Re Big River Gold Ltd - [2022] WASC 296

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE BIG RIVER GOLD LTD; EX PARTE BIG RIVER GOLD LTD [2022] WASC 296
CORAM:   HILL J
HEARD:   29 JULY 2022
DELIVERED          :   29 JULY 2022
PUBLISHED           :   2 SEPTEMBER 2022
FILE NO/S:   COR 134 of 2022
MATTER:   IN THE MATTER OF BIG RIVER GOLD LTD
EX PARTE

BIG RIVER GOLD LTD
Plaintiff

AURA MINERALS INC
Interested Party

Catchwords:

Corporations law - Scheme of arrangement - Application for orders convening scheme meeting under s 411(1) of the Corporations Act 2001 (Cth) - Whether requirements to order scheme meeting are satisfied - Orders made convening scheme meeting

Corporations law - Scheme of arrangement - Application for approval of communications to shareholders by way of telephone calls - Orders made approving script

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:

Orders made convening scheme meeting
Orders made approving script

Category: B

Representation:

Counsel:

Plaintiff	:	A J Papamatheos & V N Ghosh
Interested Party	:	J Y Wang

Solicitors:

Plaintiff	:	Minter Ellison
Interested Party	:	King & Wood Mallesons

Cases referred to in decision:

First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116; (2017) 320 FLR 78
Re Amcom Telecommunications Ltd [2015] FCA 341
Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400
Re Beadell Resources Ltd [2018] WASC 410; (2018) 133 ACSR 600
Re CannPal Animal Therapeutics Ltd [2021] WASC 37
Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358
Re David Jones Ltd [No 2] [2014] FCA 720; (2014) 101 ACSR 381
Re Doray Minerals Ltd [2019] WASC 57
Re DUET Management Company 1 Ltd [2013] NSWSC 817; (2013) 95 ACSR 34
Re Galaxy Resources Ltd [2021] WASC 314
Re Healthscope Ltd [2019] FCA 542; (2019) 139 ACSR 608
Re Hills Motorway Ltd [2002] NSWSC 897; (2002) 43 ACSR 101
Re Kangaroo Resources Ltd [2018] WASC 327
Re Macquarie Private Capital A Ltd [2008] NSWSC 323
Re NRMA Ltd [2000] NSWSC 82; (2000) 156 FLR 349
Re NTM Gold Ltd [2021] WASC 22
Re Nusantara Resources Ltd [2021] WASC 334
Re Nzuri Copper Ltd [2019] WASC 189
Re Opes Prime Stockbroking Ltd [2009] FCA 813; (2009) 179 FCR 20
Re Pacific Energy Limited [2019] WASC 443
Re PetroNor E&P Ltd [2021] WASC 426
Re Piedmont Lithium Ltd [2021] WASC 76
Re ResApp Health Ltd [2022] NSWSC 983
Re Saracen Mineral Holdings Ltd [2020] WASC 483
Re SRG Ltd [2018] FCA 1092
Re Swick Mining Services Ltd [2022] WASC 79
Re Uniti Group Ltd [2022] FCA 671
Re Vimy Resources Ltd [No 2] [2022] WASC 257
Re Wajema Ltd [2021] FCA 878
Re Wesfarmers Ltd [2018] WASC 308
Re Western Areas Ltd [2022] WASC 193

HILL J:

The plaintiff, Big River Gold Ltd (Big River Gold) is an Australian public company listed on the Australian Securities Exchange (ASX). On 19 April 2022, Big River Gold entered into a Scheme Implementation Deed (SID) with Aura Minerals Inc (Aura), which was announced to the ASX on 20 April 2022.[1] It is proposed that a subsidiary of Aura will acquire all of the issued ordinary shares in Big River Gold, apart from those in which Dundee Resources Ltd (Dundee) has a relevant interest, for $0.36 per share (Scheme). In relation to Dundee's shares, it is proposed that (except in limited circumstances) Dundee receive one share in Borborema Inc (a wholly owned subsidiary of Aura) for every 10 shares it holds in Big River Gold.
[1] Affidavit of Andrew Lehane Richards filed 14 July 2022, 'ALR-14'.
By originating process dated 14 July 2022, Big River Gold sought orders under s 411 and s 1319 of the Corporations Act 2001 (Cth) (Act) convening two meetings of its members to consider the proposed Scheme. The application came before me for the first court hearing on 29 July 2022. On that date, I made orders pursuant to s 411(1) of the Act to convene two meetings to consider and vote on the proposed Scheme. Orders were also made approving the distribution of a Scheme booklet to Big River Gold's shareholders under s 412(1)(a) of the Act. I also made ancillary orders as to the convening and conduct of the Scheme meetings under s 1319 of the Act.
On 19 August 2022, the matter was relisted before me for orders for the approval of a script for an outbound information campaign for Shareholders that Big River Gold proposes to run. At the conclusion of this hearing, subject to one amendment, I made orders approving the proposed script.
In making each of these orders, I stated that I would subsequently publish written reasons for my orders. These are my reasons for decision.

Factual background

Big River Gold

Big River Gold is a mineral exploration and development company. Its major focus is on the Borborema Gold Project, which is located in the Serido area of the Borborema province in north-eastern Brazil.[2] The Borborema Gold Project comprises three mining leases. Through various subsidiaries, Big River Gold also has a number of exploration licences in the surrounding region.
[2] Scheme booklet [5].
As at 13 July 2022, Big River Gold had an issued capital of 242,155,811 fully paid ordinary shares (Shares), 3,060,000 unlisted options (Options), and 12,357,500 performance rights (Performance Rights).[3]

Aura and Aura group

[3] Affidavit of Andrew Lehane Richards filed 14 July 2022 [28].

Aura is a mid-tier gold and copper production company incorporated in the British Virgin Islands. Aura is focussed on the development and operation of gold and base metals projects in the Americas, including two projects in Brazil.[4]
[4] Scheme booklet [6.2].
Aura's shares are quoted on the Toronto Stock Exchange and its Brazilian Depositary Receipts are quoted on the B3, S.A (a stock exchange in Sao Paulo, Brazil).[5]
[5] Scheme booklet [6.2(a)].
Borborema LLC (Aura BidCo) is a wholly owned subsidiary of Borborema Inc (JVCo), which in turn is a wholly owned subsidiary of Aura. Aura BidCo is incorporated in the state of Delaware in the United States of America.

Proposed Scheme

If the Scheme is implemented, Aura, through Aura BidCo, will acquire all Shares on issue as at the Scheme Implementation Date. Shareholders (apart from Dundee) will receive $0.36 cash for every Share as consideration the acquisition of their Shares under the Scheme (Cash Consideration). Dundee, unless it makes an election (which can only be done in limited circumstances), will not receive the Cash Consideration but will receive one share in JVCo for every 10 shares it holds in Big River Gold (Scrip Consideration).
Members of an independent board committee (IBC) of Big River Gold have unanimously recommended that, in the absence of a superior proposal, Shareholders vote in favour of the proposed Scheme.
Big River Gold has retained an independent expert to provide an opinion and recommendation on the proposed Scheme. The independent expert, RSM Corporate Australia Pty Ltd (RSM), has concluded that, in the absence of a superior proposal, the proposed Scheme is not fair but is reasonable and in the best interests of Shareholders.

Evidence for the first court hearing

Big River Gold and the Aura Group relied on 10 affidavits that were filed prior to the first hearing. These were:
(a)an affidavit of Andrew Lehane Richards filed 14 July 2022. Mr Richards is an executive director and the executive chairman of Big River Gold. His affidavit gave a brief overview of Big River Gold, described the negotiation and entry into the SID as well as a number of aspects of the proposed Scheme, the drafting and verification process of the Scheme booklet, and confirmed the Scheme booklet had been lodged with the Australian Securities and Investments Commission (ASIC) on 14 July 2022. Annexed to his affidavit, among other things, were copies of a company search of Big River Gold obtained from ASIC, the constitution of Big River Gold, the SID, the proposed Scheme, and the draft Scheme booklet;
(b)an affidavit of Alan Gregory Boyd filed 27 July 2022. Mr Boyd is a partner and solicitor of Harneys Westwood & Riegels LP (Harneys), the solicitors of Aura in the British Virgin Islands in respect of the proposed Scheme. Mr Boyd provided an expert legal opinion to the Australian solicitors for Aura on the validity of the execution of the Deed Poll and its compliance with the laws of the British Virgin Islands. His affidavit annexes, among other things, his legal opinion;
(c)an affidavit of Heath Ford Lewis filed 27 July 2022. Mr Lewis is a partner at King & Wood Mallesons. Mr Lewis gave a brief overview of the Aura Group and attested to the verification process undertaken by the Aura Group in relation to the Scheme booklet. His affidavit annexed the deed poll executed by Aura and JVCo as well as the relevant verification certificates;
(d)an affidavit of Shaun Barry McRobert filed 27 July 2022. Mr McRobert is the nominated chairperson of the Scheme meeting and a partner at MinterEllison, the solicitors for the plaintiff. By his affidavit, Mr McRobert consented to act as chairperson of the Scheme meeting and provided the necessary disclosures required by r 3.2 of the Supreme Court (Corporations) (WA) Rules 2004 (WA) (Corporations Rules). Annexed to his affidavit were, among other things, correspondence with ASIC regarding lodgment of the draft Scheme booklet as well as correspondence between ASIC and MinterEllison in relation to the draft Scheme booklet;
(e)an affidavit of Anthony Arthur Italiano filed 27 July 2022, an employee of Big River Gold and the nominated alternate chairperson of the Scheme meeting. By his affidavit, Mr Italiano consented to act as chairperson in the event that Mr McRobert was unable to act and provided the necessary disclosures required by the Corporations Rules;
(f)a second affidavit of Mr McRobert filed 28 July 2022 detailing the proposed despatch of the Scheme booklet;
(g)a third affidavit of Mr McRobert filed 28 July 2022 confirming ASIC had been served with the court documents and annexing this correspondence;
(h)an affidavit of Joao Kleber Dos Santos Cardoso filed 29 July 2022. Mr Cardoso is the chief financial officer of Aura. Mr Cardoso outlined the verification process undertaken by Aura in relation to the Scheme booklet;
(i)an affidavit of Nadine Marke filed 29 July 2022. Ms Marke is a director and authorised representative of RSM, the independent expert engaged by the plaintiff to provide a report on the proposed Scheme. Her affidavit annexed the independent expert report produced by RSM and confirmed she was not aware of any matters that would cause her to change her opinion;
(j)a fourth affidavit of Mr McRobert filed 29 July 2022 annexing further correspondence between MinterEllison and ASIC as well as the voting intention statement of Copulos Group.

Nature of the proposed Scheme

The proposed Scheme contemplates that Aura BidCo will acquire all of the issued ordinary shares in Big River Gold (Shares) and that Shareholders (who are referred to in the Scheme booklet as General Shareholders), other than Dundee (who is referred to in the Scheme booklet as Relevant Shareholder), will receive $0.36 cash for every Share held.[6] Dundee will receive one share in JVCo for every 10 Big River Gold Shares, unless it elects to receive the Cash Consideration.[7]
[6] Scheme booklet [1.3].
[7] Scheme booklet [1.3].
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 or waived are disclosed in the Scheme booklet.[8]
[8] Scheme Booklet [1.7].
The SID between Big River Gold and Aura sets out the agreed procedures for the implementation of the proposed Scheme.
The obligations of Aura and JVCo under the Scheme are supported by a Deed Poll which has been executed by both Aura and JVCo (Deed Poll).[9]
[9] Scheme booklet, Annexure 6.
In order to consider the proposed Scheme, Big River Gold formed an Independent Board Committee (IBC) in around December 2021. The IBC includes all directors of Big River Gold except for Mr Goldstone, who holds a professional role with an entity associated with Dundee. The IBC members have unanimously recommended that Shareholders vote in favour of the Scheme, in the absence of a superior proposal.
Both the Options and the Performance Rights are being dealt with outside the Scheme.
In relation to the Options, Big River Gold and Aura are required to take all action necessary to ensure there are no outstanding Options on or after the Scheme Implementation Date[10] by entering into cancellation deeds with each of the Optionholders.[11] Entry into these deeds is a condition precedent of the SID and the Scheme.[12]
[10] SID cl 5.2(a).
[11] SID cl 5.2(b)(i).
[12] SID cl 3.1(h).
As at 13 July 2022, there were 3,060,000 Options on issue held by three Optionholders. Each option has an exercise price of $0.48 per share and an expiry date of 4 February 2024. At the date of the first court hearing, these Options were 'out of the money'. Big River Gold, Aura, and each of the Optionholders have entered into a cancellation deed in relation to the Options, providing that each Option will be cancelled on the Scheme Implementation Date for cash consideration of $0.046 per Option to be paid by Aura.[13] This amount was calculated by the application of a Black‑Scholes valuation based on the Cash Consideration.[14]
[13] Affidavit of Andrew Lehane Richards filed 14 July 2022 [44], 'ALR-18', 'ALR-19', 'ALR-20'.
[14] Affidavit of Andrew Lehane Richards filed 14 July 2022 [44].
Big River Gold is required to take necessary action to ensure that all Performance Rights will vest and be exercised in accordance with their terms prior to the Scheme Record Date.[15] There are currently 12,357,500 Big River Gold Performance Rights outstanding which are held by Mr Richards, Luis Diaz (Vice President Operations), and Diana Lima (Country Manager, Brazil). Mr Richards' Performance Rights automatically vest if the court approves the Scheme at the second court hearing.[16] On 17 June 2022, the board of Big River Gold resolved that the remaining Performance Rights will vest on the Scheme becoming effective.[17] Each Performance Right holder has instructed that their rights be exercised and converted into Shares immediately upon vesting. This is disclosed in the Scheme booklet at [1.19].
[15] SID cl 5.1.
[16] Affidavit of Andrew Lehane Richards filed 14 July 2022 [48(d)], 'ALR-22'.
[17] Affidavit of Andrew Lehane Richards filed 14 July 2022 [48(g)], 'ALR-25'.
An independent expert report (IER) has been prepared by RSM. The IER expresses the opinion that, in the absence of a superior proposal, the Scheme is not fair but reasonable and is, on balance, in the best interests of shareholders.[18] In reaching this conclusion, the IER determined the Cash Consideration was below the assessed valuation range of a Share on a control basis. The IER determined the valuation range of a Share on a control basis was between $0.48 (low) and $0.80 (high) (as compared to the Cash Consideration of $0.36 per Share). The basis for the valuation and the methodology used are set out in the IER. The consideration of advantages, disadvantages and other factors that are likely to impact shareholders are set out comprehensively in the IER.
[18] Scheme booklet, Annexure 1.
I was provided with the draft Scheme booklet submitted to ASIC on 14 July 2022 and the amendments that have been made to the document since then.[19]
[19] Affidavit of Andrew Lehane Richards filed 14 July 2022 [53], 'ALR-28'; Affidavit of Shaun Barry McRobert filed 27 July 2022 [17] - [18], 'SBM-8', 'SBM-9', 'SBM-10'; Third affidavit of Shaun Barry McRobert filed 28 July 2022 'SBM-24'; Fourth affidavit of Shaun Barry McRobert filed 29 July 2022 'SBM‑30'.
The Scheme booklet contains the following sections:
(a)a section on important dates and the expected timetable for the Scheme;
(b)a letter from the executive chairman of Big River Gold;
(c)reasons to vote in favour of or against the Scheme;
(d)a summary of the Scheme;
(e)a 'frequently asked questions' table, which addresses all essential matters;
(f)a section on how to vote;
(g)a section on relevant considerations for shareholders;
(h)an overview of Big River Gold and the Aura Group;
(i)a section on risk factors;
(j)a section on the taxation implications for Big River Gold's shareholders;
(k)a section on additional information, which includes details of the relevant interests of Big River Gold's directors and the benefits they will obtain if the Scheme is approved; and
(l)a glossary of defined terms.
The Scheme booklet includes several important annexures which will form part of the Scheme booklet. These include the independent expert's report, the Scheme, the SID, and the Deed Poll.

Legal principles in respect of the scheme

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.
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.[20]
[20] Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358 [7].
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 it is satisfied that:[21]
(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[22] and provides proper disclosure;[23]
(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;[24]
(f)the procedural requirements of the Act and the Corporations Rules have been met;
(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.
[21] Re SRG Ltd [2018] FCA 1092 [11]; Re Wesfarmers Ltd [2018] WASC 308 [60].
[22] Corporations Act 2001 (Cth) s 412(1)(a)(ii); Corporations Regulations 2001 (Cth) reg 5.1.01, Sch 8 cl 8301 ‑ 8310.
[23] Corporations Act 2001 (Cth) s 412(1)(a)(i).
[24] Corporations Act 2001 (Cth) s 411(2)(b).
Any issue about classes of members is usually determined at the first hearing.[25] This is so that costs and court time are not wasted which would otherwise occur if this issue was left to the second hearing.[26]
[25] Re CSR Ltd [73].
[26] Re Opes Prime Stockbroking Ltd [2009] FCA 813; (2009) 179 FCR 20 [20].
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.[27] 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.[28]
[27] Re Amcom Telecommunications Ltd [2015] FCA 341 [10].
[28] Re SRG Ltd [12]; Re Wesfarmers Ltd [72] - [76].

Disposition

The formal matters that Big River Gold has to prove are satisfied.
Big River Gold is a company and, accordingly, is a pt 5.1 body. The proposed Scheme constitutes an 'arrangement' of a type that has been approved by courts as an arrangement on numerous occasions.
Big River Gold filed affidavits, as required by r 3.2 of the Corporations Rules, regarding the persons who have been nominated to be the chairperson and alternate chairperson for the Scheme meeting.[29]
[29] Affidavit of Shaun Barry McRobert filed 27 July 2022 [4] - [8]; Affidavit of Anthony Arthur Italiano filed 27 July 2022 [5] - [8].
By letter dated 29 July 2022, ASIC confirmed that it had been given 14 days' notice of the hearing and a reasonable opportunity to examine the terms of the Scheme and the draft explanatory statement or Scheme booklet. ASIC also gave notice that it did not propose to appear at the first court hearing to make submissions or intervene to oppose the Scheme.[30]
[30] Fourth affidavit of Shaun Barry McRobert filed 29 July 2022, 'SBM-36'.
On the materials before me, there was nothing to suggest the Scheme was not properly proposed. The constitution of Big River Gold[31] does not prevent the Scheme.
[31] Affidavit of Andrew Lehane Richards filed 14 July 2022, 'ALR-3'.
There are a number of conditions precedent to the Scheme.[32] Both Big River Gold and the Aura Group have deposed they are not aware of any basis to believe that any condition precedent will not be satisfied or waived prior to implementation of the Scheme.[33]

Disclosure and Scheme booklet

[32] Scheme booklet [1.7].

[33] Affidavit of Andrew Lehane Richards filed 14 July 2022 [99] - [100]; Affidavit of Heath Ford Lewis filed 27 July 2022 [20]; Affidavit of Joao Kleber Dos Santos Cardoso filed 28 July 2022 [13].

I have read the initial draft of the Scheme booklet (as provided to ASIC). I have also been provided with the correspondence between ASIC and Big River Gold's solicitors relating to ASIC's review of the draft Scheme booklet.[34] The amended Scheme booklet was provided to ASIC on 27 July 2022.[35]
[34] Affidavit of Shaun Barry McRobert filed 27 July 2022 [17] - [20], 'SBM-8', 'SBM-9', 'SBM-10'.
[35] Affidavit of Shaun Barry McRobert filed 27 July 2022 [18], 'SBM-8', 'SBM-9'.
I was and am satisfied that there will be proper disclosure as to the effect of the proposed Scheme and the material considerations for shareholders of Big River Gold.
There is evidence before me as to the due diligence and verification process that was undertaken by both Big River Gold and Aura. On the basis of this evidence, I accept that:
(a)Big River Gold undertook a process of due diligence and verification to verify the accuracy of statements attributable to Big River Gold in the Scheme booklet;[36]
(b)the Aura Group undertook a similar process to verify the statements attributable to them;[37] and
(c)appropriate steps have been taken to satisfy Big River Gold and the Aura Group that the Scheme booklet does not omit any material information.
[36] Affidavit of Andrew Lehane Richards filed 14 July 2022 [81] - [90].
[37] Affidavit of Heath Ford Lewis filed 27 July 2022 [7] - [16]; 'HFL-2', 'HLF-3'.
The IBC has resolved to approve the lodgement of the Scheme booklet.[38]
[38] Affidavit of Andrew Lehane Richards filed 14 July 2022 'ALR-27'.
Based on the checklist provided by counsel for Big River Gold,[39] I was satisfied the Scheme booklet contained the prescribed information in accordance with s 412(1)(a)(ii) of the Act and sch 8 of the Corporations Regulations 2001 (Cth).
[39] Submissions, Annexure.
In written and oral submissions, counsel for the plaintiff drew my attention to some specific matters. I address each of these below.

Dundee Resources Ltd

As at 13 July 2022, Dundee had a relevant interest in 17.55% of the Shares in Big River Gold. Under the proposed Scheme, Dundee will receive Scrip Consideration (in the absence of an election to the contrary).
On 19 April 2022, Aura and Dundee entered into a Cooperation and Commitment Deed (Deed) to facilitate the Scheme (including a requirement that Dundee vote in favour of the resolution to approve the Scheme) and jointly develop the Borborema Gold Project through JVCo.[40] Under the Deed, Dundee agreed that, as soon as practicable after the Implementation Date, it would acquire additional shares in JVCo to increase its holding to 20% of this company. These shares will be acquired at a value per share which is implied by the total transaction value of the Scheme.[41] The essential terms of the Deed are set out in the Scheme booklet ([6.8]), including the obligation of Dundee to vote in favour of the resolution to approve the Scheme.
[40] Affidavit of Andrew Lehane Richards filed 14 July 2022, 'ALR-15'.
[41] Affidavit of Andrew Lehane Richards filed 14 July 2022, 'ALR-15', cl 6.3.
Counsel for the plaintiff drew to my attention the fact that the IER does not express an opinion on the value of the Scrip Consideration to be received by Dundee and that the IBC has not made any recommendation in relation to the Scrip Consideration. Two reasons for the IBC's position are disclosed in the Scheme booklet. First, this is consistent with the express terms of the SID. Second, given the association between Aura and Dundee arising from the Deed, the IBC did not consider it was necessary or appropriate to make a recommendation. The evidence before me is that it is proposed that only one shareholder will receive the Scrip Consideration, Dundee is a sophisticated investor who has entered into a deed with Aura which governs their relationship, and Dundee is able to consider and take appropriate advice in respect of its interests. In addition, these matters have been the subject of consideration and discussion with ASIC. Given these matters, it is my view that it is not necessary for there to be a further IER or for the IBC to make a recommendation in respect of the Scrip Consideration. In this regard, I note that the position of the IBC is consistent with reg 8301(a) of sch 8 of the Corporations Regulations 2001 (Cth).

Class issue

The Act does not define the term 'class'. To determine whether separate classes of members are required, the test involves three questions.[42] First, what are the rights which existing members have against the company and to what extent are they different. Second, to what extent are these rights affected differently by the scheme. Third, does the different treatment of rights make it impossible for the members in question to consider the scheme as one class.
[42] First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116; (2017) 320 FLR 78 [80].
The test is not one of identical treatment but of 'community of interest'.[43] It is necessary for the court to determine whether the rights of different groups, viewed in the context of the proposed scheme, are so dissimilar as to make it impossible for them to consult together with a view to their common interests.[44] Ordinarily, divergent commercial interests external to share membership will not be a factor which differentiates classes, although this is a question of degree.[45]
[43] Re Hills Motorway Ltd [2002] NSWSC 897; (2002) 43 ACSR 101 [12].
[44] Re Wesfarmers Ltd [95]; Re Healthscope Ltd [2019] FCA 542; (2019) 139 ACSR 608 [106] - [107].
[45] Re NRMA Ltd [2000] NSWSC 82; (2000) 156 FLR 349 [79]; Re Wesfarmers Ltd [95].
In approaching the issue of classes, a practical, business-like approach should be adopted by the court.[46] As Finkelstein J noted in Re Opes Prime Stockbroking, there is a built‑in safeguard against majority oppression in that the court is not bound by the decision of the meeting.[47]
[46] Re Healthscope Ltd [118].
[47] Re Opes Prime Stockbroking Ltd [66].
In this case, Big River Gold proposed, and I accept, that given the terms of the proposed Scheme, there were two relevant classes of shareholders and there should be two shareholders' meetings to consider the proposed Scheme.
The first class of shareholders is Dundee or Dundee's custodian. As at 13 July 2022, Dundee had a relevant interest in 17.55% of the Shares in Big River Gold. Under the proposed Scheme, Dundee will receive Scrip Consideration (in the absence of an election to the contrary). The circumstances in which the Relevant Shareholder can elect to receive Scheme Cash Consideration are set out in the Deed.[48]
[48] Affidavit of Andrew Lehane Richards filed 14 July 2022, 'ALR-15'.
In contrast to the position of Dundee, under the proposed Scheme, all remaining Shareholders of Big River Gold will receive Cash Consideration.
As Beach J stated in Re Uniti Group Ltd,[49] 'shares are a fundamentally different form of consideration to cash'.
[49] Re Uniti Group Ltd [2022] FCA 671 [32].
Given this fundamental difference, I accept that it is not possible for all Shareholders to consult together on the proposed Scheme. On this basis, it is appropriate for orders to be made to convene two meetings, one for General Shareholders and one for the Relevant Shareholder.
In relation to the Scheme meeting for the Relevant Shareholder, only one shareholder, namely Dundee's custodian, is entitled to attend and vote at this meeting. The constitution of Big River Gold requires a quorum of two members for a general meeting of the company. Big River Gold sought an order that the quorum for the Relevant Shareholder meeting be Dundee's custodian and that the provisions of the Constitution not apply to either Scheme meeting. While I was satisfied it was appropriate to make these orders in relation to the Relevant Shareholder Scheme meeting, in my view, there was no reason that the provisions of the constitution should not apply to the General Shareholder Scheme meeting.

Performance risk

I was and am satisfied that the nature and terms of the proposed Scheme are such that the shareholders are adequately protected against the risk that they will not receive the Scheme Consideration and have no capacity to sue Aura or JVCo to recover their shares or damages.
In that respect, I have had regard to the terms of the Scheme and the Deed Poll. Pursuant to these documents:
(a)Aura is required to provide or procure the payment of the Cash Consideration for each Share prior to the transfer of Shares taking place;[50]
(b)Aura is required to deposit (or procure the deposit of) in cleared funds the amount equal to the total Cash Consideration into a trust account operated by Big River Gold as trustee of the Shareholders by two business days prior to the Scheme Implementation Date;[51]
(c)Big River Gold is required to pay the Cash Consideration to its Shareholders on the Scheme Implementation Date;[52]
(d)in respect of the issue of shares to Dundee, JVCo must provide the Scrip Consideration to Dundee and enter Dundee's name in the share register on the Scheme Implementation Date;
(e)transfer of the Shares is subject to provision of the Scheme Consideration.[53]
[50] Scheme cl 6.1(b), 6.2(a); SID cl 4.3(b).
[51] Scheme cl 6.4.
[52] Scheme cl 6.5.
[53] Scheme cl 5.2.
The statements made in the Scheme booklet as to the funding available to satisfy the Cash Consideration have been verified by Aura.[54]
[54] Scheme booklet [6.6(b)]; Affidavit of Heath Ford Lewis filed 27 July 2022; Affidavit of Joao Kleber Dos Santos Cardoso filed 28 July 2022.
The arrangements under the terms of the proposed Scheme are supported by the Deed Poll. By the Deed Poll, Aura covenants in favour of each Big River Gold shareholder that it will perform all actions attributed to it under the Scheme. Aura has guaranteed the performance of JVCo. There is also an acknowledgement that the Deed Poll may be relied on and enforced by any Scheme shareholder in accordance with its terms. In my view, the shareholders are sufficiently identified within the Deed Poll to enable them to enforce the Deed Poll as against Aura and JVCo.
The Deed Poll is governed by Western Australian law and Aura and JVCo submit irrevocably to the non‑exclusive jurisdiction of courts of the State of Western Australia.[55]
[55] Deed Poll, cl 10.1.
There is evidence from a lawyer in the British Virgin Islands to the effect that the Deed Poll has been duly executed in accordance with the recognised means or methods of execution for contracts or other instruments for a company incorporated in the British Virgin Islands and that it constitutes a legal, valid and binding obligation of Aura which is enforceable.[56]

Exclusivity provisions and Break Fee

[56] Affidavit of Allan Gregory Boyd filed 27 July 2022.

The SID contains the customary lock up devices in the form of 'no‑shop', 'no‑talk', 'no due diligence', 'notification' and 'matching right' provisions.[57] The 'no‑talk' and 'no due diligence' provisions are subject to a fiduciary carve out.[58] In certain circumstances, a Break Fee of $920,000 is payable by Big River Gold to Aura[59] and by Aura to Big River Gold.[60]
[57] SID cl 10.
[58] SID cl 10.6.
[59] SID cl 11.2.
[60] SID cl 11.3.
In considering whether the exclusivity provisions impact on completion of the transaction and the duties of directors, the court has regard to: [61]
(a)the period of the 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.
[61] Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400 [29] - [35]; Re Kangaroo Resources Ltd [2018] WASC 327 [57] - [61]; RePacific Energy Limited [2019] WASC 443 [58].
In this case, the exclusivity period is, at most, a period of approximately seven months.
The affidavit of Mr Richards sets out the commercial justification for the exclusivity provisions and the Break Fee.[62] I accept his evidence that the inclusion of these provisions in the SID followed arm's-length commercial negotiations in which all parties were separately advised and represented by external legal advisers.[63]
[62] Affidavit of Andrew Lehane Richards filed 14 July 2022 [58] - [64].
[63] Affidavit of Andrew Lehane Richards filed 14 July 2022 [58] - [60].
The amount of the Break Fee is approximately 1% of the equity value of Big River Gold, based on the Scheme Consideration at the date of entry into the SID. As such, it is within generally accepted commercial parameters for break fees. The Break Fee is intended to compensate the parties for the costs (both costs incurred and opportunity costs) if the Scheme does not proceed,[64] and is not payable if shareholders do not vote in favour of the Scheme. Accordingly, I consider the amount of the Break Fee in this case is unlikely to influence shareholders in their decision to vote on the Scheme.
[64] SID cl 11.6.
Importantly, the exclusivity arrangements and Break Fee provisions are prominently disclosed in the Scheme booklet.[65]

No collateral benefit which should prevent approval of the Scheme

[65] Scheme booklet [1.14], [1.15], [1.16], [2], [4.6(d)], [4.7(f)], [7.2(a)].

The court must examine whether a benefit exists for one shareholder in particular, so as to bring into question the overall fairness of the Scheme.[66] To determine whether there is a collateral benefit, the court considers the 'net benefits' test, to ensure that there is no overall disparity in favour of the party to the non-Scheme transaction.[67] If no net benefit is present, then, prima facie, the equality principle under s 602(c) of the Act is satisfied.
[66] Re David Jones Ltd [No 2] [2014] FCA 720; (2014) 101 ACSR 381 [16] - [21] (Farrell J).
[67] Takeovers Panel, Guidance Note 21: Collateral Benefits [15].
On the evidence before me, no issue of collateral benefit arises in this Scheme application.

Voting intention statement

On 13 April 2022, Copulos Group wrote to Rig River Gold informing them that, subject to certain conditions, Copulos Group intended to vote all of its Shares in favour of the Scheme (Voting Intention Statement).[68] At the date of the Scheme announcement, Copulos Group owned approximately 18.8% of the Shares on issue.[69] The Voting Intention Statement was expressly subject to the possibility that a superior proposal may emerge and did not prevent a sale of Shares before the Scheme meeting.
[68] Fourth affidavit of Shaun Barry McRobert filed 29 July 2022, 'SBM-37'.
[69] Scheme booklet [9.7].
Since this time, Copulos Group has reduced its interest in Big River Gold to approximately 1.95% of the Shares on issue.[70]
[70] Scheme booklet [9.7].
I accept that, in and of itself, a public statement of voting intention is not class creating.[71] Given the significant reduction in Copulos Group's shareholding since the making of the Voting Intention Statement, and in line with my reasons in Re Western Areas Ltd,[72] I did not require tagging of Copulos Group's votes at the Scheme meeting.

Director benefits and recommendations

[71] Re NTM Gold Ltd [2021] WASC 22 [73].

[72] Re Western Areas Ltd [2022] WASC 193 [44] - [46].

The IBC has unanimously recommended that Shareholders vote in favour of the Scheme, in the absence of a superior proposal.
Counsel for Big River Gold drew to my attention that each of the directors on the IBC holds Shares and that Mr Richards, who is a member of the IBC, also holds Performance Rights. These Performance Rights will immediately vest and be automatically exercised if the court makes an order approving the Scheme.
For the following reasons, it was and is my view that it was not inappropriate for Mr Richards or the other members of the IBC to make a recommendation in respect of the Scheme.
First, the Performance Rights that have been issued to Mr Richards arise in respect of a pre‑existing contractual entitlement that was agreed well before entry into the SID.
Second, the proposed payment while significant is not of such magnitude that would lead to an inference that it is excessive, unwarranted, or provide an inappropriate incentive for Mr Richards to recommend to shareholders to vote in favour of the Scheme.
Third, Mr Richards sought independent advice on whether he could make a recommendation in the Scheme booklet, considered his position and formed the view it was appropriate for him, given his role within Big River Gold, to make a recommendation. The other members of the IBC similarly considered their position and formed the view it was appropriate to make a recommendation.
Finally, and importantly, the benefit Mr Richards and each of the members of the IBC will receive is prominently disclosed throughout the Scheme booklet including the value of the benefit.

Independent expert's conclusion

The independent expert, RSM, has concluded that, in the absence of a superior proposal, the proposed Scheme is not fair but is reasonable and, on balance, is in the best interests of shareholders.
In Re Beadell Resources Ltd, Vaughan J summarised the approach that should be taken by the court in these circumstances.[73] In essence, provided that shareholders are adequately informed of the independent expert's conclusion and the basis for it, it is ultimately a decision for shareholders, and not the court, whether the scheme is in their best interests.
[73] Re Beadell Resources Ltd [2018] WASC 410; (2018) 133 ACSR 600 [60] - [64].
In this case, the IER concluded the proposed Scheme Consideration is not fair, as the experts assess the value of a Share on a controlling interest basis to be between $0.48 and $0.80 per Share, compared to the Scheme Cash Consideration of $0.36 cash per Share.
The IER concludes, however, that the proposed Scheme is reasonable because there are sufficient reasons for members to vote for the Scheme. These reasons include that:
(a)the assessed value is predicated on the successful development of the Borborema Project. The development of that Project requires significant funding and, in the absence of the Scheme being approved, it is expected that the funding will be achieved through future equity raisings which is likely to dilute existing Shareholders;[74]
(b)the Cash Consideration of $0.36 per share reflects a control premium of 33% being paid on the closing price of Big River Gold shares as at 19 April 2022, which was $0.27 per share;[75]
(c)Big River Gold is a relatively illiquid stock. The Scheme provides Scheme participants with an ability to convert their investment in Big River Gold from an illiquid stock in a relatively volatile market environment as at the date of the IER to cash.[76]
[74] IER [2.30].
[75] IER [2.36].
[76] IER [2.42] - [2.44].

The IER also refers to various other advantages and disadvantages, and the absence of alternative proposals.[77]
[77] IER [2.45] - [2.49].
I have carefully considered the explanations contained in the IER to determine the basis for the assessment that the Scheme was reasonable but not fair. I was and am satisfied that the matters referred to in the IER provide justification for the conclusion that the Scheme is reasonable. In my view, there is appropriate disclosure of the basis for the opinion of the independent expert. Sufficient information is provided to shareholders to give them an opportunity to understand and assess for themselves the basis of the independent expert's opinion. In my view, shareholders of Big River Gold will be in a position to make an informed decision whether or not to approve the Scheme.
The conclusion of the IER that the Scheme is not fair but reasonable is not a reason to refuse to convene the Scheme meeting. The opinion of the independent expert that the Scheme is reasonable is open to them. On this basis, the Scheme is one that sensible business people may consider will be of benefit to shareholders. Accordingly, it was and is my view that the Scheme is fit for consideration by shareholders.

No liability when acting in good faith

Counsel for Big River Gold drew to my attention the inclusion of cl 11.4 in the Scheme which provides Big River Gold and Aura with an exclusion from liability for acts or omissions done in good faith in performance of the Scheme or Deed Poll.
On its proper construction, it is my view that this clause will not exclude liability for acts or omissions in breach of the Scheme or the Deed Poll. Any such acts or omissions could not be in performance of the Scheme or Deed Poll. For this reason, I do not consider that this clause will deprive members of their intended benefits under the Scheme.

Deemed warranty provision

Counsel for Big River Gold drew my attention to the 'Warranty by Scheme Participants' provisions in the proposed Scheme.[78] Deemed warranty clauses are not unusual and are acceptable provided there is adequate disclosure that it is a condition.[79] In this case, the warranty provision is sufficiently disclosed in the Scheme booklet.[80]

Despatch of the Scheme booklet to General Shareholders

[78] Scheme, cl 5.6.

[79] Re APN News and Media Ltd [57] - [63]; Re DUET Management Company 1 Ltd [2013] NSWSC 817; (2013) 95 ACSR 34 [23]; Re Nzuri Copper Ltd [2019] WASC 189[90]; Re Macquarie Private Capital A Ltd [2008] NSWSC 323 [13] - [14]; Re Doray Minerals Ltd [2019] WASC 57 [71].

[80] Scheme booklet [1.12], [2].

Big River Gold sought orders pursuant to s 1319 of the Act for electronic despatch of the Scheme booklet and applicable proxy form by email to those Big River Gold Shareholders that have nominated an electronic address for the purpose of receiving shareholder communications from Big River Gold (Email Shareholders). These orders are now common.[81] Details were provided as to the terms of the proposed electronic notification, namely that email notices would be sent to Email Shareholders containing links to the Scheme booklet and proxy form.
[81] See, for example, Re SRG Limited [48]; Re Doray Minerals Ltd [72]; Re Saracen Mineral Holdings Ltd [2020] WASC 483 [81]. See too Re CannPal Animal Therapeutics Ltd [2021] WASC 37 [73] - [75]; Re Piedmont Lithium Ltd [2021] WASC 76 [69] (given the uncertainties of COVID-19); Re Nusantara Resources Ltd [2021] WASC 334 [66] - [68]; Re PetroNor E&P Ltd [2021] WASC 426 [64] - [65]; Re Swick Mining Services Ltd [2022] WASC 79 [79]; Re Western Areas Ltd [2022] WASC 193 [82].
I was and am satisfied that an order for electronic despatch of the Scheme booklet to Email Shareholders is appropriate.
Initially, counsel for the plaintiff sought orders for all other Shareholders to receive a letter by post with the relevant forms and a link to the Scheme booklet.
In February this year, pt 1.2AA, div 2 of the Act was introduced by the Corporations Amendment (Meetings and Documents) Act 2022. Section 110C of the Act provides that this division applies to any document covered by subs (2) that is required to be sent to a person by a company. Section 110C(2) specifies that these documents include documents that relate to a meeting of members of the company. Pursuant to s 110E of the Act, a member can elect to receive documents in either physical or electronic form. If the company fails to take reasonable steps to comply with the member's election, the company commits an offence, which is an offence of strict liability (s 110F(4)).
Given these provisions, it was my view that the orders initially proposed by the plaintiff did not comply with the Act and that it was necessary for Shareholders who have elected to only receive physical copies of shareholder communications to receive a hard copy of the Scheme booklet and a proxy form.
In respect of the remaining Big River Gold shareholders (who have not made an election in relation to the manner in which they will receive documents from Big River Gold and those Email Shareholders in respect of whom electronic delivery has been notified as being ineffective), I am satisfied that the orders proposed by Big River Gold, namely that these Shareholders receive a letter by post with the relevant forms and a link to the Scheme booklet, are appropriate.
In relation to Dundee, the orders proposed by Big River Gold included a requirement that they be sent an election form. I am satisfied this is appropriate.

Shareholder script

Big River Gold also sought orders pursuant to s 1319 of the Act to cause an inbound telephone information line in relation to the Scheme to be operated by Automic Group Pty Ltd. The scripts were consistent with the information in the Scheme booklet and it was stressed that the scripts should not be substantially departed from.
At the hearing, I indicated that the footnote contained in the script to the question 'What does the Independent Board Committee (IBC) recommend?'[82], which set out the interests of each of the members of the IBC, should be moved into the contents of the scripts for the sake of clarity for the information line operators.

Scheme meeting

[82] Affidavit of Shaun Barry McRobert filed 27 July 2022, 'SBM-11'.

Big River Gold proposes that the Scheme meetings be held on 2 September 2022 in person. That is, Big River Gold does not propose that there be provision for electronic attendance at the meeting.
Big River Gold proposed that the board of directors have the ability to add an electronic component of the meeting in the event there was a concern the proposed physical meeting could not take place.
The orders made reflect this proposal and set out the procedure Big River Gold is required to follow if the physical Scheme meeting cannot be held on the proposed date.

Outbound shareholder telephone line

On 17 August 2022, the solicitors for Big River Gold requested that the matter be relisted for a short hearing for the purpose of seeking approval for an outbound information campaign.
The matter was relisted for 19 August 2022. At the hearing, Big River Gold sought orders pursuant to s 1319 of the Act to allow Shareholders to be contacted via telephone by Georgeson Shareholder Communications Australia Pty Ltd (Georgeson) who have been retained by Big River Gold to run an outbound campaign.
Big River Gold relied on three affidavits in relation to the application being:
(a)a second affidavit of Mr Richards filed 17 August 2022, which detailed Georgeson's engagement and annexed all announcements made by Big River Gold to the ASX since the date of the first court hearing as well as the proposed script for the outbound campaign;
(b)a fifth affidavit of Mr McRobert filed 17 August 2022 which annexed evidence of the lodgement of the Scheme booklet and the orders of 29 July 2022 with ASIC; and
(c)a sixth affidavit of Mr McRobert filed 19 August 2022, which annexed correspondence between ASIC and MinterEllison in relation to the proposed outbound script.
The principles that govern communications by a company with its members once a court has convened a scheme meeting has been the subject of a number of recent decisions.[83] The applicable case law governing these communications has been summarised by Black J in Re ResApp Health Ltd[84] and Strk J in Re Vimy Resources Ltd [No 2].[85] In Re Vimy Resources Ltd [No 2], counsel suggested to Strk J that my position on the position had evolved between Re Galaxy Resources (which I heard in 2021) and Re Western Areas Ltd (which I heard this year). I do not accept that this is an accurate summation of my views or the position that I have expressed.
[83] Re Vimy Resources Ltd [No 2] [2022] WASC 257 [75] - [96]; Re ResApp Health Ltd [2022] NSWSC 983 [6], [21]; Re Galaxy Resources Ltd [2021] WASC 314; Re Western Areas Ltd [84] - [85]; Re Wajema Ltd [2021] FCA 878 [22(o)].
[84] Re ResApp Health Ltd [15] - [19]
[85] Re Vimy Resources Ltd [No 2] [75]- [96].
However, for the avoidance of doubt, I consider that the views expressed by Black J and Strk J (which is also the position expressed by Farrell J in Re Wajema Ltd) accurately summarise the position. That is, if a company proposes to use a proxy solicitation agent (that is, an outbound telephone campaign), this should be drawn to the attention of the court at the first court hearing and approval sought as to the proposed script. The purpose of this is to ensure that the scripts are consistent with the Scheme booklet, are appropriately balanced and do not contain any information that is new or misleading.[86]
[86] Re Galaxy Resources Ltd [31] - [33]; Re Western Areas Ltd [84] - [85].
Where prior approval is not sought, it will be necessary to consider at the second court hearing whether these communications (both in respect of content and the manner in which it has occurred) have compromised the integrity of the voting process at the Scheme meeting. There is a risk in this situation that a court may not approve the Scheme at the second court hearing because of the manner in which the campaign has been conducted.
I reviewed the script which is proposed to be used and, subject to one deletion, was satisfied that it was consistent with the disclosures in the Scheme Booklet and did not contain any new information or information that is misleading. The deletion was to remove the adverb 'significantly' from the section of the script that described the view of the IBC that the benefits of the Scheme 'significantly' outweighed its potential disadvantages and risks. In this regard, I note that the view of the IBC expressed in the original announcement of the Scheme and the Scheme booklet itself was in more measured terms.
At the conclusion of the hearing on 19 August 2022, I made orders approving the script.

Conclusion and orders

At the first hearing before me, I was satisfied that the substantive and procedural requirements under s 411(1) and s 1319 of the Act had been satisfied and that the proposed Scheme was fit for consideration by Big River Gold's members.
For these reasons, I made orders in terms of 'Annexure A' to this judgment at the conclusion of the hearing on 29 July 2022 in respect of the Scheme, and orders in terms of 'Annexure B' to this judgment at the conclusion of the hearing on 19 August 2022 in respect of the outbound shareholder telephone line.

ANNEXURE A

ANNEXURE B

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
FD
Associate to the Honourable Justice Hill
2 SEPTEMBER 2022