Gallery Gold Limited, in the Matter of

[2006] FCA 230

FEDERAL COURT OF AUSTRALIA

Gallery Gold Limited, in the Matter of [2006] FCA 230

CORPORATIONS – proposed arrangement with members under Pt 5.1 of the Corporations Act 2001 – approval by Court – relevant considerations.

Corporations Act 2001 (Cth), ss 411(1), (11), (4)(a)(ii), (6), (17)(a),(b), 412(1)(a), 414, 602, Ch 6.

Re ACM Gold Ltd (1992) 34 FCR 530 referred to

Re Archaean Gold NL (1997) 23 ACSR 143 referred to
Statewest Credit Society Limited v Home Building Society Limited [2005] FCAFC 273 referred to

Re Sonodyne International Ltd (1995) 13 ACLC 221 referred to
Re NRMA Ltd (No 2) (2000) 34 ACSR 261 referred to
Re Northumberland Insurance Co Ltd (No 3) (1977) 3 ACLR 15 cited

IN THE MATTER OF GALLERY GOLD LIMITED
WAD 16 of 2006

LEE J
13 MARCH 2006
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 16 OF 2006

IN THE MATTER OF GALLERY GOLD LIMITED

GALLERY GOLD LIMITED
(ACN 009 125 197)
Plaintiff

JUDGE:	LEE J
DATE OF ORDER:	13 MARCH 2006
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1.The proposed arrangement between the plaintiff and its members in respect of which a resolution in favour was passed in the manner required by section 411(4)(a)(ii) of the Corporations Act 2001 (Cth) (“the Act”) at the meeting of members convened on 3 March 2006 as directed by the Court on 25 January 2006 be approved.

2.The plaintiff be exempt from compliance with section 411(11) of the Act.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 16 OF 2006

IN THE MATTER OF GALLERY GOLD LIMITED

GALLERY GOLD LIMITED
(ACN 009 125 197)
Plaintiff

JUDGE:	LEE J
DATE:	13 MARCH 2006
PLACE:	PERTH

REASONS FOR JUDGMENT

1. This is an ‘ex parte’ application under s 411(6) of the Corporations Act 2001 (Cth) (“the Act”) for approval of a proposed arrangement between the plaintiff (“Gallery Gold”) and its members.

2. On 25 January 2006 the Court made orders under s 411(1) of the Act that a meeting of the members of Gallery Gold be convened to consider the proposed arrangement and that the explanatory statement proposed to be sent to members with notices convening the meeting, as required by s 412(1)(a) of the Act, be approved. On 9 February 2006 the Court made a further order approving the manner in which members were to be informed of printing errors in the explanatory statement.

3. By making the order that a meeting of members be convened to consider the proposed arrangement, the Court did no more than indicate that it was satisfied that the proposed arrangement outlined in the explanatory statement warranted consideration by members and the exercise of their commercial judgment, and that if the resolution proposed to be put at the meeting was passed by the majorities prescribed by s 411(4)(a)(ii) of the Act such a decision by the members could support an order by the Court that the proposed arrangement be approved. (See: Re ACM Gold Ltd (1992) 34 FCR 530 per O’Loughlin J at 535).

4. An ‘ex parte’ application made under s 411(1) of the Act obliges the plaintiff to draw to the Court’s attention any potential problems in the application. (See: Re Archaean Gold NL (1997) 23 ACSR 143 per Santow J at 148). In addition, in some circumstances it may be necessary for the application to be conducted as an inquisitorial proceeding to enable the Court to determine whether it is satisfied that it is appropriate to make an order under s 411(1) of the Act. Of course, if an objector to the proposed arrangement has been given leave by the Court to be heard on the application, or has been joined as a defendant to the application, the proceeding can be conducted as an adversarial hearing in the ordinary way. (See: Statewest Credit Society Limited v Home Building Society Limited [2005] FCAFC 273).

5. Before making an order under s 411(1) the Court must be satisfied that the proposed explanatory statement provides sufficient disclosure of matters relevant to the proposed arrangement and be able to form the opinion that acceptance of such an arrangement by members could be regarded by reasonable business people to be a decision made for the benefit of members. (See: Re Sonodyne International Ltd (1995) 13 ACLC 221).

6. In the instant case the proposed arrangement to be put to the members for acceptance was that the whole of the shareholding in the plaintiff be acquired by IAMGOLD Corporation (“IAMGOLD”) and that the plaintiff become a wholly owned subsidiary of IAMGOLD. In its terms the proposed arrangement, if approved by the Court, would effect a compulsory acquisition of all of the shares in the Plaintiff without compliance with the takeover provisions of Ch 6 of the Act.

7. Given that the proposed arrangement would bind all members (notwithstanding the terms of s 414 of the Act) the Court had to have regard to whether the explanatory statement provided sufficient detail of the benefits and detriments of the proposed arrangement for members to be sufficiently informed to be able to make a commercial judgment on whether the proposed arrangement was in their interests. That is to say, the Court had to be satisfied that all information a member may regard as material to a decision on the proposed arrangement appeared to have been adequately disclosed.

8. The Court was satisfied that the explanatory statement met those requirements and enabled members to exercise a commercial judgment on whether the proposed arrangement should be accepted or rejected.  Accordingly orders were made that a meeting of members be convened and that the explanatory statement be approved. 

9. A meeting of members was duly convened on 3 March 2006 in accordance with the order of the Court. A resolution put to the meeting that the proposed arrangement be accepted was duly passed in the manner prescribed by s 411(4)(a)(ii) of the Act. 316 members were present at the meeting, either in person or by proxy, of whom 311 cast their votes in favour of the proposed arrangement. Two members voted against the proposal and three abstained. The total votes cast on the resolution (343, 904, 911) represented approximately 60% of the voting shares issued by the plaintiff. Of the votes cast 99.99% was in favour of the proposal and .01% was opposed.

10. The Court was informed that all conditions precedent to the implementation of the proposed arrangement have been satisfied or waived. Notice of the further hearing of the application has been duly given as required by r 3.4 of the Federal Court (Corporations) Rules 2000 and no party has come forward to seek leave to be heard in opposition to the further orders sought by the plaintiff.

11. As required by the Act the Australian Securities and Investment Commission (“ASIC”) was duly served with notice of the proposed arrangement and a copy of the explanatory statement was duly filed with ASIC. I am satisfied that ASIC has had sufficient time to consider the documents. As required by s 411(17)(b) of the Act, there has been produced to the Court a statement in writing by ASIC that it has no objection to the proposed arrangement.

12. The requirement of s 411(17)(a) of the Act that the Court be satisfied that the arrangement has not been proposed for the purpose of enabling the takeover provisions of Ch 6 of the Act to be avoided, obliged the Court to consider whether a “break fee” of $2,600,000.00 that the directors of the plaintiff had bound the plaintiff to pay to IAMGOLD if another offer to buy the shares of the plaintiff caused the members to reject the proposed arrangement, could have affected the market in the plaintiff’s shares and have infringed the spirit of the provisions of Ch 6 of the Act. Section 602 of the Act provides that it is a purpose of Ch 6 to ensure that acquisition of control over the voting shares of a corporation “takes place in an efficient, competitive and informed manner”. (See: Re Northumberland Insurance Co Ltd (No 3) (1977) 3 ACLR 15). Observations on such a question are made in ASIC Policy Statements PS 60 (at 60.1–60.10) and PS 142 (at 142.18–142.19). In the absence of any relevant evidence, and on the assumption that ASIC has given due consideration to the question and has not elicited any material relevant to the purpose of the proposal that should be put before the Court, the Court may be satisfied that the purpose of IAMGOLD in participating in the proposed arrangement was to implement a merger with the plaintiff in the most efficient way and not to avoid the provisions of Ch 6. (See: Re ACM Gold Ltd per O’Loughlin J at 535-543).

13. Having regard to the fact that the members of the plaintiff were sufficiently informed by the explanatory statement to be able to determine for themselves whether it was in their interests for IAMGOLD to acquire their shares, and did so in overwhelming numbers, and having regard to the fact that all requirements of the Act have been met, I am satisfied that the Court should approve the arrangement pursuant to s 411(6) of the Act. (See: Re NRMA Ltd (No 2) (2000) 34 ACSR 261 per Santow J at 270).

14. Accordingly the order sought by the plaintiff that the proposed arrangement be approved will be made.  

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee.

Associate:

Dated:            13 March 2006

Counsel for the Applicant:	L Wilk (24, 25 January 2006) S M Davies; L Wilk (13 March 2006)
Solicitors for the Applicant:	Blake Dawson Waldron
Date of Hearing:	24, 25 January 2006,  13 March 2006
Date of Judgment:	13 March 2006