Meridian Minerals Limited, in the matter of Meridian Minerals Limited (No 2)
[2011] FCA 1415
•29 November 2011
FEDERAL COURT OF AUSTRALIA
Meridian Minerals Limited, in the matter of Meridian Minerals Limited (No 2) [2011] FCA 1415
Citation: Meridian Minerals Limited, in the matter of Meridian Minerals Limited (No 2) [2011] FCA 1415 Parties: MERIDIAN MINERALS LIMITED ACN 125 277 634 File number: QUD 327 of 2011 Judge: LOGAN J Date of judgment: 29 November 2011 Catchwords: CORPORATIONS – scheme of arrangement – whether court should approve arrangement – where omissions in respect of meeting of shareholders – where no substantial injustice caused to shareholders – where further technical irregularities – scheme fair and reasonable – scheme approved Legislation: Corporations Act 2001 (Cth) ss 411, 1322 Cases cited: Re Allied Gold Ltd (No 2) [2011] QSC 194 considered
Re BRL Hardy Ltd (2003) 45 ACSR 397 followed
Re James Hardie Industries Ltd (2001) 39 ACSR 552 followed
Re NRMA Ltd (No 2) (2000) 156 FLR 412 followedDate of hearing: 29 November 2011 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 29 Counsel for the Plaintiff: Mr R Lilley SC with Mr C Jennings Solicitor for the Plaintiff: Hynes Lawyers
Solicitor for the Northwest Nonferrous Australia Mining Pty Ltd and Northwest Nonferrous International Investment Company Ltd: Blake Dawson
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 327 of 2011
IN THE MATTER OF MERIDIAN MINERALS LIMITED ACN 125 277 634 MERIDIAN MINERALS LIMITED ACN 125 277 634
Plaintiff
JUDGE:
LOGAN J
DATE OF ORDER:
29 NOVEMBER 2011
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth), the scheme of arrangement between the plaintiff and its shareholders, a copy of which is at page 313 and following of Exhibit LW2 to the affidavit of Lily Wang sworn on 25 November and filed on 29 November 2011, is approved.
2.Pursuant to s 411(12) of the Corporations Act 2001 (Cth), the plaintiff is exempted from compliance with s 411(11) of the Corporations Act 2001 (Cth) in relation to the scheme of arrangement referred to in paragraph 1 of these orders.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 327 of 2011
IN THE MATTER OF MERIDIAN MINERALS LIMITED ACN 125 277 634 MERIDIAN MINERALS LIMITED ACN 125 277 634
Plaintiff
JUDGE:
LOGAN J
DATE:
29 NOVEMBER 2011
PLACE:
BRISBANE
REASONS FOR JUDGMENT
The present application is a sequel to orders which I made on 18 October 2011 providing for the convening, under the Corporations Act2001 (Cth) (the Act), of a meeting of the shareholders of Meridian Minerals Ltd (Meridian) for the purpose of considering, and/or, if thought fit, resolving to approve a scheme of arrangement proposed between Meridian and its shareholders. As to those shareholders, and, for that matter, as to the parties to the scheme of arrangement, there was, in addition to an appearance on behalf of Meridian as plaintiff today, an appearance by Northwest Nonferrous Australia Mining Pty Ltd (Northwest Australia) and its parent company, Northwest Nonferrous International Investment Company Ltd (Northwest).
Northwest and Northwest Australia are, with Meridian, the parties to the scheme implementation agreement of 20 September 2011. Northwest Australia and Northwest appeared today by their solicitors to support the approval of the scheme. There was no appearance by any other person, including, in that regard, by the Australian Securities and Investments Commission (ASIC).
The ASIC did, however, furnish to Meridian a statement stating that it had no objection to the arrangement. Thus, the condition precedent for which s 411(17) of the Act provides is met.
As is to be expected in respect of applications of this kind, there was a full and frank disclosure in the course of submissions by Meridian, by its counsel, of particular acts and omissions in respect of the convening of the meeting and of disclosures made at that meeting.
It transpires that the scheme booklet did not provide information in respect of the contingency that if the employment of Meridian’s managing director, Mr Jeremy Read (Mr Read), were to be terminated, he would be entitled to 12 months’ wages, namely, $349,741 inclusive of superannuation and accrued annual leave. The amount of Mr Read’s annual wage itself and his entitlement to 12 months’ pay upon termination is information which is included in Meridian’s financial report for the year ended 30 June 2011 which is dated 14 September 2011. That records the wage itself in the amount of $294,612.
In Re James Hardie Industries Ltd (2001) 39 ACSR 552 at [9] – [11], Santow J observed:
[9]… the test which has been applied in relation to subsequent events of this sort can be expressed, though with one refinement, in the terms used by Harman J in Re Minster Assets Plc [1985] BCLC 200 at 201. It was subsequently adopted by Young J in Re Adams International Food Traders Pty Ltd (1988) 13 NSWLR 282; 13 ACLR 586. Re Minster Plc was cited with approval in Cleary v Australian Co-operative Food (Nos 2 & 3) (1999) 32 ACSR 701. A variation of the formulation was used by Young J in an earlier case as follows: “after the meeting of creditors nothing should have occurred that had it been known to the creditors at the time of the meeting might have induced them to vote differently”: Re Telford Inns Pty Ltd (1985) 10 ACLR 312 at 315.
[10]Applying that test as I would refine it to the present circumstances and, I should emphasise, on the material presently before me, I would conclude that reasonable shareholders would not alter their decision as to how to act on the scheme if the changes had been disclosed, at least to such degree as to be likely to alter the result of the meeting.
[11]It is desirable that I express the test in the way I have done with the emphasised refinement. This is in order to avoid the suggestion that the court can necessarily be dogmatic about what every hypothetical reasonable shareholder might do individually, as distinct from the safer generalisation about what the collective outcome is likely to be, in a situation where 98% favour the scheme. However, I would in the present clear-cut circumstances consider even the more stringent test likely to be satisfied.
In this case, what Meridian did so as to seek to ameliorate the omission of the disclosure of this contingent benefit was this:
(a)it informed all shareholders present at the scheme meeting of that contingent benefit before voting on the resolution commenced;
(b)it lodged a notice with the Australian Securities Exchange (ASX) concerning, amongst other things, that matter; and
(c)on 24 November 2011, it posted to each shareholder on the register, as at 7 pm on 22 November 2011, a notice informing that shareholder of the benefit and that if, as a consequence of that information, they would have voted differently they could notify Meridian or appear at today’s hearing or both.
There is evidence before me that no notice was given to Meridian by any shareholder of any effect in terms of voting as a result of the receipt of that notice. Further, there was no appearance today by any shareholder who would have been able to vote at the meeting. The result of the poll at the meeting was as follows:
(a)72 shareholders holding 205,946,244 shares were present and voted in person or by proxy.
(b)Of those shareholders present in person or by proxy 71 shareholders holding 205,924,022 shares voted for the proposed resolution.
(c)The remaining shareholder present in person or by proxy holding 22,222 shares abstained from voting.
The result then of the meeting was that the resolution to agree to the scheme was passed by the necessary majorities. Meridian has 482,350,360 issued shares. Of these Northwest Australia holds 199,394,597 shares. Northwest Australia did not vote for the resolution to agree to the scheme. Of the remaining shares, namely, 282,955,763, 71.41 per cent of those shares were the subject of a vote in favour of the resolution. 0.01% were the subject of an abstention and 1.37% were the subject of open proxies.
When one has regard to the vote in favour of the resolution by the number and percentage mentioned and the absence of any appearance today by any shareholder or the giving of any notice to Meridian and the fact that basic information concerning Mr Read’s entitlement was present in the accounts, together with the fact that the entitlement is but a contingency which would only arise in the event of termination upon the assumption of control of the company by Northwest Australia, my opinion is that the omission concerned has not resulted in any substantial injustice.
I also take into account in that regard a notice that was given at the meeting itself as well as the lodgement of a notice concerning the matter with the ASX.
One of the requirements for an arrangement to be binding is that which appears in s 411(4)(a) of the Act. That provides, materially, that an arrangement is binding if, and only if:
1. At a meeting convened in accordance with an order of the court:
(i) The arrangement is agreed to by a majority, ….
2.It is approved by order of the court.
The order made on 18 October 2011 provided for the summoning and convening pursuant to s 411(1) of the Act, of a meeting of shareholders for the purpose of considering the scheme substantially in the form set out in the scheme booklet: see paragraph 1 of the order. Paragraph 3 of that order provided that the meeting:
Shall be convened by the plaintiff sending to the shareholders by ordinary prepaid post on or before 25 October 2011:
3.1 The scheme booklet -
3.2 The notice of scheme meeting -
3.3 A proxy form -3.4A reply paid envelope addressed to Meridian and substantially in the form contained in the exhibit to Mr Read’s affidavit containing the amendments specified in that order.
What occurred, in fact, after the making of that order was this. The scheme booklet was posted on 25 October 2011 to each Meridian shareholder appearing on the share register as at 5 pm on 19 October 2011. That booklet was sent together with the proxy form. The reply paid envelope was not, in fact, included with the scheme booklet and the proxy form in that initial mailing. Rather, it was separately posted to those same shareholders on 25 October 2011. Further, a separate notice of meeting, that is separate from the notice which appears at Annexure E in the scheme booklet, was not included in either of the mailings which occurred on 25 October 2011.
The notice which appears at annexure E to the scheme booklet (at page 335) gives notice of the meeting for which the Court order provided, namely, a meeting on 24 October 2011 at Christie Conference Centre, 320 Adelaide Street, Brisbane commencing at 11 am for the purpose of transacting the business detailed in that notice. That business is accurately stated in the notice to be the consideration of a resolution for the acquisition of Meridian by Northwest Australia in terms more particularly specified in the notice. Apart from the formal notice found in Annexure E, to the existence of which a reader is alerted by a reference to it in the table of contents on page 6, there are multiple other references in the scheme booklet either to the date of the meeting or to the date of the meeting and also the place of the meeting: see pages 7, 9, 12, 13, 22, 28 and 29 of the scheme booklet. Pages 12 and 13 of the scheme booklet contain a discrete section headed in bold type, Scheme Meeting and Voting.
The cover of the scheme booklet is noteworthy for its omission of a reference to the date and place of the meeting. I say that because it has otherwise commended itself to the author of the booklet to place on the cover other key information items more particularly detailed in the booklet itself, namely the recommendation of eligible directors to vote in favour of the scheme in the absence of a superior proposal and a reference to the independent expert’s conclusion that the scheme is fair and reasonable, and hence in the best interest of non associated shareholders. That said, the booklet itself not only contains the requisite notice of meeting, but is also replete, as I have indicated, with references to it.
The language of s 411(4):
(4)A compromise or arrangement is binding on the creditors, or on a class of creditors, or on the members, or on a class of members, as the case may be, of the body and on the body or, if the body is in the course of being wound up, on the liquidator and contributories of the body, if, and only if:
(a)at a meeting convened in accordance with an order of the Court under subsection (1) or (1A):
(i)in the case of a compromise or arrangement between a body and its creditors or a class of creditors--the compromise or arrangement is agreed to by a majority in number of the creditors, or of the creditors included in that class of creditors, present and voting, either in person or by proxy, being a majority whose debts or claims against the company amount in the aggregate to at least 75% of the total amount of the debts and claims of the creditors present and voting in person or by proxy, or of the creditors included in that class present and voting in person or by proxy, as the case may be; and
(ii)in the case of a compromise or arrangement between a body and its members or a class of members--a resolution in favour of the compromise or arrangement is:
(A)unless the Court orders otherwise--passed by a majority in number of the members, or members in that class, present and voting (either in person or by proxy); and
(B)if the body has a share capital--passed by 75% of the votes cast on the resolution; and
(b)it is approved by order of the Court.
Nonetheless, assuming for the moment that the meeting was not convened in accordance with the requirements of the order, that nonetheless would, in my opinion, amount to an irregularity of the kind excused by s 1322, unless the Court on the application of, materially, a person entitled to attend the meeting or the ASIC declared the proceedings at the meeting to be void, or unless the Court were of the opinion that the regularity had caused or may cause substantial injustice.
There has been no application by any person entitled to attend or by the ASIC for the invalidation of the meeting. Further, I am convinced, having regard to the presence of the notice in the scheme booklet and other references to the meeting in that document, that there has been no substantial injustice to any person entitled to attend the meeting.
There was reference in evidence as well to the attendance at the meeting not being abnormal in terms of the history of the company or, for that matter, other public company shareholder meetings. While I have taken that into account, the history may provide an uncertain guide, given the potential for fluctuation, perhaps even large fluctuation, in the shareholder register of a public company. What is more influential are the considerations as to the giving of notice in the booklet which I have mentioned. Further, it is at least arguable in any event that there was compliance with the terms of the order in that the booklet itself contained the notice of meeting and the order required that a notice of meeting be sent.
However one approaches the subject, the result is that no invalidity should or does attend the meeting as a result of the failure separately to include in the mailing a discrete document being the notice of meeting as opposed to the inclusion of that document in the scheme booklet.
I am fortified in reaching that conclusion by the approach taken by PD McMurdo J to the subject of the question of procedural irregularity in relation to the giving of notice in respect of the convening of a meeting in ReAllied Gold Ltd (No 2) [2011] QSC 194. There the omission was, if anything, more serious than that apparent in the present case, but was rectified by remedial action in a way in which his Honour concluded that no substantial injustice to shareholders had occurred.
Finally, so far as the notice of the meeting is concerned, I note that it was also advertised in the press. I have taken that into account as well in concluding that no substantial injustice occurred.
The evidence read before me also discloses a number of what one might term minor changes in the form of capitalisation, corrections to names, insertion of the correct time of the second court hearing, and the like, into the scheme booklet. These were aptly described in submissions as technical changes which did not change the substance of the scheme booklet. They do not mean, in my opinion, that there was not a meeting convened in accordance with the Court’s order.
The proxy form was not included in the scheme booklet, but rather sent as a separate document. So far as I can see, all that this did was to present shareholders with the advantage of not having to cut or tear the proxy form from the scheme booklet itself. I do not regard that particular change as being in any way material. The same may be said in respect of the separate dispatch of the reply-paid envelopes.
In Re BRL Hardy Ltd (2003) 45 ACSR 397, Perry J observed at [20] to [21]:
20As to the function of the court in considering whether the arrangements should be approved s 411(4)(b), the authorities make it plain that it is not for this court to second guess the view of the statutory majority of the members in the exercise of their commercial judgment, if, as is clearly the case, they have reached the view that they wish to participate in the schemes of arrangement. It is not for the court to substitute its commercial judgment for theirs.
21It is sufficient for the court to reach the view that the proposals embodied in the schemes of arrangement are fair and reasonable, and that intelligent, honest, and reasonable people acquainted with the terms of the schemes of arrangement would be prepared to enter into them.
Earlier, in Re NRMA Ltd (No 2) (2000) 156 FLR 412 at 415, Santow J stated, in respect of the court’s role, where approval was sought:
5 … This Court must simply look at the outcome of the members’ vote to determine whether it is vitiated by any illegality, or by such manifest unfairness and unreasonableness that no intelligent and honest person, or at least one properly informed, could approve it. Beyond that, it’s for the members to judge what is in their best interests.
On the evidence before me, I am satisfied that the conditions required by s 411 of the Act have either been complied with or that the effect of section 1322 is such that no invalidity attends any non-compliance. I am also satisfied that the majority of shareholders have acted in good faith, not in pursuit of any illegitimate purpose, and that the scheme is at least fair and reasonable. As the authorities dictate, it is not for me to substitute my commercial judgment for that of the shareholders.
Accordingly, I order that:
1.Pursuant to s 411(4)(b) of the Act, the scheme of arrangement between the plaintiff and its shareholders, a copy of which is at pages 313 and following of exhibit LW2 to the affidavit of Lily Wang sworn on 25 November 2011 and filed by leave, is approved.
2.Pursuant to s 411(12) of the Act, the plaintiff is exempted from compliance with s411(11) of the Act in relation to the scheme of arrangement referred to in paragraph 1 of these orders.
I make the second order because, given that the effect of the scheme is that Meridian will become wholly owned by Northwest Australia, there seems to me to be no point in requiring that there be a copy of the order kept with the constitution, pursuant to s 411(11) of the Act.
I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Associate:
Dated: 9 December 2011
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