CITATION: RE EDGE MINERALS LTD; EX PARTE EDGE MINERALS LTD [2022] WASC 395
CORAM: STRK J
HEARD: 14 & 16 SEPTEMBER 2022 (FIRST COURT HEARING)
DELIVERED : 16 SEPTEMBER 2022
HEARD: 21 SEPTEMBER 2022 (APPLICATION ON THE PAPERS)
DELIVERED : 23 SEPTEMBER 2022
PUBLISHED : 28 NOVEMBER 2022
FILE NO/S: COR 156 of 2022
MATTER: IN THE MATTER OF EDGE MINERALS LTD
EX PARTE
EDGE MINERALS LTD
Plaintiff
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 - Appropriateness of all directors making a recommendation on the scheme of arrangement - Three of four board members not independent of the proposed acquirer - The proposed acquirer and the scheme proponent have common directors - Bona fides of proposed scheme of arrangement - Public policy - Director's duties - Whether disclosure adequate - 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 after amendments made at the first court hearing - Ancillary orders
Corporations law - Scheme of arrangement - Application for approval of additional communications to shareholders - Outbound campaign - Orders made approving script
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Re Edge Minerals Ltd [2022] WASC 395
Case
[2022] WASC 395
Decision Date
CaseChat Overview and Summary
In the case of Re Edge Minerals Ltd, the court was asked to consider an application for orders convening a scheme meeting under the Corporations Act 2001 (Cth). The application was brought by Trek, a party seeking to acquire shares in Edge Minerals Ltd. The legal issues before the court included whether the requirements for convening a scheme meeting were satisfied and whether the scheme proponent had complied with their duties under the Corporations Act. Specifically, the court needed to determine if the board's recommendation on the scheme of arrangement was appropriate, given that three of the four board members were not independent of the proposed acquirer, and whether the disclosure provided to shareholders was adequate.
The court found that the requirements for convening a scheme meeting were indeed satisfied. It was determined that the board's recommendation on the scheme was appropriate despite the lack of independence of three directors. The court also found that the disclosure provided to shareholders was adequate. The independent expert engaged by Edge had concluded that the proposed scheme was fair and reasonable and in the best interests of Edge shareholders, absent a superior proposal. The court approved the amended scheme booklet and ancillary orders, including the script for additional communications to shareholders.
This decision underscores the importance of ensuring proper disclosure and independence in board recommendations regarding schemes of arrangement. The court emphasised the need for shareholders to be provided with clear and comprehensive information to make an informed decision. The outcome of the case highlights the rigorous scrutiny applied by the court in approving scheme of arrangement proposals.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Part 4 of the circular resolution of the board of Edge addressed the material personal interests held by the directors of Edge, which I reproduce below:4.SECTION 195 CORPORATIONS ACT4.1 Interests in EdgeIt is noted that the Directors John Young, Neil Biddle and Anthony Leibowitz hold the following interests in the Company (Interested Directors): Mr Boys also deposed in his first affidavit that he was not aware of any basis to believe that any superior proposal concerning the ownership of Edge would be forthcoming from any other party at that time.[35] Edge had engaged an independent expert to provide an opinion on the proposed scheme of arrangement. The independent expert had concluded that in the absence of a superior proposal, the proposed scheme of arrangement was fair and reasonable and therefore was in the best interests of Edge shareholders.[36][36] First affidavit of RE Barclay, REB-6 (draft scheme booklet, annexure A); third affidavit of RE Barclay, REB-3; sixth affidavit of RE Barclay, REB-4. As three of the four directors of Edge were not independent, I sought clarification as to how the independent expert came to be instructed and briefed. In response to that query, Ms Barclay in her seventh affidavit deposed to the process by which the independent expert had been engaged by Edge to consider the proposed scheme and to opine as to whether the proposal was fair and reasonable. I understood that the initial engagement of the independent expert was sought by Mr Hardwick, and Mr Boys signed the engagement letter on 9 June 2022 on behalf of Edge.[37][37] Seventh affidavit of RE Barclay par 5, REB-1. The draft of the independent expert report annexed to the version of the draft scheme booklet first lodged with ASIC stated that:[38]The Directors of Edge have requested RSM, being independent and qualified for the purpose, to express an opinion as to whether the Scheme is in the best interests of Edge Scheme Shareholders.[38] First affidavit of RE Barclay, REB-6 (draft scheme booklet, annexure A, pars 1.5, 3.1). However, the independent expert report was amended to correct the error, and recorded as follows:[39]The Independent Director of Edge has requested RSM, being independent and qualified for the purpose, to express an opinion as to whether the Scheme is in the best interests of Edge Scheme Shareholders. The scheme of arrangement will not be effected unless and until a number of conditions precedent are satisfied or waived as set out in cl 3.1 of the scheme of arrangement and in cl 3.1 of the scheme implementation agreement. Among other things, the scheme of arrangement is conditional upon court approval in accordance with s 411(4)(b) of the Corporations Act, and such other conditions made or required by the court under s 411(4)(b) in relation to the scheme of arrangement as are acceptable to Trek and Edge being satisfied.[40] Ineligible Foreign Shareholders (described in the scheme of arrangement as Foreign Scheme Participants) are scheme participants whose address as shown on the Edge register as at the Record Date is located outside of Australia, New Zealand or any other jurisdiction as may be agreed in writing by Edge and Trek.[41][41] First affidavit of RE Barclay, REB-5 (scheme of arrangement, cl 1.1 (definitions and interpretation)).