUM NEUTRAL CITATION:	[2007] VSC 223

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CORPORATIONS – Corporations Act 2001 (Cth), ss.411(6), 1322 – Scheme of arrangement – Application for approval of scheme – Whether procedural irregularity – Failure to notify some members registered in Botswana of meeting to approve scheme until after meeting took place – Statutory majorities obtained at meeting – Subsequent steps to notify Botswana members.

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APPEARANCES:	Counsel	Solicitor
For the Plaintiff	Mr J.D. Merralls QC with Mr G.J. McEwen	G.A. Menzies

HER HONOUR:

The plaintiff, A-CAP Resources Limited (“A-CAP”), applies pursuant to s.411(6) of the Corporations Act 2001 Cth (“the Act”) for approval of a scheme of arrangement between the company and its members.

The plaintiff also seeks an order under s.1322(2) or (3) of the Act that the holding or convening of the scheme meeting held on 15 May 2007 was not invalid by reason of the failure to despatch the scheme documents and notice of the meeting to certain members registered on the Botswana Register of the company, or an order under s.1322(4)(a) or s.1322(2) of the Act that the meeting was not invalid by reason of non‑compliance with the order of 30 March 2007.

A-CAP is a public company. Its shares are listed for quotation on the ASX and the Botswana Stock Exchange. It has 109,895,078 shares on issue.

The proposed scheme is a “demerger”, pursuant to which the existing uranium and non‑uranium tenements of A-CAP will be split and held in separate corporate divisions. To that end, under the scheme, all 54,947,539 fully paid shares which A‑CAP owns in its wholly‑owned subsidiary, Botswana Metals Ltd (“BML”) will be distributed to A-CAP members (save for foreign shareholders) in specie, in accordance with the demerger provisions of the Income Tax Assessment Act, by way of a capital reduction pursuant to s.256C of the Act.

A-CAP acquired its shares in BML (which was incorporated on 19 January 2007 with one issued share held by A-CAP) under an acquisition agreement, independent of the scheme, whereby a subsidiary of BML acquired certain non-uranium tenements in Botswana from another A-CAP subsidiary, in consideration for the issue and allotment to A-CAP of the BML shares.

Upon implementation of the scheme, the A-CAP shareholders will receive A-CAP’s shares in BML and BML will cease to be a subsidiary of A-CAP. A-CAP (directly or indirectly) will retain the uranium tenements. BML will hold the non-uranium tenements.

The directors unanimously recommended the scheme because, inter alia, it would extend the opportunity for different companies holding the uranium and non‑uranium assets respectively to develop separately and the aggregate…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] VSC 223
Decision Date: 22 June 2007

CaseChat Overview and Summary

A-CAP Resources Ltd made an application for the approval of a scheme of arrangement under the Corporations Act 2001 (Cth). The dispute arose due to a procedural irregularity in the notification process of the meeting at which the scheme was approved. Some members registered in Botswana were not notified of the meeting until after it had taken place. Despite the irregularity, statutory majorities were obtained at the meeting. Following the meeting, steps were taken to notify the Botswana members. The court was required to determine whether the procedural irregularity was significant enough to invalidate the approval of the scheme.

The central legal issue before the court was whether the failure to notify some members, specifically those registered in Botswana, of the meeting until after it had already occurred constituted a procedural irregularity that invalidated the approval of the scheme. The court had to balance the statutory requirements for notice and the practicalities of the situation, including whether the Botswana members had an opportunity to be heard and whether the irregularity was material.

The court considered the statutory requirements under sections 411(6) and 1322 of the Corporations Act 2001 (Cth) and noted that proper notice is crucial for the validity of meetings and approvals under the act. However, the court also recognised the practical challenges in ensuring all members are notified in a timely manner, especially in cases involving international shareholders. Ultimately, the court determined that despite the irregularity, the statutory majorities obtained at the meeting and the subsequent efforts to notify the Botswana members meant that the approval of the scheme could not be invalidated on these grounds alone.

The court approved the scheme of arrangement, finding that while the procedural irregularity was significant, it did not render the approval invalid. The court acknowledged the efforts taken to rectify the situation post-meeting and considered the practicalities of ensuring timely notification to all members. This decision provides guidance on the importance of procedural compliance while also allowing for some flexibility in complex cases involving international shareholders.

Orders