Coalspur Mines Limited, in the matter of Coalspur Mines Limited
[2015] FCA 391
•17 March 2015
FEDERAL COURT OF AUSTRALIA
Coalspur Mines Limited, in the matter of Coalspur Mines Limited [2015] FCA 391
Citation: Coalspur Mines Limited, in the matter of Coalspur Mines Limited [2015] FCA 391 Parties: COALSPUR MINES LIMITED (ACN 003 041 594) File number(s): WAD 49 of 2015 Judge(s): SIOPIS J Date of judgment: 17 March 2015 Catchwords: CORPORATIONS – scheme of arrangement – application for the convening of a meeting under s 411 of the Corporations Act 2001 (Cth). Legislation: Corporations Act 2001 (Cth) s 411 Cases cited: In re Hills Motorway Ltd (2002) 43 ACSR 101 Date of hearing: 17 March 2015 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 18 Counsel for the Plaintiff: Mr A Papamatheos Solicitor for the Plaintiff: Hardy Bowen Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 49 of 2015
IN THE MATTER OF COALSPUR MINES LIMITED (ACN 003 041 594)
COALSPUR MINES LIMITED (ACN 003 041 594)
PlaintiffJUDGE:
SIOPIS J
DATE OF ORDER:
17 MARCH 2015
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1.Pursuant to s 411 of the Corporations Act 2001 (Cth) (Corporations Act), the plaintiff convene a meeting of holders of fully paid ordinary shares in the capital of the plaintiff (shareholders) to be held in Perth, Western Australia on 22 April 2015 at 10:00 am (Perth time) or on such other date and such other time as the Court may approve (scheme meeting) for the purpose of considering and if thought fit, approving with or without modifications, the scheme of arrangement proposed between the plaintiff and its shareholders (scheme), being contained in the Annexure “MTR-09” to the affidavit of Mark Trevor Rodda sworn 11 March 2015.
2.The scheme booklet which contains an explanatory statement required by s 412(1)(a) of the Corporations Act and being the Annexure “MTR-09” to the affidavit of Mark Trevor Rodda sworn 11 March 2015, which includes the notice of scheme meeting being Annexure 5 to Annexure “MTR-09” to the affidavit of Mark Trevor Rodda sworn 11 March 2015 and the complete independent expert report also contained in Annexure “MTR-09”, be and is approved, subject to:
(a)correction of any minor typographical or grammatical errors and the date of the second hearing as provided for in order 9 below;
(b)any minor amendments required or approved by the Australian Securities and Investments Commission (ASIC) for registration under s 412(6) of the Corporations Act; and
(c)adopting the marked-up amendments contained in Annexure “MCN-3” to the affidavit of Michael Choon Ming Ng sworn on 16 March 2015.
3.Subject to registration of the scheme booklet pursuant to s 412(6) of the Corporations Act, the plaintiff is to dispatch, on or before 23 March 2015 or such other date as directed by the Court, a document substantially in the form of the scheme booklet (as amended in order 2 above) to the shareholders who appear on the register of members as at 5:00 pm (Perth time) on 20 March 2015 by ordinary post (or by airmail to overseas holders) or by fax or e-mail (provided a fax number or e‑mail address has been nominated by the holder).
4.Subject to these orders, the scheme meeting is to be (so far as practicable):
(a)convened, held and conducted in accordance with the provisions of Part 2G.2 of the Corporations Act that apply to members of a company and the provisions of the plaintiff’s constitution that are not inconsistent therewith and that apply to meetings of members;
(b)convened, held and conducted pursuant to s 1319 of the Corporations Act, on the basis that regulations 5.6.11 to 5.6.12 and 5.6.13A to 5.6.36A of the Corporations Regulations 2001 (Cth) do not apply to the scheme meeting; and
(c)convened using the notice of meeting substantially in the form of the notice annexed as Annexure 5 to Annexure “MTR-09” to the affidavit of Mark Trevor Rodda sworn 11 March 2015 and filed herein.
5.Mark Rodda or, failing him, Marc Wilshaw is to be appointed to act as chairperson of the scheme meeting and report the result of the scheme meeting to this Court.
6.The chairperson can adjourn the scheme meeting in his discretion.
7.Two shareholders present in person or by proxy, corporate representative or attorney under power and entitled to vote shall constitute a quorum for the scheme meeting.
8.Voting on the resolution to approve the scheme at the scheme meeting is to be conducted by way of poll.
9.The matter may be relisted on 28 April 2015 for such application as appropriate following the scheme meeting.
10.If the matter is relisted, then the plaintiff is to give notice of the hearing of the application pursuant to s 411(4) of the Corporations Act and that notice:
(a)is to be published once in each of “The Australian” and “The West Australian” newspapers; and
(b)is to be substantially in accordance with Form 6 of the Federal Court (Corporations) Rules 2000, such advertisement to be published at least five days before the date fixed for the hearing
11.The scheme and scheme booklet be confidential to the plaintiff on the Court file until the explanatory statement in the scheme booklet has been registered with the ASIC in accordance with s 412(6) of the Corporations Act.
12.The plaintiff, the ASIC and any interested party has liberty to apply to relist the matter on 24 hours’ written notice.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 49 of 2015
IN THE MATTER OF COALSPUR MINES LIMITED (ACN 003 041 594)
COALSPUR MINES LIMITED (ACN 003 041 594)
PlaintiffJUDGE:
SIOPIS J
DATE:
17 MARCH 2015
PLACE:
PERTH
REASONS FOR JUDGMENT
This is an application under s 411 of the Corporations Act 2001 (Cth) for the convening of a meeting of members of a company, Coalspur Mines Limited (Coalsupr), to consider and, if thought fit, to pass a resolution in favour of a proposed scheme of arrangement between Coalspur and its members.
Coalspur is a public company and its shares are listed on the Australian Stock Exchange and the Toronto Stock Exchange. The company is engaged in the exploration and development of the Vista Coal Project in Alberta, Canada, and its management is based in Vancouver, British Columbia, Canada.
The proposed scheme of arrangement provides for, in effect, a merger between Coalspur and a North American company, Cline Resource and Development Company Inc (Cline). The scheme proposes that KC Euroholdings S.à.r.l (KCE), a Luxembourg incorporated affiliate of Cline, acquire all the shares in Coalspur for the consideration of AUD0.023 in cash per share.
Coalspur also has some unlisted options and performance rights and warrants. The evidence shows that the holders of those instruments are to be dealt with outside of the scheme of arrangement.
The evidence is that Coalspur had a number of creditors, including one, in particular, Borrowdale Park S.A. (Borrowdale), and was facing an uncertain financial future. The board of Coalspur conducted a study and determined that the best way to secure the position of the shareholders was to proceed by way of the proposed scheme of arrangement.
At the first hearing of an application for the convening of a meeting or meetings to approve a scheme of arrangement, the Court must be satisfied of four main requirements. The first is whether the scheme of arrangement which is proposed actually falls within the statutory concept of being an arrangement or compromise; secondly, that there will be available to the members of the company sufficient disclosure of all the main facts relevant to the exercise of their decision whether to approve the scheme; thirdly, that the Australian Securities and Investments Commission (ASIC) has had a reasonable opportunity to examine the proposed scheme; and fourthly, that the scheme is such that there is, so far as can be seen, no apparent reason why, in due course, it should not receive the Court’s approval if the necessary majorities are obtained at the meeting (In re Hills Motorway Ltd (2002) 43 ACSR 101).
There are also prescribed information and procedural requirements which have been satisfactorily dealt with in counsel’s submissions.
As to the first of the requirements, I am satisfied that the proposed scheme of arrangement is an arrangement which falls within the statutory concept of an arrangement to which s 411 of the Corporations Act applies.
In relation to whether ASIC has been given a proper opportunity to examine the proposed scheme and the scheme booklet, the evidence shows that there has been correspondence between ASIC and the company and that ASIC made proposals for amendments to the scheme booklet and those amendments have been implemented. There is also evidence that notice of this hearing has been given to ASIC in time for ASIC to appear at this hearing, if it so desired. As is not unusual, ASIC has sent a letter to the solicitors for the company stating that it did not intend to appear at this hearing today to make submissions but reserved its right to do so at the second hearing. I am, therefore, satisfied that the second requirement has been satisfied.
The next question is whether, prima facie, the members will have before them a sufficient disclosure of the main facts relevant to the scheme of arrangement so that the members would have a fair opportunity to exercise their vote on an informed basis. In this regard, I am satisfied that the scheme booklet has been the subject of scrutiny by ASIC and that consequential amendments have been made. Further, I have evidence that Coalspur had undertaken a process to verify the truth of the matters which appear in the scheme booklet and that its directors consider the content of the scheme booklet to be accurate. I also have evidence from Mr Robert Varney, a director of KCE, to similar effect. I am also satisfied that the scheme booklet deals in detail with the issues to which I will allude later in the reasons for judgment. Accordingly, on the basis of the evidence which is before the Court at present, I am satisfied that the third requirement has been met.
The next issue is whether on the face of it there is any reason why, if the scheme is approved by the requisite majorities of the members of Coalspur at the scheme meeting, the Court would not approve the scheme at the second hearing. In relation to this question, counsel who, if I may say so, has prepared very comprehensive and helpful submissions, has drawn my attention to a number of matters.
The first relates to the position of Borrowdale. The issue arises from the fact that Borrowdale holds 20.4% of the issued share capital of Coalspur and is also a lender to Coalspur under a loan facility which stands at approximately CAD33 million. It is a condition of the scheme implementation agreement that KCE take an assignment of Borrowdale’s rights and interests in its loan facility agreement with Coalspur. Borrowdale will in exchange acquire a royalty linked to coal sales from the Vista Coal Project. There is, therefore, a question as to whether Borrowdale may be influenced to vote in favour of the scheme by reason of a collateral benefit to it. There is in the scheme booklet a report from an expert who has undertaken a valuation of Borrowdale’s respective interests and has opined that there is no collateral benefit flowing to Borrowdale from the implementation of the proposed transactions affecting Borrowdale. I am, at this stage, prepared to proceed on the basis of the expert report. However, someone may perhaps take a different view and, if so, it would be a matter to be ventilated at the second hearing. I am satisfied that the issue is fully disclosed in the scheme booklet. Also, I observe that ASIC has required that Borrowdale’s vote at the scheme meeting be tagged in case a question as to the fairness of the scheme is raised at the second hearing.
Counsel also referred to the exclusivity provisions in the scheme implementation agreement. In this regard, I observe that there is a satisfactory fiduciary carve-out. I am satisfied that the exclusivity provisions fall within acceptable standards.
There is also provision for the payment of “break fees”. I observe that the obligation to pay a break fee is imposed on each party; and that the fee potentially payable by Coalspur, is not payable simply because the scheme is not approved by the members at the meeting. Further, there is evidence that the break fees constitute a genuine pre-estimate of the loss and damages which might flow from the failure of the scheme to proceed. In my view, albeit that the break fee potentially payable by Coalspur is slightly higher than what is set out in the Takeovers Panel Guidance Note, this break fees provision would not constitute an impediment to the approval of the scheme.
I also observe that there is evidence that the break fees provision and the exclusivity provisions were negotiated at arms-length.
There is also a deed poll which satisfies the performance risk.
Accordingly, I am satisfied, on the basis of the information as it currently stands before the Court, that, so far as can be seen, there is no apparent reason why any aspect of the proposed scheme would constitute an impediment to approval of the scheme at the final hearing, should the members of Coalspur vote in favour of it by the requisite majorities.
In those circumstances, I am content to make the 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. Associate:
Dated: 24 April 2015
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