Re Bardoc Gold Ltd - [2022] WASC 94

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE BARDOC GOLD LTD; EX PARTE BARDOC GOLD LTD [2022] WASC 94
CORAM:   STRK J
HEARD:   22 FEBRUARY 2022
DELIVERED          :   22 FEBRUARY 2022
PUBLISHED           :   17 MARCH 2022
FILE NO/S:   COR 22 of 2022
MATTER:   IN THE MATTER OF BARDOC GOLD LTD

EX PARTE
BARDOC GOLD LTD
Plaintiff
ST BARBARA LTD
Interested Party

Catchwords:

Corporations law - Scheme of arrangement - Proposed share acquisition - Application for orders convening a scheme meeting under Corporations Act 2001 (Cth) s 411(1) - Whether requirements to order scheme meeting are satisfied - Orders made convening scheme meeting - Distribution of scheme booklet containing the explanatory statement required by the Corporations Act 2001 (Cth) s 412(1)(a) approved - Ancillary orders

Legislation:

Corporations Act 2001 (Cth), s 411(1), s 412(1)(a), s 1319
Corporations Regulations 2001 (Cth), sch 8
Supreme Court (Corporations) (WA) Rules 2004 (WA), r 3.2

Result:

Application granted
Orders made convening scheme meeting

Category: B

Representation:

Counsel:

Plaintiff	:	J M Healy
Interested Party	:	J Y Wang

Solicitors:

Plaintiff	:	Steinepreis Paganin
Interested Party	:	King & Wood Mallesons

Cases referred to in decision:

Anatolia Energy Ltd, in the matter of Anatolia Energy Ltd [2015] FCA 1134
APN News & Media Ltd, in the matter of APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400
Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485
Creso Pharma Ltd [2019] WASC 472
Excelsior Gold Ltd; Re Excelsior Gold Ltd [2018] FCA 2064
Firefly Resources Ltd [2021] WASC 376
First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116; (2017) 320 FLR 78
Integra Mining Ltd, in the matter of Integra Mining Ltd [2012] FCA 1414
Piedmont Lithium Ltd [2021] WASC 76
Re Advance Bank Australia Ltd (1997) 136 FLR 281
Re Alinta Ltd [2007] FCA 1416
Re Doray Minerals Ltd; Ex parte Doray Minerals Ltd [2019] WASC 57
Re Envestra Ltd [2014] FCA 395
Re Galaxy Resources Ltd; Ex parte Galaxy Resources Ltd [2021] WASC 277
Re Gazal Corporation Ltd [2019] FCA 701
Re Kangaroo Resources Ltd; Ex parte Kangaroo Resources Ltd [2018] WASC 327
Re Kangaroo Resources Ltd; Ex parte Kangaroo Resources Ltd [No 2] [2018] WASC 388
Re Kidman Resources Ltd [2019] FCA 1226
Re Macquarie Private Capital A Ltd [2008] NSWSC 323
Re Mosaic Oil NL [2010] FCA 985
Re Navitas Ltd; Ex parte Navitas Ltd [2019] WASC 180
Re NRMA Insurance Ltd (No 1) [2000] NSWSC 82; (2000) 156 FLR 349
Re NTM Gold Ltd; Ex parte NTM Gold Ltd [2021] WASC 22
Re Nzuri Copper Ltd [2019] WASC 189
Re Peak Coal Ltd [2010] FCA 6
Re Ruralco Holdings Ltd [2019] FCA 878
Re SRG Ltd [2018] FCA 1092
Re Tower Australia Group Ltd [2011] FCA 224
Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [2018] WASC 357
Re Zenith Energy Ltd; Ex parte Zenith Energy Ltd [2020] WASC 266
Seven Network Ltd (ACN 052 816 789), in the matter of Seven Network Ltd (No 3) [2010] FCA 400
Seven Network Ltd (ACN 052 816 789), in the matter of Seven Network Ltd [2010] FCA 220

STRK J:

Overview

By an originating process filed on behalf of Bardoc Gold Ltd on 8 February 2022, orders were sought that Bardoc convene a meeting to consider a proposed scheme of arrangement between Bardoc and its shareholders pursuant to s 411(1) and s 1319 of the Corporations Act 2001 (Cth), and for related orders and directions.
Bardoc (ASX:BDC) is an Australian Securities Exchange (ASX) listed company formed on 29 May 2007 and was admitted to the official list of ASX on 10 December 2007. Bardoc has a core focus on exploring the Bardoc Gold Project located in the Eastern Goldfields region of Western Australia.[1]
[1] First Hardwick affidavit pars 16 ‑ 18, RPH-7; scheme booklet s 6.1, annexed to the second Ferguson affidavit, JIF-12, page 404.
As at 18 February 2022, Bardoc had on issue the following securities:[2]
(a)289,119,938 fully paid ordinary shares (Bardoc shares);
(b)1,604,015 fully paid ordinary shares on issue (representing approximately 0.55% of all fully paid ordinary shares on issue in Bardoc), the subject of limited recourse loan arrangements between Bardoc and the nine holders of the Bardoc loan shares (Bardoc loan shares);
(c)1,499,998 unlisted options each exercisable into a Bardoc share, comprising:
(i)499,998 exercisable at $1.20 each on or before 11 September 2022;
(ii)1,000,000 exercisable at $0.72 each on or before 27 September 2022, (together the Bardoc options); and
(d)5,574,992 unlisted performance rights each convertible into a Bardoc Share on the satisfaction of certain performance conditions (Bardoc performance rights), granted under Bardoc's Performance Rights and Option Plan adopted by Bardoc shareholders on 29 June 2017 and 29 November 2019.
[2] Second Hardwick affidavit par 20.
St Barbara Ltd (ASX:SBM) is also an Australian public company listed on the official list as conducted by the ASX. St Barbara has gold mining operations in Australia, Canada and Papua New Guinea. Its assets include the Leonora Operations in Western Australia, the Atlantic Operations in Nova Scotia, Canada and the Simberi Operations in New Ireland Province, Papua New Guinea.[3]
[3] Scheme booklet s 7.1, annexed to the second Ferguson affidavit, JIF-12, page 418.
On 20 December 2021, Bardoc announced to the ASX that it had entered into a scheme implementation deed with St Barbara, which set out the terms and conditions on which Bardoc and St Barbara agreed that St Barbara would acquire by the scheme all of the Bardoc shares on issue as at the record date for the scheme (Record Date), other than Bardoc loan shares.[4]
[4] Scheme implementation deed, annexed to the first Hardwick affidavit, RPH-1; scheme booklet, annexed to the second Ferguson affidavit, JIF-12. The term 'Record Date' is defined in s 15 of the scheme booklet (Glossary), page 501.
The consideration for the acquisition of the Bardoc shares is proposed to be 0.3604 fully paid St Barbara share for each Bardoc share held by a Bardoc shareholder, subject to certain sale arrangements for Bardoc shareholders who do not have a registered address in Australia or new Zealand (Foreign Ineligible Shareholders);[5] and Bardoc shareholders who hold Bardoc shares that would entitle them to less than $500 worth of St Barbara shares (Unmarketable Parcel Shareholders).[6] There are also mechanisms to deal with Bardoc options and Bardoc performance rights.[7] Shareholders who hold Bardoc loan shares are intended to be dealt with outside of the scheme.[8]
[5] Discussed at [27] below. See the second Hardwick affidavit pars 29 ‑ 34, RPH-7; and cl 6.7 of the proposed scheme, being Annexure B to the scheme booklet, annexed to the second Ferguson affidavit, JIF-12, pages 696 ‑ 697.
[6] Discussed at [28] - [30] below. See the second Hardwick affidavit pars 35 ‑ 38, RPH-8; and cl 6.6 of the proposed scheme, being Annexure B to the scheme booklet, annexed to the second Ferguson affidavit, JIF‑12, page 696.
[7] Discussed at [35] ‑ [41] below.
[8] Discussed at [31] ‑ [34] below.
If the scheme is implemented, Bardoc will become the wholly owned subsidiary of St Barbara, and Bardoc will be subsequently delisted from the ASX.
A control premium will be paid by St Barbara. An analysis has been undertaken of the extent to which a control premium is to be paid. The assessment of the preferred value of consideration offered per Bardoc share assuming the spin‑out transaction is approved is $0.503, and $0.492 assuming the spin‑out transaction is not approved. These values represent a premium of 22.6% and 19.9% respectively to the closing price of Bardoc shares of $0.410 on 17 December 2021 (being the last day shares were available for trading immediately prior to the announcement of the scheme), and a premium of 34.7% and 31.7% respectively to the assessment of preferred value of a Bardoc share of $0.373 prior to the scheme.[9]
[9] Independent expert's report par 2.19, annexed to the second Ferguson affidavit, JIF‑12, page 818.
Edge Minerals Pty Ltd is a wholly owned subsidiary of Bardoc. Edge is the holder of the South Woodie Woodie manganese project. Bardoc announced a spin‑out of the South Woodie Woodie manganese project at the same time as the proposed scheme was announced. Before the implementation of the scheme, Bardoc intends to demerge the South Woodie Woodie project by way of an in‑specie distribution of all of the fully paid ordinary shares in Edge to Bardoc shareholders.[10] That is, subject to Bardoc obtaining all necessary approvals, the demerger would result in Bardoc shareholders retaining ownership of the South Woodie Woodie manganese project. However, the scheme and the proposed demerger are not interdependent. The proposed demerger will be subject to Bardoc shareholder approval at a separate general meeting of Bardoc shareholders.[11]
[10] Scheme booklet, annexed to the second Ferguson affidavit, JIF-12, page 369; see also s 4, page 394, and s 9.1, page 448; see also pars 1.6 and 5.8 of the independent expert's report, being Annexure A to the scheme booklet, annexed to the second Ferguson affidavit, JIF-12, pages 511 and 523.
[11] Scheme booklet, annexed to the second Ferguson affidavit, JIF-12, page 369; see also s 8.7(e), page 445 ‑ 446, and ts 9 (22 February 2022).
Section 411 of the Corporations Act envisages three steps. First, the court approves the convening of a scheme meeting and the draft explanatory statement to be sent to the scheme members. Secondly, the members vote on the proposed scheme at the scheme meeting. Thirdly, assuming the first two stages have occurred, a further application to the court for approval of the arrangement.
The first court hearing took place on 22 February 2022. Counsel for St Barbara appeared in support of the application.[12] The Australian Securities and Investments Commission (ASIC) did not seek to be heard.
[12] Leave to appear was granted, see ts 12 (22 February 2022).
After hearing from counsel, I made orders in accordance with s 411(1) of the Corporations Act to convene a meeting of Bardoc's shareholders on 30 March 2022 to consider and vote on the proposed scheme. Orders were also made approving for distribution of a scheme booklet comprising the explanatory statement required by s 412(1)(a) of the Corporations Act. Ancillary orders were made as to the convening and conduct of the meeting.

Evidence for the first court hearing

Six affidavits were filed on behalf of Bardoc prior to the first court hearing and all were read in support of the application. They were as follows.
First, the affidavit of Russell Paul Hardwick sworn on 8 February 2022 which attached documents RPH1 to RPH7. Mr Hardwick is the company secretary of Bardoc, and is responsible for the date to day conduct of Bardoc in relation to the proposed scheme and this proceeding. By his first affidavit, Mr Hardwick briefly described the scheme, the loan arrangements for the Bardoc loan shares, and the status of Bardoc. The attachments included the scheme implementation deed; Bardoc's announcement to the ASX on 20 December 2021; the proposed scheme of arrangement; the proposed timetable for implementation of the scheme; the proposed scheme deed poll (which deed poll was intended to be made by St Barbara in favour of Bardoc shareholders covenanting that St Barbara will perform its obligations under the scheme implementation deed and the scheme of arrangement); an example of a loan share deed; and ASIC searches in relation to Bardoc.
The second was a further affidavit of Mr Hardwick sworn on 18 February 2022 which attached documents RPH1 to RPH22. Among other things, in his second affidavit Mr Hardwick described the board of directors of Bardoc; the conditions precedent of the scheme; and the scheme consideration. He also deposed to the securities that Bardoc had on issue as at the date of his second affidavit; Bardoc having been granted a waiver of ASX Listing Rule 6.23.2 to permit the Bardoc options to be cancelled without requiring the approval of Bardoc shareholders, subject to the scheme being approved by the Bardoc shareholders and the court; the process undertaken in relation to the drafting and verification of the scheme booklet; service on ASIC of the draft scheme booklet; the board of Bardoc's unanimous resolution to enter into the scheme implementation deed on 17 December 2021; the interests of the directors of Bardoc in the outcome of the scheme; the resolution of the board of Bardoc to unanimously support the scheme and recommend that all Bardoc shareholders vote in favour of it in the absence of a superior proposal; and the steps proposed to be taken by Bardoc if the court directed Bardoc to convene the scheme meeting.
The attachments to Mr Hardwick's second affidavit included the draft scheme booklet; Bardoc's Performance Rights and Option Plan; ASX Listing Rule 6.23.2 waiver; a copy of the verification draft of the scheme booklet; and the circular resolution of the Bardoc directors dated 17 December 2021.
The third was the affidavit of James Ian Ferguson sworn on 21 February 2022 attaching documents JIF1 to JIF6. Mr Ferguson is a solicitor employed by Steinepreis Paganin, the solicitors for Bardoc. By his affidavit, Mr Ferguson deposed to service on ASIC on 11 February 2021 of the originating process with a copy of Mr Hardwick's first affidavit; service on ASIC on 18 February 2022 of the second Hardwick affidavit; and to having informed ASIC of the date of the first court hearing. He also annexed to his affidavit communications as between Steinepreis Paganin and ASIC in relation to the scheme booklet.
The fourth affidavit was the affidavit of Derek Noel La Ferla sworn on 21 February 2022. Mr La Ferla is a lawyer and partner of Lavan and had been nominated as chairperson for the scheme meeting. Mr La Ferla deposed to his willingness to act as chairperson of the scheme meeting; his independence; his agreement to report the results of the scheme meeting to the court if he is required to chair the scheme meeting; and to holding no interest or obligation that may give rise to a conflict of interest or duty if he were to act as chairperson of the scheme meeting.
The fifth was the affidavit of Matthew Adam Ireland sworn on 21 February 2022. Mr Ireland is a lawyer and partner of Steinepreis Paganin and has been nominated as alternate chairperson for the scheme meeting. Mr Ireland deposed to his willingness to act as chairperson in the event that Mr La Ferla is unable to act. Mr Ireland deposed that as at the date of his affidavit, he did not have an interest in any shares or securities of Bardoc, nor any interest in any securities of St Barbara. He deposed to the engagement of Steinepreis Paganin by Bardoc for legal services provided in relation to the proposed scheme and for other legal services; discloses the fees paid; and estimates the fees Steinepreis Paganin expects to receive in relation to the proposal and implementation of the scheme.
Mr Ireland also deposed that except as disclosed in his affidavit, he had had no previous relationship or dealing with Bardoc or any other person interested in the proposed scheme; and had no interest or obligation that may give rise to a conflict of interest or duty if he were to act as chairperson of the scheme meeting.
The sixth was the further affidavit of Mr Ferguson sworn on 22 February 2022 attaching documents JIF7 to JIF18.
Among other things, Mr Ferguson deposed to having served ASIC with a copy of Bardoc's submissions for hearing, minute of proposed order, his first affidavit, Mr La Ferla's affidavit and Mr Ireland's affidavit. He also deposed to having sent amended scheme booklets to ASIC. Mr Ferguson attached to his affidavit the amended drafts of the scheme booklet, together with the latest scheme booklet as sent to ASIC on 22 February 2022 which included the final independent expert's report. He also attached the executed deed poll given by St Barbara in favour of each scheme participant, dated 21 February 2022; a bundle of email communications by which the directors of Bardoc each confirmed their respective approval of changes made to the scheme booklet; and a copy of a letter dated 22 February 2022 received from ASIC confirming ASIC's intentions in relation to the scheme.
On 18 February 2022, St Barbara filed a notice of appearance as a party interested in this proceeding. The affidavit of Sarah Lorne Standish affirmed on 21 February 2022 was filed on behalf of St Barbara in support of the application and was read at the first court hearing. Ms Standish is the general counsel and company secretary of St Barbara. Ms Standish deposed to the process undertaken in relation to the drafting and verification of the scheme booklet; entry into the scheme implementation deed on 19 December 2021 and the basis on which the break fee was agreed. She also deposed that as at the date of her affidavit, she was not aware of any fact, matter or circumstance that had resulted in, or was likely to result in, the failure of the conditions precedent to the scheme implementation deed.
At the first court hearing, Bardoc also relied upon the written outline of submissions filed on 21 February 2022, and the minute of proposed orders filed on the same date.

The scheme

On 19 December 2021, Bardoc and St Barbara entered into the scheme implementation deed, which was announced to the ASX the next day.[13] Subject to a number of exceptions which are discussed below, if implemented the scheme will have the following effect:[14]
(a)all Bardoc shares (other than Bardoc loan shares) on issue on the Record Date will be transferred on the Implementation Date from Bardoc shareholders to St Barbara in return for the scheme consideration;[15]
(b)Bardoc will become a wholly-owned subsidiary of St Barbara, and Bardoc will be delisted from the ASX;
(c)Bardoc shareholders will become shareholders in St Barbara; and
(d)the strategic direction for the development of Bardoc's existing projects will be determined by the St Barbara board.
[13] First Hardwick affidavit par 6, RPH-1.
[14] Scheme booklet s 5.1, annexed to the second Ferguson affidavit, JIF-12, page 395.
[15] The capitalised terms are detailed in the scheme implementation deed at cl 1.1 annexed to the first Handwick affidavit, RPH-1.
Bardoc's shareholders will receive 0.3604 fully paid St Barbara shares for each Bardoc share as consideration for the acquisition of their Bardoc shares under the scheme, alternatively the equivalent of the net sale proceeds of the St Barbara shares.

Foreign Ineligible Shareholders

Counsel for Bardoc summarised the proposed treatment of Bardoc shareholders whose address in the company's register is a place outside of Australia or its external territories or New Zealand (Ineligible Foreign Holders), as follows.[16] Ineligible Foreign Holders will have the St Barbara shares that they would otherwise be entitled to under the scheme issued to Macquarie Equities Ltd as a sale agent or to a nominee of the sale agent, and sold on market on the ASX, and will receive the net proceeds from that sale. Counsel also noted that the treatment would be subject to an exception. That is, if St Barbara is satisfied that the laws of a particular foreign holder's country of residence (as shown in the Bardoc share register) would permit the issue and allotment of new St Barbara shares to that shareholder, either unconditionally or after compliance with conditions which St Barbara in its sole discretion regards as acceptable and not unduly onerous.

Unmarketable Parcel Shareholders

[16] Bardoc's submissions pars 32 ‑ 33; scheme booklet ss 5.7 and 5.8 annexed to the second Ferguson affidavit, JIF-12, pages 397 – 399. See also the second Hardwick affidavit pars 29 - 34.

Particular 'opt-in' arrangements are contemplated for Bardoc shareholders who are Unmarketable Parcel Shareholders.

Counsel for Bardoc explained that Unmarketable Parcel Shareholders who wish to receive the scheme consideration in the form of St Barbara shares must provide Bardoc's share registry, Computershare, with a duly completed opt-in notice before 5.00 pm (Perth time) on 5 April 2022 (being the business day prior to the Record Date).[17]
[17] Bardoc's submissions pars 35 ‑ 38. See also the second Hardwick affidavit pars 35 - 38, RPH-8.
Any Unmarketable Parcel Shareholder who does not provide Computershare with a duly completed opt-in notice prior to this time will be deemed to be a 'Relevant Unmarketable Parcel Shareholder'. The St Barbara shares to which a Relevant Unmarketable Parcel Shareholder would otherwise be entitled will be issued to the sale agent, who will deal with those shares in accordance with the procedure set out at s 5.8 of the scheme booklet (that is, they will have the St Barbara shares that they would otherwise be entitled to under the scheme issued to Macquarie Equities Ltd as a sale agent and sold on market on the ASX, and will receive the net proceeds from that sale).[18]

Bardoc loan shares

[18] Scheme booklet s 5.8(b), annexed to the second Ferguson affidavit, JIF-12, page 398.

Counsel for Bardoc summarised the proposed treatment of Bardoc loan shares as follows.[19] Bardoc currently has 1,604,015 fully paid ordinary shares on issue (representing approximately 0.55% of all fully paid ordinary shares on issue in Bardoc), which are the subject of limited recourse loan arrangements (that is, Bardoc loan shares) between Bardoc and the nine holders of the Bardoc loan shares.
[19] Bardoc's submissions pars 118 ‑ 121. See also second Hardwick affidavit par 43, RPH-6.
Bardoc and St Barbara have entered into a loan share deed with each holder of Bardoc loan shares, under which it has been agreed that:
(a)St Barbara will acquire all Bardoc loan shares;
(b)Bardoc loan shares will be exchanged for $0.0791 for each Bardoc loan share, payable by St Barbara; and[20]
(c)the corresponding loan is forgiven by Bardoc.
[20] In the scheme booklet, 'Bardoc Loan Share Consideration' is defined at cl 15 as 'The consideration payable by St Barbara to a Bardoc Loan Share Holder for the sale and purchase of the Bardoc Loan Shares, being $0.0791 multiplied by the number of Bardoc Loan Shares held by that Bardoc Loan Share Holder': second Ferguson affidavit, JIF-12, page 498.
Each acquisition of the Bardoc loan shares by St Barbara under a loan share deed is conditional on the scheme becoming effective. If the scheme becomes effective, the Bardoc loan shares will be acquired on the date of implementation of the scheme under arrangements for transfer and payment that are outside of the scheme.
As a result of the arrangements that have been made under the loan share deeds, the Bardoc loan shares are not subject to the scheme and the holders of the Bardoc loan shares are not entitled at the proposed scheme meeting to vote their Bardoc loan shares. However, with regards to any Bardoc shares that are not Bardoc loan shares, they will be permitted to vote.

Bardoc options

As noted above, Bardoc had options to acquire Bardoc shares on issue, with various exercise prices and expiry dates.
Bardoc and St Barbara have executed a deed with each of the holders of the Bardoc options, whereby it was agreed that the Bardoc options held by the holder would be cancelled at 10.00 am on the date of implementation of the scheme. The monetary consideration to be paid to a holder of Bardoc options was agreed under cl 3.3 of the option cancellation deed.[21]
[21] Bardoc's submissions pars 41 ‑ 45; second Hardwick affidavit pars 20, 39 ‑ 42, RPH-10. See also s 5.9 of the scheme booklet, annexed to the second Ferguson affidavit, JIF-12, pages 399 - 400.
Counsel for Bardoc explained that the consideration to be paid to holders of Bardoc options was determined independently using the Black & Scholes option model, based on a valuation date of 17 December 2021, the implied offer price of Bardoc shares being $0.530, the implied offer price to Bardoc shareholders based on a 0.3604 exchange ratio as at 17 December 2021, with a risk free interest rate of 1.61% (per Australian 10‑year government bonds as at close on 17 December 2021) and a volatility of 56.18% (based on Bardoc's one year (253 trading day) volatility as at close on 17 December 2021).
Counsel also noted that under cl 3.l(k) of the scheme implementation deed,[22] it is a condition of the scheme that the option cancellation deeds have been entered into with each option holder prior to 8.00 am on date of the second court hearing for approval of the scheme.[23]

Bardoc performance rights

[22] Annexed to the first Hardwick affidavit at RPH-1.

[23] Second Hardwick affidavit, par 42.

Bardoc has a total of 5,574,992 Bardoc performance rights on issue, of which 1,916,664 Bardoc performance rights are held by Bardoc directors.[24]
[24] Bardoc's submissions pars 46 - 47. See also s 5.10 of the scheme booklet annexed to the second Ferguson affidavit, JIF-12, pages 400 - 402; and second Hardwick affidavit pars 46 - 48.
Pursuant to the terms of Bardoc's performance right and option plan (being the incentive plan pursuant to which Bardoc performance rights were issued), the vesting conditions attaching to the Bardoc performance rights are deemed to be automatically waived upon a change of control occurring, including a court approving, under s 411(4)(b) of the Corporations Act a proposed arrangement.
Counsel noted that in accordance with their terms, those existing Bardoc performance rights will automatically vest and be converted into Bardoc shares on a one for one basis on the scheme becoming effective. That is, all existing Bardoc performance rights will convert into Bardoc shares before the Record Date, which in turn will be exchanged for new St Barbara shares under the scheme.[25]

Position adopted by the directors of Bardoc

[25] Bardoc's submissions par 47; scheme booklet s 5.10, annexed to the second Ferguson affidavit, JIF-12, page 400.

The directors of Bardoc unanimously recommended that shareholders vote in favour of the scheme.[26]

The independent expert's report

[26] Bardoc's submissions par 112; the circular resolution of the board of Bardoc, annexed to the second Hardwick affidavit, RPH-17; scheme booklet, annexed to the second Ferguson affidavit, JIF‑12, page 396.

Bardoc engaged RSM Corporate Australia Pty Ltd to undertake a review and to provide an opinion on the scheme.
The scheme booklet includes the independent expert's report prepared by RSM Corporate Australia Pty Ltd, expressing the opinion that the proposed scheme is fair and reasonable and in the best interests of shareholders, in the absence of a superior proposal.[27]

Conditions precedent

[27] Scheme booklet s 12.2, annexed to the second Ferguson affidavit, JIF-12, pages 475 ‑ 476.

The scheme will not be implemented unless and until a number of conditions precedent are satisfied or waived. The conditions precedent which are required to be satisfied are prescribed in cl 3.1 of the scheme implementation deed and are disclosed in a summarised form in the scheme booklet.[28]
[28] Scheme implementation deed cl 3.1, annexed to the first Handwick affidavit, RPH-1. See also s 4 and s 12.2 of the scheme booklet, annexed to the second Ferguson affidavit, JIF-12, pages 391, 475 - 476.
At the second court hearing, Bardoc and St Barbara will provide certificates under cll 5.2(n) and 5.3(i) of the scheme implementation deed to demonstrate satisfaction or waiver of each condition precedent, as applicable.
By the scheme booklet, Bardoc shareholders will be advised that they will receive an update of the status of scheme conditions at the scheme meeting. Further, it is proposed that Bardoc will announce to the ASX any relevant matter that affects the scheme or the likelihood of a scheme condition being satisfied or not being satisfied, in accordance with Bardoc's continuous disclosure obligations. These details will be published on the ASX website, and will also appear on Bardoc's website.[29]

Documents before the court

[29] Scheme booklet s 12.2, annexed to the second Ferguson affidavit, JIF-12, page 476.

The documents before the court at the first court hearing included the draft scheme booklet, with marked‑up changes which incorporate the comments and questions of ASIC;[30] and a 'clean' version of the scheme booklet as at 18 February 2022 with some annexures.[31] The final scheme booklet (excluding proposed annexures) is 142 pages and contains the following introductory documents:[32]
(a)a two page document titled 'important information', which provides introductory information such as the role of ASIC, ASX and the court;
(b)a two page document titled 'important information regarding director's recommendations', which discloses the relevant interests held by the directors of Bardoc in Bardoc securities;[33]
(c)a two page document which summarises the reasons to vote in favour of or against the scheme, and describes the 'spin‑out transaction and the South Woodie Woodie Project';
(d)a two page document which provides an overview of the scheme booklet;
(e)a one page document titled 'important dates and times';
(f)a letter from Tony Leibowitz, Non‑Executive Chairman of Bardoc, outlining the position of the Bardoc directors;
(g)a letter from Tim Netscher, Independent Non‑Executive Chairman of St Barbara; and
(h)a three page document which provides an overview of the meeting details and how to vote.
[30] First Ferguson affidavit, JIF-3.
[31] Second Hardwick affidavit, RPH-1.
[32] Second Ferguson affidavit, JIF-12.
[33] Corporations Act ss 608 and 609.
The scheme booklet also addressed:
(a)key reasons to vote in favour of the scheme (which included an outline of considerations relevant to the vote of shareholders, and reasons to vote in favour of the scheme);
(b)reasons why a shareholder may choose to vote against the scheme;
(c)implications if the scheme is not implemented;
(d)'frequently asked questions';
(e)an overview of the scheme;
(f)profiles of Bardoc and St Barbara, and a profile of the combined group;
(g)a description of the intentions of St Barbara and the combined group;
(h)risk factors (which included specific risks relating to the combined group, risks to Bardoc shareholders if the scheme does not proceed, general risks relating to an investment in St Barbara and the combined group, and scheme implementation specific risks);
(i)Australian tax implications;
(j)implementation of the scheme;
(k)the key terms of the scheme implementation deed; and
(l)additional information (which included the relevant interests of Bardoc's directors and the benefits they will obtain if the scheme is approved, and rights and liabilities attaching to new St Barbara shares if the scheme becomes effective).
The following documents are annexed to the scheme booklet:
(a)the independent expert's report;
(b)the scheme of arrangement;
(c)the deed poll executed by St Barbara dated 21 February 2022; and
(d)a notice of scheme meeting.

Legal principles in respect of the scheme

Justice Hill in Re Galaxy Resources Ltd; Ex parte Galaxy Resources Ltd [2021] WASC 277 succinctly summarised the legal principles to be applied at a first court hearing, which I reproduce below and I applied in determining Bardoc's application:
[31]Pursuant to s 411 of the Act, a scheme of arrangement can be used to re-organise a company in a manner which will be binding on its members, provided that:
(a)the arrangement is agreed by the requisite majorities as prescribed by s 411(4)(a) of the Act, namely 75% of shareholders by value and 50% by number; and
(b)the court approves the arrangement pursuant to s 411(4)(b) of the Act.
[32]There are three stages to an application under s 411 of the Act. First, the court approves the convening of a scheme meeting and the draft explanatory statement to be sent to the scheme members. Second, the members vote on the proposed scheme at the scheme meeting. Third, assuming the first two stages have occurred, the court approves the proposed scheme.
[33]There are well-established principles which apply to the first stage of proceedings. The court will order the convening of the scheme meeting and approve the dispatch of the scheme booklet if satisfied that:
(a)there is a pt 5.1 body;
(b)there is a compromise or arrangement within the meaning of s 411 of the Act;
(c)the proposed scheme booklet contains the prescribed information and provides proper disclosure;
(d)the scheme is bona fide and properly proposed;
(e)ASIC has had at least 14 days' notice of the proposed hearing date and a reasonable opportunity to examine the terms of the scheme and the scheme booklet and make submissions;
(f)the procedural requirements of the Act and the Corporations Rules have been met; and
(g)the scheme is of such a nature that, if it receives the necessary statutory majority at the scheme meeting, the court will be likely to approve it.
[34]Any issues about classes of members is usually determined at the first hearing. This is so that costs and court time are not wasted which would otherwise occur if this issue was left to the second hearing.
[35]The standard of review that is undertaken by the court at the first hearing is whether the proposed scheme is not inappropriate and is one that sensible businesspeople might consider is of benefit to its members. If the proposed arrangement is one that appears fit for consideration by a meeting of members and is a commercial proposition likely to gain the court's approval if passed by the necessary majority, leave should be given to convene the meeting. [footnotes omitted]

Disposition

The formal matters that Bardoc were required to prove were satisfied for the reasons stated in the written submissions filed on behalf of Bardoc.

Part 5.1 body

The term 'Part 5.1 body' is defined in s 9 of the Corporations Act to mean, relevantly, a company. The term 'company' is defined in s 9 to mean, relevantly, a company registered under the Corporations Act. I accepted that Bardoc is a public company registered under the Corporations Act.[34]

An arrangement within the meaning of s 411

[34] First Hardwick affidavit, RPH-7.

The scheme participants are members of Bardoc. The term 'member' is defined in s 9 of the Corporations Act to mean, in relation to a company, a person who is a member under s 231.
I accepted that the proposed scheme will be between Bardoc and its shareholders, as shown on its register of members.
I accepted that the word 'arrangement' is of wide import,[35] and that the proposed scheme is an 'arrangement' of a type that has been accepted by courts on numerous occasions. Further, for the reasons set out below, I was satisfied that the scheme meeting will be convened between members of the same class.

Members of the same class

[35] Re NRMA Insurance Ltd (No 1) [2000] NSWSC 82; (2000) 156 FLR 349, 356 [20], cited in Bardoc's submissions par 23.

The term 'member' is defined in s 9 of the Corporations Act to mean, in relation to a company, a person who is a member under s 231. Broadly, a person is a member of a company if they are a member of the company on its registration, or agree to become a member of the company after its registration and their name is entered on the register of members.
An arrangement to which s 411(1) of the Corporations Act applies is one between a company and its members or creditors or any class of them. The orders sought on behalf of Bardoc assumed that the Bardoc shareholders form only one class for purposes of voting on the proposed scheme.
Section 411 does not define the term 'class'. In determining whether a new or separate class is required, the following threefold test is to be applied:[36]
(a)What are the rights which existing members have against the company and to what extent are they different?
(b)To what extent are those rights affected by the scheme?
(c)Does the different treatment of rights make it impossible for the members in question to consider the scheme as one class?
[36] First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116; (2017) 320 FLR 78, 92 ‑ 94 [77] ‑ [81], cited in Bardoc's submissions par 31, footnote 14; see also Re Zenith Energy Ltd; Ex parte Zenith Energy Ltd [2020] WASC 266 [36].
Counsel for Bardoc submitted that all Bardoc shareholders the subject of the scheme have the same rights in the scheme, being the right to receive the 'Scheme Consideration'.[37]
[37] Bardoc's submissions par 30; scheme booklet s 5.2, annexed to the second Ferguson affidavit, JIF-12, page 395.
It was submitted, and I accepted, that the existence of mechanisms to deal with Ineligible Foreign Shareholders and Unmarketable Parcel Shareholders, and the treatment of Bardoc option holders, Bardoc performance rights, and Bardoc loan shares are not class creating.

Ineligible Foreign Shareholders

As to the treatment of Ineligible Foreign Shareholders, I accepted that mechanism proposed is commonplace and is not class creating.[38] There is a sensible commercial justification for these sale mechanisms in not requiring scheme companies to ascertain and comply (if possible) with numerous sets of foreign securities laws.[39]

Unmarketable Parcel Shareholders

[38] See Excelsior Gold Ltd; Re Excelsior Gold Ltd [2018] FCA 2064 [37] - [43]; Re Doray Minerals Ltd; Ex parte Doray Minerals Ltd [2019] WASC 57 [45]; Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2][2018] WASC 357 [96]; and Piedmont Lithium Ltd [2021] WASC 76 [41].

[39] Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [96], [97].

As to the treatment of Unmarketable Parcel Shareholders, I accepted that the 'opt in' arrangements will not be class creating. Those that opt‑in will receive the same scheme consideration as all Bardoc shareholders under the scheme. Those that do not opt-in will have the St Barbara shares that they would otherwise be entitled to under the scheme issued to Macquarie Equities Ltd as a sale agent and sold on market on the ASX, and will receive the net proceeds from that sale.
I accepted that there is a sensible commercial justification for the treatment proposed, and the inclusion of 'opt-in' arrangements is appropriate.[40]

Bardoc options

[40] See Re Alinta Ltd [2007] FCA 1416; Re Peak Coal Ltd [2010] FCA 6; Re Mosaic Oil NL [2010] FCA 985; and Re Envestra Ltd [2014] FCA 395, cited in Bardoc's submissions at par 39, footnote 19.

Turning to the Bardoc options, as noted above, the Bardoc options are not being dealt with by a separate scheme of arrangement as between Bardoc and the holders of Bardoc options, nor will they be the subject of the compulsory 'mop-up' provisions post scheme. Rather, the Bardoc options are to be cancelled pursuant to the Option Cancellation Deed in exchange for the consideration described at [35] to [38] above. Bardoc submitted that the treatment of the Bardoc options under the option cancellation deed does not require the shareholders of Bardoc who hold Bardoc options to be treated as a separate class for the purposes of the scheme.
I accepted that the treatment of Bardoc option holders is not class creating. The question of whether a separate class exists must be considered by reference to the rights of the relevant Bardoc shareholders as shareholders. That some Bardoc shareholders also hold Bardoc options does not alter the scheme consideration that they will receive for their Bardoc shares.
The treatment and receipt of consideration does not result in the member receiving a right or benefit under the scheme that is different from other members. That is, the consideration is not to be received by the holder of the Bardoc options as a member of Bardoc, but as a holder of, and in exchange for Bardoc options.

Bardoc performance rights

As noted at [39] to [41] above, Bardoc performance rights are not being dealt with by a separate scheme of arrangement as between Bardoc and the holders of that class of securities. Again, Bardoc submitted that there is no need for the shareholders of Bardoc who hold Bardoc performance rights to be treated as a separate class for the purposes of the scheme.
In accordance with their terms, those existing Bardoc performance rights will automatically vest and be converted into Bardoc shares on a one for one basis on the scheme comes into effect. The Bardoc shares issued on exercise will then be exchanged for St Barbara shares under the scheme.
In these circumstances, I accepted that the treatment of Bardoc performance rights is not class creating. Bardoc performance rights are rights affected by the vesting provisions in the Performance Rights and Option Plan. They are not affected by the scheme. Each Bardoc shareholder (who holds Bardoc shares by operation of a vesting provision, or otherwise) will get the same benefit for his or her shares under the scheme.

Bardoc loan shares

Finally, I turn to the Bardoc loan shares. Having regard to the Bardoc loan share deed, I accepted that the treatment of Bardoc loan shares is to take place outside of the scheme and is not class creating.
The holders of Bardoc loan shares will receive loan share consideration. To the extent that these holders also hold shares that are not Bardoc loan shares, they will receive the scheme consideration for the same.
Receipt of the loan share consideration does not result in the member receiving a right or benefit under the scheme that is additional to or different from the rights and benefits the other members will receive under the scheme. Such consideration will be received by the member not as member, but as holder of and in exchange for Bardoc loan shares under the Bardoc loan share deeds.[41]

Consideration by ASIC

[41] Integra Mining Ltd, in the matter of Integra Mining Ltd [2012] FCA 1414 [23].

Section 411(2) of the Corporations Act requires that before making an order, the court be satisfied of two matters. First, that ASIC has been given 14 days' notice of the hearing, or such lesser period of notice as the court or ASIC permits: s 411(2)(a). Secondly, that ASIC has had a reasonable opportunity to examine the terms of the scheme and the draft explanatory statement, and to make submissions to the court: s 411(2)(b).
ASIC considers that its role is to assist the court by, among other things, reviewing the content of the scheme's documents; reviewing the nature and function of the scheme; representing the interests of investors and creditors; and bringing all relevant matters to the court's attention before it orders a scheme meeting or confirms a scheme.[42]
[42] ASIC Regulatory Guide 60 at RG 60.4.
The role of ASIC has been referred to by the High Court, which observed that its predecessor, the Australian Securities Commission, had an obligation to assist the court by presenting argument if it deems that course necessary or desirable.[43] In an application such as this, the court relies on ASIC, as it is not for the court to fulfil the role of contradictor.[44]
[43] Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485, 506; and Re Advance Bank Australia Ltd (1997) 136 FLR 281, 287, cited by Jacobson J in Seven Network Ltd (ACN 052 816 789), in the matter of Seven Network Ltd [2010] FCA 220 [15].
[44] Seven Network Ltd (ACN 052 816 789), in the matter of Seven Network Ltd (No 3) [2010] FCA 400 [43].
On 7 February 2022, Bardoc lodged with ASIC a draft scheme booklet in respect of the proposed scheme. I understand that the draft scheme booklet was updated following receipt of comments and questions from ASIC. The court was provided with a copy of the scheme booklet as provided to ASIC together with subsequent drafts, including a version of the scheme booklet as first presented to ASIC with later amendments shown in mark up. Attached to Mr Ferguson's affidavit are email communications as between representatives of ASIC and representatives of Bardoc in the period 9 to 17 February 2022. Also attached to Mr Ferguson's second affidavit is a copy of the final version of the scheme booklet provided to ASIC on 22 February 2022.[45]
[45] See ts 7 ‑ 9 (22 February 2022).
A copy of the independent expert's report is intended to be annexed to the scheme booklet. I understand that upon review of the draft independent expert's report provided to ASIC on 7 February 2022, ASIC liaised directly with RSM Corporate Australia Pty Ltd in relation to ASIC's comments and questions. Amendments were made to the independent expert's report to address concerns raised by ASIC. Attached to Mr Ferguson's second affidavit is a copy of the independent expert's report provided to ASIC with later amendments shown in mark up, and a clean final version of the independent expert's report.
I was satisfied that ASIC had been given 14 days' notice of the first court hearing and a reasonable opportunity to examine the terms of the scheme, the draft explanatory statement and the scheme booklet, including the documents intended to be annexed to the scheme booklet.
On 22 February 2022, Steinepries Paganin received a letter from ASIC regarding the scheme booklet and the proposed scheme. By the letter, ASIC confirmed that it did not propose to appear to make submissions, or intervene to oppose the scheme at the first court hearing. A copy of ASIC's letter was annexed to Mr Ferguson's second affidavit as JIF18. In determining to grant the application, I had regard to the same.

The explanatory statement

I had regard to whether the proposed scheme booklet contained the prescribed information and provided proper disclosure.
The court was informed that the scheme booklet prepared by Bardoc in relation to the scheme had been drafted to satisfy the disclosure requirements prescribed in:
(a)ASIC Regulatory Guide 60, and in relation to the independent expert's report to be included as Annexure A to the scheme booklet, ASIC Regulatory Guides 111 and 112;
(b)the takeover provisions of the Corporations Act, and the prospectus provisions of the Corporations Act to the extent that these are applicable to the scheme booklet as required by ASIC Guide 60; and
(d)s 441(3) and s 412 of the Corporations Act, and sch 8 of the Corporations Regulations 2001 (Cth).
Further, the court was informed that the explanatory statement would be registered with ASIC before it was dispatched in accordance with s 412(6) of the Corporations Act.[46]
[46] Bardoc's submissions par 55.
I read the revised scheme booklet attached to the second affidavit of Mr Ferguson. I was provided with a copy of correspondence as between ASIC and Bardoc's solicitors relating to ASIC's review of the draft scheme booklet.[47]
[47] Second Ferguson affidavit, pars 6 - 10.
In considering the revised scheme booklet and annexures, I paid particular attention to the treatment of the proposed spin-out of the South Woodie Woodie manganese project. Addressing the comments and questions posed by ASIC, among other things, the scheme booklet was amended to make plain that the scheme and the spin-out transaction were not inter-conditional, and by reason of the same, the spin-out transaction was not a reason to vote in favour of the scheme nor a benefit of St Barbara acquiring Bardoc to form the combined group.[48]
[48] Second Ferguson affidavit JIF-14. See also ts 3 (22 February 2022).
I understand that ASIC liaised directly with the independent expert in relation to the independent expert's report and amendments were made to the report to address ASIC's concerns.
I note that in assessing whether the scheme is fair to Bardoc shareholders, the independent expert undertook a valuation of a share in Bardoc prior to the implementation of the scheme and compared it to the value of consideration offered per Bardoc share immediately after the scheme, to determine whether a Bardoc scheme shareholder would be better or worse off should the scheme be approved. The independent expert's report was amended so as to undertake that valuation having regard to two potential scenarios. That is, a valuation on the basis that Bardoc shareholders retain their proportionate interest in the South Woodie Woodie manganese project by virtue of the spin-out transaction (scenario 1), alternatively, a valuation on the basis that the South Woodie Woodie manganese project is absorbed into the merged group (scenario 2). Further, the independent expert's report was amended to remove any suggestion that the spin-out transaction was an advantage of approving the scheme.
There was also evidence before me as to the due diligence and verification process that was undertaken by both Bardoc and St Barbara.[49] On the basis of this evidence, I accepted that:
(a)Bardoc had undertaken a process of due diligence and verification to verify the accuracy of statements attributable to it in the scheme booklet;
(b)St Barbara had undertaken a similar process to verify the statements attributable to it; and
(c)appropriate steps had been taken to satisfy Bardoc and St Barbara that the scheme booklet did not omit any material information.
[49] Bardoc's submissions pars 62 - 70; second Hardwick affidavit pars 62 - 76; Standish affidavit pars 4 - 14.
The directors of Bardoc had resolved to approve the scheme booklet.[50]
[50] Bardoc's submissions par 67.2; second Hardwick affidavit pars 70 ‑ 73, RPH-17.
Based on the information provided to the court on behalf of Bardoc, I was satisfied that the scheme booklet contained the prescribed information in accordance with s 412(1)(a)(ii) of the Corporations Act and sch 8 of the Corporations Regulations. The checklist annexed to the submissions filed on behalf of Bardoc on 21 February 2022 assisted in verification of the same. Given the amendments to the scheme booklet and its annexures that were made in consultation with ASIC, I was also satisfied that there would be proper disclosure as to the effect of the proposed scheme and the material considerations for shareholders of Bardoc.

Procedural matters

I was satisfied that the procedural requirements of the Supreme Court (Corporations) (WA) Rules 2004 (WA) had been met.
The requirements include compliance with r 3.2, which requires Bardoc to file an affidavit stating the names of the persons nominated to be the chairman and alternate chairman of the scheme meeting; and that each person nominated is willing to act as chairman, has had no previous relationship or dealing with Bardoc or any other person interested in the scheme except as disclosed in the affidavit, and has no interest or obligation that may give rise to a conflict of interest or duty if the person were to act as chairman of the scheme meeting, except as disclosed in the affidavit. This requirement was satisfied by the affidavits of Mr La Ferla and Mr Ireland.

The proposed scheme is bona fide and properly proposed

Counsel for Bardoc submitted that the court should be satisfied that the scheme is properly proposed (bona fides and intra vires), noting that where there is no suggestion of an improper purpose on the material before the court, bona fides is a matter for consideration on any application to approve the scheme.[51] Further, counsel for Bardoc noted that Bardoc's constitution does not prevent the scheme, and submitted there was nothing in the materials before the court to suggest that the scheme was not bona fides or had not been properly proposed.[52]
[51] Re NRMA Insurance Ltd (No 1), 356 - 357 [22] - [24]; and Firefly Resources Ltd [2021] WASC 376 [85], cited in Bardoc's submissions par 77.
[52] Bardoc's submissions par 78; Bardoc's constitution is attached to the second Hardwick affidavit, RPH-2.
In determining the application, I had regard to the constitution of Bardoc and I accepted the submission made on behalf of Bardoc that there was nothing in the materials before the court to suggest that the scheme was not bona fides or had not been properly proposed.

Specific matters raised by counsel for Bardoc

Courts endeavour to carefully scrutinise the material provided, but are heavily reliant on counsel to expressly address those features of the scheme that require attention.[53] Through written and oral submissions, Bardoc's counsel drew my attention to the following additional specific matters, while submitting that none of these matters provides (in Bardoc's view) a basis for the court to refuse to convene the scheme meeting. I address each in turn below.

Conditions precedent

[53] Seven Network Ltd (ACN 052 816 789), in the matter of Seven Network Ltd [No 3] [42].

Counsel for Bardoc drew to the court's attention the fact that the scheme is subject to a number of conditions precedent, set out in cl 3.1 of the proposed scheme and in cl 3 of the scheme implementation deed.[54]
[54] Scheme implementation deed annexed to the first Hardwick affidavit, RPH-1; scheme booklet, annexed to the second Ferguson affidavit, JIF-12.
In considering the application, I had regard to the matters set out at [45] to [47] above. I also had regard to the evidence of Mr Hardwick and Ms Standish. That is, Mr Hardwick on behalf of Bardoc deposed that as at the date of his affidavit, he was not aware of any reason why any of the conditions precedent to the scheme may not be satisfied or waived (as applicable).[55] Ms Standish on behalf of St Barbara deposed that as at the date of her affidavit, she was not aware of any fact, matter or circumstance that had resulted in, or was likely to result in, the failure of the conditions precedent to the implementation of the scheme.[56]
[55] Second Hardwick affidavit par 27.
[56] Standish affidavit par 22.
I accepted for the purposes of the first court hearing, there was no indication on the evidence that that the conditions precedent would not be met.

Performance risk

Counsel for Bardoc addressed performance risk.[57] That is, risk that after transferring their shares, shareholders in Bardoc will be left with no scheme consideration; and no capacity to sue St Barbara to get back their shares or damages.
[57] Bardoc's submissions pars 83 ‑ 91; ts 4 (22 February 2022).
Having regard to the following, I was satisfied that the nature and terms of the proposed scheme were such that the performance risk was minimal,[58] and such performance risk was not a basis to refuse to convene the scheme meeting.

The scheme

[58] Having regard to APN News & Media Ltd, in the matter of APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400, 405 [23]; Anatolia Energy Ltd, in the matter of Anatolia Energy Ltd [2015] FCA 1134 [34]; and Creso Pharma Ltd [2019] WASC 472 [75] ‑ [77].

The mechanism for the implementation of the scheme is set out in cl 5 of the scheme of arrangement, and the obligations of St Barbara to provide scheme consideration are set out in cl 6.[59] I noted that there is no obligation on Bardoc to transfer any shares to St Barbara until St Barbara has issued the scheme consideration to Bardoc shareholders. Further, the appointment by cl 5.7 of St Barbara as sole proxy by the Bardoc shareholders occurs only after the provision of the scheme consideration.
[59] First Hardwick affidavit, RPH-3, pages 146 - 152.
Under cl 11.5 of the scheme, Bardoc undertakes in favour of each Scheme Participant (being each person who is registered in the Register of Bardoc as a holder of Bardoc shares on the Record Date (other than Bardoc loan shares)), to enforce the deed poll against St Barbara on behalf of and as agent and attorney for the 'Scheme Participants'.

The deed poll

The arrangements under the proposed scheme are supported by the deed poll.[60] The deed poll was executed by St Barbara prior to the first court hearing.[61]
[60] First Hardwick affidavit par 12, RPH-5, pages 158- 167.
[61] Second Ferguson affidavit par 16, JIF-16.
By the deed poll, St Barbara covenants in favour of each Bardoc shareholder that it will perform all actions attributed to it under the scheme. There is also an acknowledgement that the deed poll may be relied upon and enforced by any scheme shareholder in accordance with its terms.
Clause 9.1 concerns future variation of the rights created under the deed poll, and provides as follows:
9.1 Variation
A provision of this document or any right created under it may not be varied, altered or otherwise amended unless:
(a) the variation is agreed to by Bardoc and St Barbara in writing; and
(b) the Court indicates that the variation, alteration or amendment would not itself preclude approval of the Scheme,
in which event St Barbara must enter into a further deed poll in favour of the Scheme Participants giving effect to the variation, alteration or amendment.

The scheme implementation deed

I also had regard to cl 7.1 of the scheme implementation deed, which provides for the appointment/retirement of the directors of Bardoc subject to the scheme consideration having been provided to the Bardoc shareholders. As noted by counsel for Bardoc, the proviso mitigates the impact of any potential actions of an incoming board of an acquirer to interfere with the implementation of a scheme.[62]

Exclusivity provisions

[62] Bardoc's submissions par 90, citing as an example Re Kangaroo Resources Ltd; Ex parte Kangaroo Resources Ltd [No 2] [2018] WASC 388 [28] ‑ [31].

Counsel for Bardoc submitted that the scheme implementation deed at cl 10 contains 'customary lock up devices' in the form of 'no existing discussions', 'no shop', 'no talk', 'notification obligations', 'matching right' and 'equal access to information' provisions.
In considering whether an exclusivity provision may impact on the completion of the transaction and the duties of directors, the court has regard to:[63]
(a)the period of exclusivity, which should be no more than a reasonable period and capable of precise ascertainment;
(b)whether the provisions are subject to an overriding obligation that the directors not breach their fiduciary duties or are otherwise unlawful; and
(c) whether there is adequate prominence given to these provisions in the scheme booklet.
[63] APN News & Media Ltd, in the matter of APN News & Media Ltd [29] - [35]; Re Kangaroo Resources Ltd; Ex parte Kangaroo Resources Ltd [2018] WASC 327 [57] - [61]; Re Pacific Energy Ltd [2019] WASC 443 [58]; Bardoc's submissions par 93.
For reasons which included the following, counsel for Bardoc submitted that the exclusivity provisions satisfy these criteria in this case.[64]
[64] Bardoc's submissions pars 94.1 - 94.3.
First, the exclusivity period in cl 10.1 of the scheme implementation deed is defined to mean the period from and including the date of the scheme implementation deed to the termination of the scheme implementation deed in accordance with its terms. The scheme implementation deed ends on the date 7 months after the date of the scheme implementation deed (unless extended by agreement): cl 13.1(a) of the scheme implementation deed.
Secondly, the 'no-talk' and 'notification obligation' provisions in cl 10 contain directors' fiduciary and statutory duty qualifications, which allow Bardoc's board to undertake any action (or refuse to take any action) in respect of a bona fide 'Competing Transaction' that would otherwise be prohibited under those exclusivity provisions if, after consultation with its financial adviser, the board determines the 'Competing Transaction' is a 'Bardoc Superior Proposal', and have obtained written advice from its external legal advisers that undertaking (or not undertaking) the prohibited action would be reasonably likely to constitute a breach of the Bardoc's directors' fiduciary or statutory duties: cl 10.5 of the scheme implementation deed.
Thirdly, prominence is given to the exclusivity provisions in the scheme booklet.

Further, counsel for Bardoc noted that the provisions were negotiated at arm's length by Bardoc, Bardoc's solicitors (Steinepreis Paganin), St Barbara and St Barbara's Australian solicitors (King & Wood Mallesons), and are consistent with normal industry practice.[65]
[65] Bardoc's submissions par 95, referencing the first Hardwick affidavit par 13; the second Hardwick affidavit pars 94 - 97; and the Standish affidavit par 20.
Having regard to the above, I was satisfied that the exclusivity provision was within bounds and not a reason to refuse to convene the scheme meeting.

Break fee provision

Counsel for Bardoc addressed the break fee provision contained in cl 11 of the scheme implementation deed, seeking to address the court's concern that such a provision does not operate so as to unfairly or unduly fetter competition.
Counsel noted that Bardoc may become liable to pay St Barbara a break fee of $1,500,000 in certain circumstances,[66] which represents approximately 1% of the total equity value of Bardoc implied by the scheme consideration and which is in line with the Takeovers Panel Guidance Note 7.
[66] Scheme implementation deed cl 11.2, annexed to the first Hardwick affidavit, RPH-1, page 60.
Counsel for Bardoc submitted that the potential liability of Bardoc to pay the break fee does not provide a basis for refusing to allow the Bardoc shareholders to vote on the merits of the scheme for the following reasons.
First, the break fee is payable by Bardoc in specific and prescribed circumstances, as set out in cl 11 of the scheme implementation deed. Bardoc shareholders have been informed as to when the break fee is payable.
Secondly, the circumstances when the break fee is payable by Bardoc under clause 11.2 of the scheme implementation deed are the usual types of events that trigger payment (for example, the acceptance of a 'Competing Transaction'; the termination of the scheme implementation deed on receipt of a 'Superior Proposal', termination for material breach, or the unjustified withdrawal of Bardoc director recommendation or voting intention).
Thirdly, and Bardoc says importantly, the break fee is not payable by Bardoc if the scheme is not approved by Bardoc shareholders. Bardoc says that this means that the break fee is not 'coercive' of shareholders, coercing them to vote in favour of the proposed scheme.[67]
[67] Bardoc's submissions par 100.3.
Fourthly, the break fee was negotiated at arm's-length with the benefit of legal and financial advice.[68]
[68] Bardoc's submissions par 100.4, second Hardwick affidavit par 94; Standish affidavit par 40.
Finally, Bardoc and St Barbara have agreed that St Barbara would not have entered into the scheme implementation deed without the break fee agreed; that it is appropriate for both parties to agree to the break fee to secure St Barbara's involvement; and that each party's shareholders will derive significant benefits from the implementation of the scheme.[69]
[69] Scheme implementation deed cl 11.1, annexed to the first Hardwick affidavit, RPH-1, page 60.
Counsel noted and I accepted that prominence is given to the break fee provisions in the scheme booklet. Further, I was satisfied that the reimbursement fee was within generally accepted commercial parameters for break fees.
Again, having regard to all of Bardoc's submissions and the matters described above, I was satisfied that the break fee provision was within bounds and not a reason to refuse to convene the scheme meeting. In particular, the fact that the reimbursement fee is not payable if Bardoc shareholders do not vote in favour of the scheme weighed favourably in the balance, as I considered that the reimbursement fee was unlikely to influence shareholders in their decision to vote on the scheme.

Warranty provision

Counsel for Bardoc drew my attention particularly to cl 5.5 of the scheme, reproduced below:
5.5 Warranty by Scheme Participants
Each Scheme Participant warrants to and is deemed to have authorised Bardoc to warrant to St Barbara as agent and attorney for the Scheme Participant by virtue of this clause 5.5, that:
(a)all their Scheme Shares (including any rights and entitlements attaching to those shares) transferred to St Barbara under the Scheme will, as at the date of the transfer, be fully paid and free from all Encumbrances; and
(b)they have full power and capacity to sell and to transfer their Scheme Shares (including any rights and entitlements attaching to those shares) to St Barbara under this Scheme.
Counsel for Bardoc noted that existence of the provision is drawn to the attention of Bardoc shareholders in s 12.7 of the scheme booklet, and that Bardoc shareholders are also told to have regard to their own financial circumstances and to take any necessary financial or legal advice.[70] Counsel submitted that deemed warranties in these terms, with this disclosure, are generally considered acceptable.[71]
[70] Bardoc's submissions pars 102 ‑ 103; scheme booklet cover page, annexed to the second Ferguson affidavit, JIF-12, page 362.
[71] Bardoc's submissions par 104, citing Re APN News & Media Ltd, 412 ‑ 413, [57] ‑ [63]; Re Macquarie Private Capital A Ltd [2008] NSWSC 323 [13] ‑ [14]; Re Doray Minerals Ltd; Ex parte Doray Minerals Ltd [2019] WASC 57 [71];and Re Navitas Ltd; Ex parte Navitas Ltd [2019] WASC 180 [112].
Counsel also noted that the scheme also contains a customary 'clear title' and 'no encumbrance' provision: cl 9.3 of the scheme. It was submitted that this provision is expressed to be 'to the extent permitted by law', and so expressed, does not give rise to the concern, expressed by some courts, that third parties may gain the impression that their interests would be extinguished by operation of the provision.[72]

Director recommendations

[72] Bardoc's submissions par 105, citing Re Tower Australia Group Ltd [2011] FCA 224 [13] ‑ [15].

The Bardoc directors unanimously recommend that, in the absence of a superior proposal and subject to the independent expert maintaining its conclusion that the scheme is fair and reasonable and therefore in the best interests of Bardoc shareholders, Bardoc shareholders vote in favour of the scheme at the scheme meeting.
Counsel for Bardoc submitted that the directors' recommendation was 'within bounds', observing that recent court decisions have considered the appropriateness of directors joining in a recommendation to shareholders to vote in favour of a scheme where, by reason of a bonus or similar benefit, the directors have an additional and different interest to the members in the approval of the scheme.[73] It was submitted that the critical consideration for the court is to ensure that the nature and extent of the relevant benefits that the directors stand to receive if the scheme is approved are properly disclosed.[74]
[73] Bardoc's submissions par 110, citing Re Gazal Corporation Ltd [2019] FCA 701; and Re Ruralco Holdings Ltd [2019] FCA 878.
[74] Bardoc's submissions par 111, citing Re Kidman Resources Ltd [2019] FCA 1226 [115]; and Re Nzuri Copper Ltd [2019] WASC 189.
Counsel for Bardoc noted that in this case, Bardoc's directors have unanimously recommended that Bardoc shareholders vote in favour of the scheme, in the absence of a superior proposal and subject to the independent expert continuing to conclude that the scheme is in the best interests of Bardoc shareholders. Further, full disclosure of the Bardoc directors' respective interests in Bardoc and the scheme is made at the section titled 'Important Information Regarding Director's Recommendations' in the scheme booklet.[75]
[75] Bardoc's submissions pars 112 and 113. See also ts 5 ‑ 7 (22 February 2022).
I noted that the benefit to be received for each director is set out with clarity and prominently in the scheme booklet. Pages 3 and 4 of the scheme booklet sets out 'important information regarding director's recommendations'.
In clear terms, Bardoc shareholders are informed that:[76]
(a)Mr Tony Leibowitz has an interest in Bardoc shares and Bardoc performance rights and will receive aggregate scheme consideration of 2,180,245 St Barbara shares, equating to approximately $3,139,553 if the scheme is implemented. He will also receive an additional $50,000 from Bardoc for services in relation to Bardoc's previous strategic review;
(b)Mr Neil Biddle has an interest in Bardoc shares and Bardoc performance rights and will receive aggregate scheme consideration of 2,420,853 St Barbara shares, equating to approximately $3,486,028 if the scheme is implemented;
(c)Mr Rowan Johnston has an interest in Bardoc shares and Bardoc performance rights and will receive aggregate scheme consideration of 553,032 St Barbara shares, equating to approximately $796,366 if the scheme is implemented;
(d)Mr John Young has an interest in Bardoc shares and Bardoc performance rights and will receive aggregate scheme consideration of 2,522,800 St Barbara shares, equating to approximately $3,632,832 if the scheme is implemented; and
(e)Mr Peter Buttigieg has an interest in Bardoc shares and Bardoc performance rights and will receive aggregate scheme consideration of 4,837,695 St Barbara shares, equating to approximately $6,966,281 if the scheme is implemented.
[76] Scheme booklet pages 3 - 4, annexed to the second Ferguson affidavit, JIF-12, pages 365 - 366. As noted in the scheme booklet, the value is calculated based on a closing price of St Barbara shares of $0.44 as at the Last Practicable Date.
The scheme booklet makes plain that all Bardoc directors (which held an interest in Bardoc of 11.2% at the date of Bardoc's announcement on 20 December 2021) intend to vote their respective Bardoc shares (also noted in the announcement) in favour of the scheme in the absence of a superior proposal.[77]
[77] Scheme booklet s 5.4, annexed to the second Ferguson affidavit, JIF-12, page 396.
Throughout the scheme booklet, references to the recommendation of the Bardoc directors was cross referenced to the 'important information regarding director's recommendations' at the beginning of the scheme booklet. The cross reference is in the following terms:
In respect of the recommendations of the Bardoc directors, Bardoc shareholders should have regard to the fact that, if the scheme is implemented, the Bardoc directors will each receive various personal benefits as further detailed in the section titled 'Important Information Regarding Directors' Recommendation' on page i of this Scheme Booklet.
In all of the circumstances disclosed, I concluded that there was nothing to impugn the appropriateness of the directors recommending the scheme.

No liability when acting in good faith

Counsel for Bardoc also drew the court's attention to cl 11.4 of the scheme, which provides that neither Bardoc or St Barbara will be liable for anything done or omitted to be done in the performance of the scheme in good faith. Counsel submitted that having regard to its proper construction, this clause does not deprive members of their intended benefits under the scheme because actions must be undertaken in good faith.[78]
[78] Bardoc's submissions par 117, citing Re Wesfarmers Ltd; Ex parte Westfarmers Ltd [49(4)]; and Firefly Resources Ltd [114] ‑ [115].
I concluded that inclusion of cl 11.4 would not ground a basis to refuse to convene the scheme meeting.

Section 411(17) of the Corporations Act

It is now settled that the appropriate occasion on which the court is required to address the question posed by s 411(17) of the Corporations Act is on an application to approve a scheme at the second court hearing.[79] Consequently, it is not incumbent upon the court at the convening stage to canvass the question of avoidance of the operation of Chapter 6. While acknowledging the same, counsel submitted that in any event, no such issue arose in this case.[80]
[79] Re Macquarie Private Capital A Ltd [25] ‑ [37].
[80] Bardoc's submissions par 114 ‑ 116.
I note that prior to the first court hearing, ASIC provided a written statement that it did not intend to appear and make submissions at the first court hearing, a copy of which was before the court. I weighed the same in the balance.
Having given careful consideration to the materials filed, and having weighed in the balance the unanimous recommendation of Bardoc's directors; the conclusion of the independent expert; the involvement and expressed position of ASIC; and the matters drawn to the court's attention by counsel for Bardoc, I was satisfied that there was no apparent reason why the scheme should not, in due course, receive the court's approval if the necessary majority of member's votes were to be achieved.

Electronic dispatch of the scheme booklet and proxy form

Bardoc sought an order, pursuant to s 1319 of the Corporations Act, for the dispatch of the notice of access and proxy form by electronic means to those Bardoc shareholders who had nominated an electronic address for the purposes of receiving notices of meeting and proxy forms from Bardoc.
Counsel for Bardoc explained that this will be done by an email notice to the Bardoc shareholders containing links within the notice of access to the scheme booklet and proxy form. Counsel also noted that otherwise, it is intended that the documents will be dispatched by mail, including where attempted electronic delivery to a shareholder is notified as having been ineffective.
Counsel further submitted and I accepted that the electronic dispatch of scheme booklets, including notices of meeting, and proxy forms is now common.[81] I was satisfied, having read the terms of the proposed communication to shareholders (notice of access),[82] that an order for electronic dispatch of the scheme booklet was appropriate.

Scheme meeting

[81] Bardoc's submissions par 109, citing Re SRG Ltd [2018] FCA 1092 [48]; Re Doray Minerals Ltd [72]; Re Galaxy Resources Ltd; Ex parte Galaxy Resources Ltd [73] - [76]; and Firefly Resources Ltd [117].

[82] Notice of access, annexed to the second Hardwick affidavit, RPH-13, page 571.

Bardoc proposed that the scheme meeting scheduled to take place at 1.00 pm (AWST) on 30 March 2022, be held electronically through an online platform. In person attendance at the scheme meeting was not proposed.
I accepted that the form of meeting proposed was consistent with the conduct of previous scheme meetings recently convened.[83] Given the uncertainty surrounding the COVID‑19 pandemic and the short notice with which stay at home directions or lockdowns may be ordered, I considered that it was appropriate for the meeting to be convened through an online platform.
[83] Firefly Resources Ltd [121]; Re NTM Gold Ltd; Ex parte NTM Gold Ltd [2021] WASC 22 [81]; Piedmont Lithium Ltd; and Re Galaxy Resources Ltd; Ex parte Galaxy Resources Ltd.

Conclusion and orders of the first court hearing

Taking into account all of the matters referred to above, I considered that there was no apparent reason why the scheme should not, if approved at the scheme meeting, receive the court's approval. There was nothing to suggest that the scheme had not been properly proposed.
Upon considering the affidavit evidence filed in support of the application, and upon considering the submissions made by counsel on behalf of Bardoc, I was satisfied that the substantive and procedural requirements of s 411(1) and s 1319 of the Corporations Act had been satisfied, that the scheme was fit for consideration by Bardoc's shareholders, and that leave ought to be given.
I also approved for distribution to Bardoc's shareholders the scheme booklet containing the explanatory statement required by s 412(1)(a) of the Corporations Act. The orders made at the conclusion of the first court hearing are reproduced at sch A to these reasons.

Sch A – Orders made at the conclusion of the first court hearing

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LP
Research Associate to the Honourable Justice Strk
17 MARCH 2022