PNX Metals Ltd [No 2] - [2024] WASC 335

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   PNX METALS LTD [No 2] [2024] WASC 335
CORAM:   HILL J
HEARD:   20 AUGUST 2024 & 30 AUGUST 2024
DELIVERED          :   20 AUGUST 2024 & 30 AUGUST 2024
PUBLISHED           :   10 SEPTEMBER 2024
FILE NO/S:   COR 97 of 2024
BETWEEN:   PNX METALS LTD
Plaintiff
PATRONUS RESOURCES LTD
Interested Party

Catchwords:

Corporations - Scheme of arrangement - Application for orders pursuant to s 1319 of Corporations Act 2001 (Cth) - Supplementary disclosure to address investor presentation at Diggers and Dealers - Whether court should order dispatch of supplementary scheme booklet - Orders made for dispatch

Corporations - Scheme of arrangement - Application for orders approving scheme under s 411(4)(b) of Corporations Act 2001 (Cth) - Orders made approving scheme

Legislation:

Corporations Act 2001 (Cth) s 411(4)(b), s 411(11), s 411(17), s 1319

Result:

Orders made for dispatch of supplementary scheme booklet
Orders made approving scheme

Category: B

Representation:

Counsel:

Plaintiff	:	C E McKay
Interested Party	:	A J Papamatheos

Solicitors:

Plaintiff	:	Piper Alderman
Interested Party	:	Hamilton Locke

Cases referred to in decision:

Re Amcom Telecommunications Limited (No 3) [2015] FCA 596
Re International Goldfields Ltd [2004] WASC 112
Re MAC Services Group Ltd [2010] NSWSC 1474
Re National Australia Bank Ltd [2016] VSC 62
Re Pensana Metals Ltd; Ex parte Pensana Metals Limited [2020] WASC 17
Re PNX Metals Ltd [2024] WASC 281
Re Prime Media Group Ltd [2019] NSWSC 1888
Re Seven Network Ltd [No 3] [2010] FCA 400; (2010) 267 ALR 583
Re TriAusMin Limited [No 2] [2014] FCA 833
Re Wesfarmers Ltd [No 2] [2018] WASC 357

HILL J:

At the first court hearing on 17 July 2024, I made orders for the convening of a meeting of PNX shareholders on 27 August 2024 to consider the proposed scheme of arrangement (Scheme). The background to this matter is set out in the judgment I delivered following the first court hearing.[1]
[1] Re PNX Metals Ltd [2024] WASC 281 (First Reasons). I have adopted the same abbreviations used in the First Reasons in these reasons.
On 20 August 2024, the matter was relisted for directions on the application of PNX for the dispatch of supplementary materials to its shareholders. Orders were made on that date authorising the dispatch of a supplementary Scheme booklet.
Following the passing of the resolution by the requisite majorities of shareholders at the Scheme meeting on 27 August 2024, at the second court hearing on 30 August 2024, PNX applied for and obtained orders approving the Scheme.
At the conclusion of each of these hearings, I indicated that I would subsequently publish reasons for my decision. These are my reasons.

Release of investor presentation and dispatch of supplementary Scheme booklet

On 5 August 2024, an investor presentation given by Patronus Resources Ltd (formerly known as KIN) (Patronus) at the Diggers and Dealers Mining Forum was published on Patronus' ASX platform and cross-released on PNX's ASX platform.[2] The investor presentation was prepared by representatives of both Patronus and PNX. At that time, these representatives were not aware of the guidance of both ASIC and the courts in relation to communications with shareholders regarding schemes of arrangement.[3]
[2] Second affidavit of Graham Leslie Ascough filed 19 August 2024, 'GLA-25'.
[3] Second affidavit of Graham Leslie Ascough filed 19 August 2024 [17]; Affidavit of William John Ingram 19 August 2024 [9(a)].
On 14 August 2024, PNX's solicitors became aware of the investor presentation.[4] The solicitors for PNX and Patronus then undertook a process of checking for any conflicting or misleading information between the investor presentation and the Scheme booklet.[5] This process formed the basis of the draft supplementary Scheme booklet.
[4] Fifth affidavit of Joshua Matti Steele filed 19 August 2024 [13].
[5] Fifth affidavit of Joshua Matti Steele filed 19 August 2024 [35] - [38], 'JMS-23'.
On 15 August 2024, PNX released an ASX announcement reminding its shareholders to rely on the Scheme materials and not the investor presentation to inform their decision on how to vote at the Scheme meeting. The announcement contained information on how shareholders could change their vote if they had already voted and been influenced by the investor presentation.[6] On the same date, the plaintiff's solicitors requested the originating process be relisted for directions.[7]
[6] Second affidavit of Graham Leslie Ascough filed 19 August 2024, 'GLA-28'.
[7] Email to Associate to Hill J dated 15 August 2024.
In order to the address the matter, PNX proposed that a supplementary Scheme booklet be dispatched to shareholders. The contents of the supplementary Scheme booklet have been verified by both PNX and Patronus.[8] A draft of the supplementary Scheme booklet (as well as a revised draft) was provided to ASIC on 19 August 2024.[9] ASIC advised the solicitors for PNX that it had no comments on the supplementary Scheme booklet[10] and did not intend to appear at the directions hearing on 20 August 2024.[11]
[8] Fifth affidavit of Joshua Matti Steele filed 19 August 2024 [45] - [50]; Affidavit of William John Ingram filed 19 August 2024 [11].
[9] Fifth affidavit of Joshua Matti Steele filed 19 August 2024, 'JMS-20'.
[10] Sixth affidavit of Joshua Matti Steele filed 19 August 2024, 'JMS-33'.
[11] Seventh affidavit of Joshua Matti Steele filed 20 August 2024, 'JMS-35'.
Under s 1319 of the Act, the court has power to authorise the dispatch of further explanatory materials in relation to a scheme of arrangement.[12] Where a meeting has been convened by order of the Court under s 411 of the Act, only material which has been approved by the court for dispatch should be provided to shareholders.[13]
[12] Re Amcom Telecommunications Limited (No 3) [2015] FCA 596 [14] and the authorities cited therein.
[13] Re Amcom Telecommunications Limited (No 3) [15] and the authorities cited therein.
In general, shareholders should be given at least 10 days' notice of any material new information in relation to a scheme.[14] However, it is a matter for the court to assess whether there is sufficient time for shareholders to consider the information and to understand its effect.[15]
[14] ASIC Regulatory Guide 60 [RG 60.92].
[15] Re Prime Media Group Ltd [2019] NSWSC 1888 [8].
Counsel for PNX submitted that while the investor presentation did not concern nor affect the terms of the Scheme, PNX accepted that its release could impact the Scheme process. For this reason, PNX proposed dispatching a supplementary Scheme booklet to advise shareholders to disregard the investor presentation and only have regard to the contents of the Scheme booklet, draw attention to certain information in the investor presentation that was not in the Scheme booklet and present a balanced view of that information. The supplementary Scheme booklet drew attention to Patronus' upcoming work programs for 2024 and 2025, reminded PNX shareholders of the advantages and disadvantages of the Scheme and referred to the interests of PNX's directors.
While it was proposed that the supplementary Scheme booklet be dispatched less than 10 days before the Scheme meeting, counsel for PNX submitted this should not prevent the Scheme meeting proceeding as scheduled. This was because of both the length of the proposed supplementary Scheme booklet (3 pages) and its limited scope.
For three primary reasons, it was my view that it was appropriate to make orders for the dispatch of the supplementary Scheme booklet and for the Scheme meeting to proceed on the date ordered. First, I accepted that the information in the supplementary Scheme booklet might be relevant to shareholders' consideration of the proposed Scheme and their decision as to how to vote at the Scheme meeting. Second, the supplementary Scheme booklet was short and confined. The independent expert confirmed that neither the contents of the supplementary Scheme booklet nor the investor presentation had any impact on their opinion on the Scheme. In my view, the information in the supplementary Scheme booklet was able to be considered and understood in a short period of time. Third, the supplementary Scheme booklet provided proper disclosure about the information in the investor presentation that was not included in the Scheme booklet, had been verified by both PNX and Patronus, and was not misleading or deceptive.
PNX proposed that the supplementary Scheme booklet be dispatched by:
(a)providing a hard copy of the supplementary Scheme booklet to its top 20 shareholders who had not elected the manner in which they preferred to receive communications;
(b)providing an email with a link to PNX's website where the supplementary Scheme booklet could be accessed to those shareholders who had nominated to receive communications electronically; and
(c)publication of the supplementary Scheme booklet on PNX's ASX platform and its website.
Subject to one amendment, I was satisfied that this proposal was appropriate in the circumstances of this case. This amendment was to require PNX to send a hard copy of the supplementary Scheme booklet to shareholders who had elected to receive hard copy communications. In my view, there was sufficient time between the directions hearing and the date of the Scheme meeting to enable the election of these shareholders to be respected. I was not satisfied, in respect of these shareholders, that publication of the supplementary Scheme booklet by way of an ASX announcement would be sufficient to draw the contents to their attention.
In respect of the remaining shareholders of PNX who had not made any election as to how they would receive information from PNX, for the following reasons, I was satisfied that the proposed announcement was an appropriate method of dispatch. First, the preparation and dispatch of a supplementary Scheme booklet was required because of an announcement made on the ASX platform. That is, it was likely that only those shareholders who regularly reviewed the announcements made by PNX on its ASX platform would have been aware of and read the investor presentation. On this basis, publication of the supplementary Scheme booklet on the ASX platform was likely to come to the attention of these shareholders. Second, the proposed supplementary disclosure did not involve any amendment to the proposed Scheme. It simply sought to address the investor presentation. Third, the proposed form of dispatch appropriately balanced the commercial imperative of maintaining the proposed Scheme meeting date with the importance of giving shareholders time to consider the information contained in the supplementary Scheme booklet.
For these reasons, at the conclusion of the hearing on 20 August 2024, I made orders in terms of 'Annexure A' to this judgment.

Scheme meeting

The Scheme meeting was convened and held on 27 August 2024.
123 shareholders were present at the Scheme meeting in person and by proxy.[16] 99.18% of shareholders who voted at the meeting were in favour of the Scheme.[17] 100% of votes cast on the Scheme resolution were cast in favour of the resolution.[18]
[16] Third affidavit of Graham Leslie Ascough filed 28 August 2024, 'GLA-35'.
[17] Third affidavit of Graham Leslie Ascough filed 28 August 2024, 'GLA-35'.
[18] Third affidavit of Graham Leslie Ascough filed 28 August 2024, 'GLA-35'.
At the first court hearing, PNX agreed to tag the votes of Delphi Unternhemensberatung Aktiengesellschaft (Delphi), and its related body corporate, at the Scheme meeting. If these votes are excluded, 99.17% of shareholders voted in favour of the Scheme and 100% of votes were cast in favour of the resolution.[19]
[19] Third affidavit of Graham Leslie Ascough filed 28 August 2024 'GLA-37'.

Should the Scheme be approved?

The originating process was listed before me for the second court hearing on 30 August 2024.
PNX relied on an additional six affidavits for the second court hearing:
(a)two affidavits of Mr Steele filed 27 August 2024 and 30 August 2024 (his eighth and ninth affidavits);
(b)two affidavits of Mr Ascough filed 28 August 2024 and 29 August 2024 (his third and fourth affidavits);
(c)an affidavit of Benjamin Noel Horne, an account director employed by Georgeson Shareholder Communications Australia Pty Ltd (Georgeson), filed 28 August 2024; and
(d)an affidavit of Nigel John Bulling, a relationship manager employed by Computershare Investor Services Pty Ltd (Computershare), filed 28 August 2024.
These additional affidavits addressed the matters PNX was required to establish at the second court hearing.

Relevant legal principles

The approval of the proposed Scheme pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), or the second court hearing, is the third stage of approval for a scheme of arrangement. The second stage is the approval of the Scheme by the requisite statutory majorities, which occurred at the Scheme meeting.
At the second court hearing, the court has two tasks:[20]
(a)to ensure that all statutory and procedural requirements have been satisfied. This includes confirming that:[21]
(i)the meeting was convened and held in accordance with the court's earlier orders;
(ii)the resolutions were passed with the requisite statutory majorities; and
(iii)the plaintiff otherwise complied with the court's earlier orders;
(b)to determine, in the exercise of the court's discretion, whether to approve the proposed arrangement.
[20] Re Wesfarmers Ltd [No 2] [2018] WASC 357 [12].
[21] Re International Goldfields Ltd [2004] WASC 112 [7].
The court has a discretion to approve a scheme under s 411(4)(b) of the Act and is not bound to approve a scheme just because the court previously made orders for the convening of a meeting or because the statutory majorities have been achieved.[22] That said, the court will usually approach the task on the basis that shareholders are better judges of what is in their commercial interests than the court.[23]
[22] Re Wesfarmers Ltd [No 2] [13]; Re Seven Network Ltd [No 3] [2010] FCA 400; (2010) 267 ALR 583 [31].
[23] Re Wesfarmers Ltd [No 2] [13]; Re Seven Network Ltd [No 3] [32] - [33].
The factors that inform the court's discretion whether or not to approve a scheme are:[24]
[24] Re Seven Network Ltd [No 3] [35] - [40], [50], [52].
(a)whether the members have voted in good faith and not for an improper purpose;
(b)whether the proposal is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it;
(c)whether the plaintiff has brought to the attention of the court all matters that could be considered relevant to the exercise of the court's discretion;
(d)whether there has been full and frank disclosure of all information material to the members' decision;
(e)whether minority shareholders would be oppressed by the scheme;
(f)whether the court is satisfied that the scheme has not been proposed to avoid ch 6 of the Act;
(g)whether ASIC has any objection to the scheme; and
(h)whether the scheme offends public policy.

Compliance with statutory and procedural requirements

I was and am satisfied, on the basis of the additional affidavits that were filed by PNX, that:
(a)a copy of the court's orders made on 17 July 2024 was lodged with ASIC that same day;[25]
(b)a copy of the Scheme booklet that was approved for distribution by the court at the first court hearing was lodged with ASIC and registered on 17 July 2024;[26]
(c)a copy of the court's orders made on 20 August 2024 approving the supplementary Scheme booklet was lodged with ASIC that same day;[27]
(d)a copy of the supplementary Scheme booklet that was approved for distribution by the court on 20 August 2024 was lodged with ASIC and registered that same day;[28]
(e)the Scheme materials and supplementary Scheme materials were dispatched to shareholders in accordance with the orders of the court;[29]
(f)in accordance with the orders of the court, the Scheme booklet, the notice of the Scheme meeting and the supplementary Scheme booklet were available for inspection on PNX's website and at its registered office upon a PNX shareholder's request;[30]
(g)the Scheme meeting was convened and held on 27 August 2024 in accordance with the orders;[31]
(h)the Scheme was approved by the requisite statutory majorities;[32]
(i)notice of the second court hearing was given by way of an ASX announcement on 17 July 2024;[33] and
(j)ASIC informed PNX on 29 August 2024, pursuant to s 411(17)(b) of the Act, that it has no objection to the proposed Scheme.[34]
[25] Eighth affidavit of Joshua Matti Steele filed 27 August 2024 [7], 'JMS-39'.
[26] Second affidavit of Graham Leslie Ascough filed 19 August 2024, 'GLA-24'.
[27] Eighth affidavit of Joshua Matti Steele filed 27 August 2024 [8], 'JMS-41'.
[28] Eighth affidavit of Joshua Matti Steele filed 27 August 2024, 'JMS-47'.
[29] Eighth affidavit of Joshua Matti Steele filed 27 August 2024 [33] - [41]; Affidavit of Nigel John Bulling filed 28 August 2024 [12] - [22], [24] - [30].
[30] Third affidavit of Graham Leslie Ascough filed 28 August 2024 [6].
[31] Third affidavit of Graham Leslie Ascough filed 28 August 2024 [14].
[32] Third affidavit of Graham Leslie Ascough filed 28 August 2024, 'GLA-35'.
[33] Eighth affidavit of Joshua Matti Steele filed 27 August 2024, 'JMS-49'.
[34] Ninth affidavit of Joshua Matti Steele filed 30 August 2024, 'JMS-58'.
Counsel for PNX drew my attention to three matters in relation to the Scheme meeting.
First, as set above at [20], even if the tagged votes of Delphi were excluded, the Scheme received sufficient votes to satisfy the requisite majorities and the resolution was properly passed. I am satisfied this matter does not impact on the exercise of the court's discretion to approve the Scheme.
Second, the poll results were announced after the Scheme meeting was closed. At the Scheme meeting, the chairperson advised attendees that the poll results would be announced to the ASX after the meeting once the votes were counted. The meeting was then declared closed.[35] This approach has been approved by the courts on numerous occasions.[36] No issue arises in the present case concerning the manner in which the polls were conducted or announced.
[35] Third affidavit of Graham Leslie Ascough filed 28 August 2024 [20].
[36] Re MAC Services Group Ltd [2010] NSWSC 1474; Re National Australia Bank Ltd [2016] VSC 62 [56].
Third, counsel drew my attention to the voter turnout at the Scheme meeting. The vote turnout was approximately 78.21% of shares on issue and 0.13% of shareholders by number.[37] On the evidence before me, this turnout was consistent with the voter turnout at the two previous annual general meetings of PNX.[38]
[37] Third affidavit of Graham Leslie Ascough filed 28 August 2024 [14(d)], [24].
[38] Third affidavit of Graham Leslie Ascough filed 28 August 2024 [25].
As was stated by Farrell J in Re TriAusMin Limited [No 2]:[39]
It is inappropriate to assume (in the absence of complaint) that shareholders who did not vote either did not have notice of the meeting or were silent in protest of the scheme; apathy should not be presumed to be antagonism.
Nonetheless it does call for consideration to ensure that the vote [was] not unrepresentative, since the court retains the discretion to withhold its approval in that case. It is relevant to consider whether members have been deterred from attending or voting at the meeting.
[39] ReTriAusMin Limited [No 2] [2014] FCA 833 [10] - [11].
I respectfully agree with her Honour's view.

In any event, relatively low shareholder turnout does not prevent the court from making orders approving a scheme of arrangement.[40]
[40] Re Pensana Metals Ltd; Ex parte Pensana Metals Limited [2020] WASC 17 [12] (6.41% of shareholders holding 37.08% of shares) as well as the cases referred to.
I was and am satisfied that there was sufficient turnout at the Scheme meetings. I do not consider the low voter turnout by number of shareholders suggested there had been an error in the dispatch of the Scheme booklet, nor that this should prevent the court from making orders under s 411(4)(b) of the Act. In this respect, I have had regard to the following matters:
(a)a significant majority of shareholders (by number) who voted at the Scheme meeting voted in favour of the Scheme;
(b)there was no evidence which suggested any irregularity in the dispatch of the Scheme booklet; and
(c)there was no evidence of any issue which would have deterred shareholders from voting at or attending the Scheme meeting.
For these reasons, I was and am satisfied that all statutory pre‑conditions have been met.

Good faith and proper purpose

I am satisfied on the evidence filed by PNX that its members voted in good faith and for a proper purpose. The proposed Scheme is to effect the acquisition of shares and does not involve any novel treatment of rights. No-one appeared at the second court hearing to object to the approval of the proposed Scheme.

Fairness and reasonableness

At the first court hearing, based on the evidence before the court, I was satisfied the proposed Scheme was of such a nature that there was no apparent reason that it should not receive approval if the requisite voting majorities were achieved at the Scheme meeting.
Nothing has occurred since the date of the first court hearing to change this view. The shareholders who voted at the meeting overwhelmingly supported the proposed Scheme.
No shareholder appeared at the second court hearing to oppose the orders sought by PNX. I was and am satisfied that the proposed Scheme is fair and reasonable and is a Scheme that sensible businesspeople might consider to be of benefit to shareholders.

All relevant matters brought to the court's attention

At the first court hearing, counsel for the plaintiff drew my attention to a number of matters which are summarised at [37] - [74] of the First Reasons.
Four additional matters were drawn to my attention by counsel at the second court hearing.
First, the inbound information line run by Georgeson (on behalf of PNX) was conducted in accordance with the form of the script that was drawn to the court's attention at the first court hearing.[41] Counsel for PNX noted that ASIC reviewed the inbound call script and had requested changes, which were incorporated into the final version. There is no evidence before the court to suggest this conduct compromised the integrity of the voting process.
[41] Affidavit of Benjamin Noel Horne filed 28 August 2024 [15].
Second, prior to the dispatch of the supplementary Scheme booklet, Mr Ascough made telephone calls to several large PNX shareholders (one of whom was Delphi).[42] These telephone calls were made following Mr Ascough receiving an update on the number of proxies that had been received and were to ensure these shareholders had received all necessary materials to vote on the proposed Scheme. While these outbound communications were not drawn to the attention of the court at the first court hearing, the evidence before me is that Mr Ascough did not discuss the merits of the Scheme and directed shareholders to the Scheme booklet for details about the Scheme. I am satisfied that these communications did not compromise the integrity of the Scheme and do not consider it is a reason to refuse approval of the Scheme.
[42] Third affidavit of Graham Leslie Ascough filed 28 August 2024 [10] - [13].
Third, as at the date of dispatch of the supplementary Scheme booklet, 93.27% of eligible PNX shareholders (apart from Delphi) had not voted on the Scheme resolution. Given this, I am satisfied that any impact the investor presentation may have had on shareholders would have been corrected by the supplementary Scheme booklet before the majority of shareholders voted.
Fourth, all remaining conditions precedent (apart from the court's approval at the second court hearing) have now been satisfied or waived.[43]

Full and fair disclosure

[43] Ninth affidavit of Joshua Matti Steele filed 30 August 2024 [11].

At the first court hearing and the directions hearing, based on the evidence before the court, I was satisfied that the draft Scheme booklet and supplementary Scheme booklet would provide full and fair disclosure to shareholders.
The additional affidavit evidence filed by PNX establishes that the Scheme booklet and supplementary Scheme booklet dispatched to shareholders were in the form approved for distribution by the court.
Nothing has arisen to suggest that there has not been full and fair disclosure of all information that was material to the decision of shareholders prior to them voting on the Scheme.

Oppression of minorities

There was no evidence that any minority has been oppressed.

Satisfaction of s 411(17) of the Act and ASIC's view

ASIC has provided a written statement to the effect that it does not object to the Scheme pursuant to s 411(17)(b) of the Act,[44] which satisfies the requirements of s 411(17). Having regard to the nature of the proposed transaction, it cannot be said the Scheme was proposed to avoid the operation of ch 6 of the Act.

Public policy

[44] Ninth affidavit of Joshua Matti Steele filed 30 August 2024, 'JMS-58'.

There is no evidence before the court that the proposed Scheme offends any aspect of public policy. Given the nature of the proposed Scheme, it is my view that it could not be sensibly suggested that the Scheme offends public policy.

Should PNX be exempt from compliance with s 411(11) of the Act?

PNX sought an exemption from complying with s 411(11) of the Act. In my view, there is no utility in requiring the court's orders approving the Scheme to be annexed to PNX's constitution as the orders do not effect any change to the constitution. This exemption has become ordinary practice for transactions of this kind.

Conclusion and orders

At the second court hearing before me, I was satisfied the substantive and procedural requirements under s 411(4) of the Act had been satisfied and that I should approve the proposed Scheme.
For these reasons, at the conclusion of the hearing on 30 August 2024, I made orders in terms of 'Annexure B' to this judgment in respect of the Scheme.

'Annexure A'

'Annexure B'

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JN
Associate to the Honourable Justice Hill
10 SEPTEMBER 2024