Papillon Resources Ltd, in the matter of Papillon Resources Ltd
[2014] FCA 1077
•7 October 2014
FEDERAL COURT OF AUSTRALIA
Papillon Resources Ltd, in the matter of Papillon Resources Ltd
[2014] FCA 1077
Citation: Papillon Resources Ltd, in the matter of Papillon Resources Ltd [2014] FCA 1077 Parties: PAPILLON RESOURCES LIMITED (ACN 119 655 891) File number: WAD 216 of 2014 Judge: GILMOUR J Date of judgment: 7 October 2014 Catchwords: CORPORATIONS – scheme of arrangement – approval of scheme of arrangement – relevant principles Legislation: Corporations Act 2001 (Cth) ss 411, 412(6) Cases cited: Central Pacific Minerals NL [2002] FCA 239
In re Alabama, New Orleans, Texas and Pacific Junction Railway Company [1891] 1 Ch 213
Re Amcor Ltd (2000) 34 ACSR 199
Re Anaconda Nickel Holdings Pty Ltd (2003) 44 ACSR 229
Re Applications of NRMA Ltd [No 1] (2000) 156 FLR 349
Re Application of NRMA Ltd [No 2] (2000) 156 FLR 412
Re Glencore Nickel Pty Ltd (2003) 44 ACSR 210
Re Hudson Conway Ltd (2000) 33 ACSR 657
Re Kalgoorlie Lake View Pty Ltd (2005) 56 ACSR 144Date of hearing: 22 September 2014 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 43 Counsel for the Plaintiff: Mr G Donaldson SC with Mr MJ Hardy Solicitor for the Plaintiff: Hardy Bowen
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 216 of 2014 IN THE MATTER OF PAPILLON RESOURCES LIMITED
(ACN 119 655 891)
PAPILLON RESOURCES LIMITED (ACN 119 655 891)
Plaintiff
JUDGE:
GILMOUR J
DATE OF ORDER:
22 SEPTEMBER 2014
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1.Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between the plaintiff and its members, in the form contained in Annexure 4 of the scheme booklet which is Exhibit GRK-01 to the affidavit of Mr Gary Raymond King sworn on 12 September 2014 in this proceeding, is approved.
2.Pursuant to s 411(12) of the Act, the plaintiff be exempted from compliance with s 411(11) of the Act, in relation to the scheme of arrangement referred to in order 1.
3.These orders be entered forthwith.
4.The plaintiff is to lodge a copy of these orders with the Australian Securities and Investments Commission as soon as practicable.
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 216 of 2014
IN THE MATTER OF PAPILLON RESOURCES LIMITED
(ACN 119 655 891)
PAPILLON RESOURCES LIMITED (ACN 119 655 891)
Plaintiff
JUDGE:
GILMOUR J
DATE:
7 OCTOBER 2014
PLACE:
PERTH
REASONS FOR JUDGMENT
I made orders in this application on 22 September 2014, at which time I indicated that I would deliver written reasons in due course. These reasons, in the broad, reflect the written submissions of the plaintiff (Papillon) which I accept.
On 8 August 2014 the Court granted Papillon approval for the convening of a members scheme meeting (Scheme Meeting) to consider the proposed scheme of arrangement (Scheme).
The Scheme, if implemented, will result in Papillon becoming a wholly owned subsidiary of B2Gold Corp. (B2Gold). B2Gold is a company formed under the laws of British Columbia, Canada.
Papillon now applies pursuant to s 411 of the Corporations Act 2001 (Cth) (Corporations Act) for orders pursuant to s 411(4)(b) of the Corporations Act approving the Scheme.
Evidence
The application is supported by the following affidavits:
Affidavits that were before the Court at the first court hearing on 8 August 2014
(a)the affidavit of Gregory David Swan sworn 15 July 2014 (the First Swan Affidavit);
(b)the affidavit of Michael Phillip Bowen sworn 15 July 2014;
(c)the affidavit of Roger Thomas Richer sworn 24 July 2014; and
(d)the affidavit of Scott Douglas Gibson sworn 7 August 2014.
Affidavits filed since the first court hearing on 8 August 2014
(a)the affidavit of Gary Raymond King sworn 12 September 2014;
(b)the affidavit of Michael Phillip Bowen sworn 15 September 2014;
(c)the affidavit of Michael Choon Ming Ng sworn 17 September 2014;
(d)the affidavit of Nicole Lewis sworn 17 September 2014;
(e)the affidavit of Michael Choon Ming Ng sworn 22 September 2014; and
(f)the affidavit of Gregory David Swan sworn 22 September 2014.
The application
Papillon has made an application for orders:
(a)approving the scheme of arrangement between Papillon and each registered holder (Shareholders) of ordinary shares in Papillon (Papillon Shares) pursuant to s 411(4)(b) of the Corporations Act; and
(b)exempting the plaintiff, pursuant to s 411(12) of the Corporations Act, from compliance with s 411(11) of the Corporations Act.
Key features of the Scheme
The First Swan Affidavit sets out the background to, reasons for, the structure of and benefits of the Scheme. This is broadly at [11]-[29] of the First Swan Affidavit.
The First Swan Affidavit attaches certain of the key documents relevant to the Scheme. These are:
(a)a certificate of registration issued by the Australian Securities and Investments Commission (ASIC) in respect of Papillon dated 11 May 2006;
(b)an ASIC company extract pertaining to Papillon dated 14 July 2014;
(c)the constitution of Papillon dated 10 April 2014;
(d)a letter from Computershare Investor Services Pty Limited (Computershare) dated 11 July 2014;
(e)an ASX Listing Rule 6.23.2 waiver dated 13 June 2014;
(f)an ASX market release dated 3 June 2014; and
(g)the Scheme Booklet, which annexes:
(i)the report by BDO Corporate Finance (WA) Pty Ltd (Independent Expert's Report) (at Annexure 1 of the Scheme Booklet);
(ii)the Merger Implementation Agreement dated 3 June 2014 (at Annexure 2 of the Scheme Booklet);
(iii)the comparison of Australian and Canadian legal regimes (at Annexure 3 of the Scheme Booklet);
(iv)the Scheme of Arrangement (at Annexure 4 of the Scheme Booklet);
(v)the Scheme Deed Poll executed by B2Gold (at Annexure 5 of the Scheme Booklet); and
(vi)the Notice of Scheme Meeting and Explanatory Memorandum (at Annexure 6 of the Scheme Booklet).
Matters that have occurred since the last appearance before the Court
Dispatch of the Scheme Booklet
On 8 August 2014, the Court approved, pursuant to s 411(1) of the Corporations Act, the explanatory memorandum and Scheme Booklet in its final form (the 8 August 2014 Orders).
On 14 August 2014, iPrintplus assembled packages of the materials in relation to the Scheme and posted them to Shareholders. The materials sent to each Shareholder were:
(a)a copy of the Scheme Booklet; and
(b)personalised proxy forms for the Scheme Meeting.
Scheme Booklet lodged with ASIC
On 8 August 2014, the solicitors for Papillon lodged a copy of the Scheme Booklet with ASIC for registration under s 412(6) of the Corporations Act.
Advertisement regarding the Scheme Meeting and the second court hearing
Advertisements of the Scheme Meeting and the hearing before this Court on 22 September 2014 to consider and, if thought fit, approve the Scheme were published in The West Australian newspaper on 16 September 2014 and The Australian newspaper on 17 September 2014.
Scheme Meeting and approval of Scheme
The Scheme Meeting was held on 15 September 2014.
At the Scheme Meeting, 141 Shareholders who between them hold 239,842,085 Papillon Shares (approximately 68.13% of the total number of Papillon Shares on issue) were present in person or by proxy.
Article 5.12 of the constitution of Papillon provides that on a poll at a meeting of members every member present in person or by proxy has one vote for every fully paid share held.
The resolution to approve the Scheme was conducted by poll.
Of the 141 Shareholders present in person or by proxy at the Scheme Meeting, 95.7% of Shareholders voted in favour of the Scheme and 4.3% of Shareholders voted against the Scheme. The votes in favour of the Scheme represented 99.5% of the votes cast on the resolution.
Computershare prepared a report on the result of the Scheme poll.
Conditions to Scheme
All of the conditions precedent to the Scheme have been satisfied or waived.
No notice of intention to appear
Neither Papillon nor its solicitors received any notice of appearance or other communication from any party intending to appear at this second hearing in this proceeding.
I accept that all the Shareholders have received sufficient notification of this second hearing and have been adequately informed of their right to be heard at, and to oppose, the application for approval of the Scheme.
ASIC - No objection to the Scheme
A letter from ASIC confirming that it has no objection to the Scheme was received on 19 September 2014. ASIC did not appear at the second court hearing.
Legal principles
Section 411(4)(b) of the Corporations Act provides a discretion to the Court.
At the approval stage, the Court considers matters that do not precisely correlate to those considered at the first meeting approval stage. The matters to which the Court is required to have regard at the first meeting approval stage were referred to and summarised in the plaintiff's outline of submissions filed for the purpose of the first court hearing on 8 August 2014. It will be recalled that these matters were stated in the framework prescribed by Santow J in Re Applications of NRMA Ltd [No 1] (2000) 156 FLR 349 at [13]-[26].
At the approval stage, the Court must be satisfied that:
(a)the meeting convened by the company was convened and held in accordance with the 8 August 2014 Orders;
(b)with every notice of such meeting, the explanatory memorandum and Scheme Booklet were sent;
(c)the resolution was passed at the meeting by the majorities required by s 411(4)(a)(ii) of the Corporations Act; and
(d)Papillon has otherwise complied with the 8 August 2014 Orders.
In addition to the matters noted above, the Court has, in exercising its power of approval, a residual discretion to withhold approval unless satisfied that the Scheme is "at least so far fair and reasonable, as that an intelligent and honest man, who is a member of that class, and acting alone in respect of his interest as such member, might approve of it": In re Alabama, New Orleans, Texas and Pacific Junction Railway Company [1891] 1 Ch 213 at 247; or, as is often put, that there has been no oppression and that the arrangement is one capable of being accepted: see eg. Central Pacific Minerals NL [2002] FCA 239 at [13].
This residual discretion is a long standing and recognised power: see In re Alabama, New Orleans, Texas and Pacific Junction Railway Company at 243-244. It has more recently been confirmed in Re Application of NRMA Ltd [No 2] (2000) 156 FLR 412 at [21]-[24] and Re Kalgoorlie Lake View Pty Ltd (2005) 56 ACSR 144 at [12].
Application to this matter
The formal requirements of Part 5.1 of the Corporations Act have been satisfied.
The Scheme has been overwhelmingly approved by members.
No member has provided any indication to Papillon that it proposes to oppose the orders sought.
ASIC has been kept fully and thoroughly informed at all stages of the process.
No grounds exist for the Court to exercise its residual power to withhold approval of this Scheme.
Shareholders will receive substantial benefits from the Scheme.
The independent expert has concluded that the Scheme is in the best interests of Shareholders.
The independent expert's opinion was, broadly, that the Scheme (being the offer of 0.661 B2Gold shares for every one Papillon Share) is "in the best interests of the Shareholders of Papillon", and is fair and reasonable.
It was disclosed at the first court hearing that ASIC was content with the Independent Expert's Report and the form of the Scheme Booklet.
On this basis, and having regard to the vote at the Scheme Meeting, there is no suggestion that the Scheme is not being proposed in good faith or that it is commercially immoral in any respect. The reasons underlying the Scheme have been clearly stated and put to all Shareholders.
All conditions to the Scheme will, on the making of the orders sought, either have been satisfied or waived, or, in the case of “negative conditions”, will not have occurred.
The Papillon unlisted options
All the holders of Papillon unlisted options have entered into option cancellation deeds under which their Papillon unlisted options will be cancelled upon the Scheme becoming effective in consideration for the issue of B2Gold shares.
Exemption from s 411(11) of the Corporations Act
Section 411(11) of the Corporations Act requires, subject to s 411(12) of the Corporations Act, that a copy of the Court's order approving the Scheme be annexed to every copy of the relevant company's constitution issued after the order is made. Section 411(12) of the Corporations Act allows the Court to exempt a body from compliance with this provision or to determine the period during which it shall comply.
Orders under s 411(12) of the Corporations Act have been made in a number of cases, including Re Hudson Conway Ltd (2000) 33 ACSR 657 at [83], Re Amcor Ltd (2000) 34 ACSR 199 at [40], Re Glencore Nickel Pty Ltd (2003) 44 ACSR 210 at [93] and Re Anaconda Nickel Holdings Pty Ltd (2003) 44 ACSR 229 at [65].
I accept Papillon’s submission that exemption from compliance with s 411(11) of the Corporations Act is appropriate given that current Shareholders are fully informed of the Scheme. Once the Scheme becomes binding on Shareholders, any purported transfers of Papillon Shares will not be accepted for registration, other than a transfer to B2Gold in accordance with the Scheme. Therefore new shareholders (apart from B2Gold) will not be entered into Papillon's register of members once the Scheme becomes binding. Upon full implementation of the Scheme, Papillon will become a wholly owned subsidiary of B2Gold. Further, the Court’s order approving the Scheme would effect no alteration to the constitution of the plaintiff.
Orders
For the reasons set out above, there will be orders, subject to a minor amendment, as set out in the minute of proposed orders lodged by Papillon.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour. Associate:
Dated: 7 October 2014
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