JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE EDGE MINERALS LTD; EX PARTE EDGE MINERALS LTD [No 2] [2022] WASC 440
CORAM: STRK J
HEARD: 26 OCTOBER 2022
DELIVERED : 26 OCTOBER 2022
PUBLISHED : 15 DECEMBER 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 - Application for orders pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) - Whether statutory and procedural requirements observed - Whether court ought to exercise its discretion to approve the scheme - Three of four board members not independent of the proposed acquirer - The proposed acquirer and the scheme proponent have common directors - Public policy - Director's duties - Whether there has been full and frank disclosure of all information material to the members' decision - The position of the Australian Securities and Investments Commission - Application unopposed - Ancillary relief sought - Declarations sought pursuant to s 1322(4) of the Corporations Act 2001 (Cth) - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 411, s 1322
Result:
Application granted
Ancillary relief granted
Category: B
Representation:
Counsel:
| Plaintiff | : | J Healy |
Solicitors:
| Plaintiff | : | Steinepreis Paganin |
Case(s) referred to in decision(s):
Bell Group Ltd v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1
Cleary v Australia Co-operative Foods Ltd [1999] NSWSC 973; (1999) 32 ACSR 582
Darvall v North Sydney Brick & Tile Co Ltd [No 2] (1989) 16 NSWLR 260
Fitzgerald v FJ Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215
Gnych v Polish Club Ltd [2015] HCA 23; (2015) 255 CLR 414
Grimaldi v Chameleon Mining NL [No 2] [2012] FCAFC 6; (2012) 200 FCR 296
Howard v Federal Commissioner of Taxation [2014] HCA 21; (2014) 253 CLR 83
ICAL Ltd v County NatWest Securities Australia Ltd (1988) 39 NSWLR 214
Pilmer v The Duke Group Ltd [2001] HCA 31; (2001) 207 CLR 165
R v Byrnes (1995) 183 CLR 501
Re Amcor Ltd [2000] VSC 157; (2000) 34 ACSR 199
Re Anaconda Nickel Holdings Pty Ltd [2003] WASC 19; (2003) 44 ACSR 229
Re Arthur Yates & Co Ltd [2001] NSWSC 40; (2001) 36 ACSR 758
Re Big River Gold Ltd [No 2] [2022] WASC 314
Re Bolnisi Gold NL [No 2] [2007] FCA 2078; (2007) 165 FCR 45
Re Coles Group -[No 2] [2007] VSC 523; (2007) 215 FLR 411
Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358
Re Drexel Burnham Lambert UK Pension Plan [1995] 1 WLR 32
Re DWS Ltd [2020] FCA 1590; (2020) 148 ACSR 616
Re Edge Minerals Ltd [2022] WASC 395
Re Gazal Corp Ltd [2019] FCA 701
Re Kidman Resources Ltd [2019] FCA 1226; (2019) 375 ALR 76
Re Linter Textiles Corp Ltd [1991] 2 VR 561
Re Macquarie Private Capital A Ltd
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- AGLC
- Re Edge Minerals Ltd; [No 2] [2022] WASC 440
- Case
- [2022] WASC 440
- Decision Date
CaseChat Overview and Summary
The court examined the nature and scope of directors' duties, as outlined by the counsel for Edge. The principles discussed included the general duty of directors to act in the best interests of the company, the requirement for unbiased and independent judgment, and the fiduciary duty of undivided loyalty to the company. The court also considered the possibility of directors serving on multiple boards and the necessity to manage conflicts of interest. The court further highlighted the importance of considering the substance over form in the exercise of directors' duties and the reluctance of courts to review business judgments of boards.
In reaching its decision, the court applied the well-established principles of directors' duties and considered the specific circumstances of the case. The court found that the directors had not breached their duties by failing to seek the highest possible price in the sale of the company. The court emphasized that there was no accepted general duty for directors to achieve the highest price in a change of control transaction, and that the directors had acted in accordance with their fiduciary duties by considering the best interests of the company.
The final orders of the court were that the directors of Edge Minerals Ltd had not breached their duties in relation to the proposed sale of the company.
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
In advance of the second court hearing, counsel on behalf of Edge filed submissions as to the nature and scope of directors' duties.[37] In this regard, well-established principles were recited, which included the following:(a)the general duty of the director is to act in the best interests of the company and for proper purposes;[38](b)a company is entitled to the unbiased and independent judgment of each of its directors;[39](c)directors, as fiduciaries, have a duty of undivided loyalty to the company to which the person is appointed as a director. Ordinarily, that means a director cannot have personal interests that conflict with interests of the company;[40](d)conflict, or real substantial possibility of a conflict, between the personal interests of the directors and the company to whom the fiduciary duty is owed should be avoided.[41] However, a company director can be a director of more than one company, but needs to take into account the interests of each company and be mindful as to management of fiduciary duties owed where they may conflict;[42](e)overlaying the nature and scope of the duties owed by a director to a company is a necessity to consider substance over form and identify with particularity the actual circumstances in which the exercise of duty is to be considered.[43] The framing of the particular fiduciary duty said to be owed and the particular factual circumstances in which the duty is said to arise are essential in determining whether there has been a breach and whether there are any defences which can be raised in respect to such conduct; and(f)there is a general reluctance for courts to review business judgments of boards.[44][37] First outline of submissions pars 21 - 34.[38] First outline of submissions par 22, citing Bell Group Ltd v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1 [4553].[39] First outline of submissions par 22, citing R v Byrnes (1995) 183 CLR 501, 516 ‑ 517.[40] First outline of submissions par 26, citing Streeter v Western Areas Exploration Pty Ltd [No 2] [2011] WASCA 17 [67].[41] First outline of submissions par 28, citing Pilmer v The Duke Group Ltd [2001] HCA 31; (2001) 207 CLR 165 [78].[42] First outline of submissions par 28, citing Walker v Wimborne [1976] HCA 7; (1976) 137 CLR 1, 5; R v Byrnes (516 ‑ 517); The State of South Australia v Clark (1996) 66 SASR 199, 223 - 224; Rosetex Co Pty Ltd v Licata (1994) 12 ACSR 779, 782 - 783.[43] First outline of submissions par 30, citing Streeter v Western Areas Exploration Pty Ltd [No 2] [450].[44] First outline of submissions par 24, citing by way of example, ICAL Ltd v County NatWest Securities Australia Ltd (1988) 39 NSWLR 214; Darvall v North Sydney Brick & Tile Co Ltd [No 2] (1989) 16 NSWLR 260; Re Arthur Yates & Co Ltd [2001] NSWSC 40; (2001) 36 ACSR 758. Counsel further observed that within Australia there is presently no accepted general duty that in the context of a change of control transaction the directors must attempt to achieve the highest price.[45]