Re Exore Resources Ltd - [2020] WASC 285

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE EXORE RESOURCES LTD; EX PARTE EXORE RESOURCES LTD [2020] WASC 285
CORAM:   VAUGHAN J
HEARD:   4 AUGUST 2020
DELIVERED          :   4 AUGUST 2020
PUBLISHED           :   4 AUGUST 2020
FILE NO/S:   COR 91 of 2020
BETWEEN:   EXORE RESOURCES LIMITED
Plaintiff
PERSEUS MINING LTD
Interested Party

Catchwords:

Corporations - Scheme of arrangement - Proposed share acquisition - Application for orders convening scheme meeting under s 411(1) of the Corporations Act 2001 (Cth) - Application for orders approving the distribution of scheme booklet comprising explanatory statement under s 412(1)(a) Corporations Act 2001 (Cth) - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 411(1), s 412(a)
Corporations Regulations 2001 (Cth)
Supreme Court (Corporations) (WA) Rules 2004 (WA)

Result:

Application granted

Category: B

Representation:

Counsel:

Plaintiff	:	J M Healy
Interested Party	:	M L Dean

Solicitors:

Plaintiff	:	Gilbert + Tobin
Interested Party	:	Corrs Chambers Westgarth

Case(s) referred to in decision(s):

Re MOD Resources Ltd; Ex parte MOD Resources Ltd [2019] WASC 326
Re Navitas Ltd; Ex parte Navitas Ltd [No 2] [2019] WASC 218
Re Nzuri Copper Ltd; Ex parte Nzuri Copper Ltd [2019] WASC 189
Re Tawana Resources NL [2018] FCA 1456
Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [2018] WASC 308

VAUGHAN J:

Overview

The plaintiff, Exore Resources Ltd (Exore), is an Australian public company listed on the official list as conducted by the ASX Ltd (ASX).
On 3 June 2020 Exore made an ASX announcement that it had entered into a scheme implementation deed (SID) with Perseus Mining Ltd (Perseus). Perseus is another Australian public company listed on the ASX and is also listed on the Toronto Stock Exchange (TSX). Under the SID it was proposed that Perseus would acquire 100% of the share capital of Exore by way of a scheme of arrangement. Thus a consequence of the scheme, if effectuated, is that Exore will become a wholly owned subsidiary of Perseus.
The proposal provided for ordinary shareholders in Exore to receive a scrip consideration of 0.07819 fully paid ordinary shares in the capital of Perseus for each Exore share.
By originating process dated 16 July 2020 Exore sought orders under s 411(1) of the Corporations Act 2001 (Cth) (Act) in relation to the proposed scheme of arrangement. The application came before me for hearing on 4 August 2020. After hearing from counsel for Exore and Perseus I made orders pursuant to s 411(1) of the Act to convene a meeting of Exore's members to consider and vote on the proposed scheme. Ancillary orders were made as to the convening and conduct of the scheme meeting. Orders were also made for the approval of the distribution of a scheme booklet comprising the explanatory statement under s 412(1)(a) of the Act.
I said that I would prepare written reasons for my orders. These are my reasons for the orders made on 4 August 2020.

Evidence and background facts

Exore relied on nine affidavits from five deponents. Annexure 'A' to these reasons summarises the deponents, their relationship with Exore and Perseus and the nature of the evidence in the affidavits. Based on that affidavit evidence I record the following matters.
Exore was incorporated in August 1985. Exore is, as already mentioned, an Australian public company admitted to the official list of the ASX. Its ordinary shares are quoted for trading on the ASX's official list. Exore is a gold exploration company. Its key project, and current focus, is the Bagoé Project in the Republic of Côte d'Ivoire.
At the time of entry into the SID, Exore had a number of securities on issue:
1.589,356,105 fully paid ordinary shares.
2.5,000,000 unlisted options issued to L39 Pty Ltd expiring 26 November 2021, exercisable at 13 cents.
3.20,616,667 unlisted options issued to various Exore officers or entities related to certain Exore officers expiring at various times between 8 October 2022 and 26 July 2023, exercisable at 0.1 cent.
As will be seen, a number of the options issued to the Exore officers and Exore officer related entities have since been exercised.
Perseus is a multi-mine West African gold producer, developer and explorer with two operating gold mines, one in the Republic of Ghana and the other in the Republic of Côte d'Ivoire. Perseus also has another project in development in the Republic of Cote d'Ivoire. As mentioned, its securities are listed for trading on the ASX and the TSX.
Exore and Perseus entered into the SID on 3 June 2020. The SID provides for the terms and conditions by which Perseus agrees to acquire the ordinary shares in Exore by means of a scheme of arrangement. The proposed consideration to be provided to Exore shareholders in accordance with the scheme is 0.07819 of a fully paid ordinary share in Perseus for each Exore share (ie Exore shareholders will receive one Perseus share for every 12.79 Exore shares held). Based on the closing price for Perseus shares as at 2 June 2020, the scheme consideration represents an implied value of $0.105 per Exore share. Based on Perseus' 10 trading day volume weighted average share price the scheme consideration values Exore, on a fully diluted equity value, in an amount of $59.8 million (ie $0.098 per share).
If effected the scheme would see the current shareholders of Exore holding approximately 3.9% of the issued ordinary shares in Perseus.
In announcing entry into the SID on the ASX's markets announcement platform, the joint Exore and Perseus ASX announcement stated that the benefits to Exore shareholders were as follows:
·The Implied Scheme Consideration represents a significant premium of 69% to last close and 78% to 20 trading day VWAP.
·Through Perseus scrip consideration, retain exposure to Exore's assets and future upside associated with exploration (including the Bagoe and Liberty Project of which, as mentioned above, Exore will obtain 100% ownership after having exercised its pre-emptive right over Apollo's 20% interest).
·Benefit from exposure to Perseus's two producing gold mines and third mine in development (currently on time and on budget for first gold in December 2020).
·Benefit from significantly enhanced trading liquidity, scale, and asset diversification.
·Benefit from Perseus's operational experience in West Africa, with proven success in developing and operating gold mines.
·Mitigates development risks including permitting, capex and funding.[1]
[1] Turner 1 attachment 'STT- 6' (page 168).
The SID was amended on 29 July 2020 by a deed of variation.[2] The amendments effected a number of minor technical enhancements to the scheme terms. They arose as a result of review of the scheme terms by the court.
[2] Turner 3 attachment 'STT-17' (pages 244 - 249).
Exore's directors unanimously recommend that its shareholders vote in favour of the scheme in the absence of a superior proposal. Since the announcement of the SID no alternate proposal has emerged. The directors' recommendation is, however, subject to an independent expert's report opining that the scheme is in the best interests of the shareholders. As will be seen, that has occurred.

Nature of the proposed scheme

By the proposed scheme, Perseus will acquire all the Exore shares on issue as at the date that the scheme is implemented (scheme terms, cl 2(d), cl 5.2). The consideration for the acquisition of the shares is 0.07918 Perseus shares per Exore share (scheme terms, cl 6.1). Where there is a fractional entitlement the shares to be issued will be rounded up or down to the nearest whole number of Perseus shares (scheme terms, cl 6.4). The unlisted options stand outside the proposed scheme and are to be dealt with by private arrangement with each of the option holders (SID, cl 4.5).
Exore and Perseus have already entered into arrangements with each of the Exore option holders.
L39 Pty Ltd was issued options as part of a commercial arrangement with a third party services provider.[3] It has entered into an option cancellation deed with Exore and Perseus.[4] The effect of that deed is that, subject to the scheme becoming effective, the options will be cancelled and L39 Pty Ltd will be issued with 104,500 fully paid ordinary shares in the capital of Perseus. The consideration provided for the cancellation of the options was based on a Black-Scholes valuation with an assumed 80% volatility.[5]
[3] Tremain 2 pars 12 - 16.
[4] Tremain 1 par 13.
[5] Scheme booklet par 3.8(b). See Turner 3 attachment 'STT-18' (page 498).
The other option holders - all officers of Exore or related parties to officers of Exore - have entered into option exercise deeds with Exore and Perseus. Subject to the scheme becoming effective, the option holders have agreed to either (1) exercise the options - in which case the newly issued shares will become subject to the scheme; or (2) cancel the options in consideration for the issue of 0.07819 new Perseus shares for each option.[6] As at 30 July 2020, 14,433,334 of these options (representing 70% of them) had been exercised.[7]
[6] Tremain 1 pars 14 - 17.
[7] Tremain 2 pars 8 - 10.
There are two exceptions to the proposed share scheme consideration of 0.07819 new Perseus shares for each Exore share:
1.Ineligible Foreign Holders (this includes shareholders whose address is outside Australia, New Zealand, the United Kingdom, Singapore, Canada and Hong Kong) will have their Exore shares dealt with in accordance with a sale facility under the scheme and the net sale proceeds remitted to them (scheme terms, cl 6.6). A brokerage commission will apply.
2.Small Shareholders (those who would, on implementation of the scheme, hold less than a marketable parcel of new Perseus shares, ie a holding with a market value of less than $500) may elect to have their Exore shares dealt with in accordance with the sale facility under the scheme, thus also receiving remittance of the net sale proceeds applicable to their shares (scheme terms, cl 6.7).
Accordingly, Ineligible Foreign Holders (and Small Shareholders who elect to do so) will receive a cash amount. The cash so received will be the net proceeds of the sale of their scheme consideration.
The new Perseus shares as issued to the former Exore shareholders will rank equally with existing Perseus shares, be fully paid and free from any security interest, and will be listed for trading on the ASX and the TSX (scheme terms, cl 6.8)
If the scheme is implemented, Exore will become a wholly owned subsidiary of Perseus and will be delisted from the ASX (scheme terms, cl 8). However, the scheme will not become effective unless and until a number of conditions precedent are satisfied (scheme terms, cl 4.1). This includes the satisfaction or waiver of numerous conditions precedent in cl 3.1 of the SID. Those conditions include that Exore exercise a pre‑emptive right in relation to certain assets associated with the Bagoé Project and another project and that Exore's actual cash balance (as defined in the SID) be above $2 million on the second court hearing date. The pre‑emptive right has been exercised for a consideration payable of US$4.5 million. Exore's current cash balance is some $4.87 million. Otherwise the nature of the various conditions precedent remaining to be satisfied are fully disclosed in the scheme booklet (scheme booklet; FAQS, pars 1.3, 10.2, 10.13(a)). I consider those remaining conditions precedent to be relatively standard for a transaction of the type under consideration.
Mr Tremain, for Exore, has deposed that he is not aware of any basis to believe that, if all approvals to the scheme are obtained, any other condition precedent will not be met.[8] There is a similar affirmation on behalf of Perseus.[9]
[8] Tremain 1 par 40.
[9] Bosboom 1 pars 32 - 33.
Perseus is not a party to the proposed scheme. However, the terms of the proposed scheme contemplate that it will provide a deed poll whereby it agrees to perform the actions attributed to it under the scheme (scheme terms, cl 2(f)). Provision of the deed poll is a condition under the SID (SID, cl 5.2(i)). The deed poll has been executed and was in evidence before me.[10]
[10] Bosboom 1 attachment 'MPB-6'.
The SID contemplates that Exore will obtain an independent expert report (IER). The IER has been prepared by BDO Corporate Finance (WA) Pty Ltd and verified by Adam Myers, a partner and representative of BDO Corporate Finance (WA) Pty Ltd with over 22 years' experience in the accounting profession. In part, the IER relies on an Independent Technical Specialists Report prepared by CSA Global in respect of Exore's mineral assets.
Mr Myers opines that, in the absence of a superior proposal, the proposed scheme is fair and reasonable to Exore shareholders. Therefore, in the absence of a superior proposal, Mr Myers concludes that the scheme is in the best interests of the shareholders. In coming to that conclusion Mr Myers determines the valuation range for a Exore share on a controlling interest basis as being between 3.3 cents per share (low) to 10.9 cents per share (high) but adopts a preferred value of 7 cents. By contrast, Mr Myers assesses the value of the scheme consideration on a minority basis to be between 9.4 cents per Exore share (low) to 11 cents per Exore share (high) with a preferred value of 10.2 cents per Exore share. Accordingly, the scheme consideration is above the assessed valuation range of the Exore shares.
The IER summarises this information as follows:

The basis of the valuations, and the methodology employed, is set out comprehensively in the IER.
I was provided with the draft scheme booklet as submitted to the Australian Securities and Investments Commission (ASIC) on 16 July 2020[11] and the various amendments that have been made to the document since then.[12] At the hearing Exore relied on a final version of the draft scheme booklet dated 31 July 2020 with minor additional alterations thereto.[13]
[11] Turner 1 attachment 'STT-7'.
[12] Turner 2 attachments 'STT-17' and 'STT-18'.
[13] Turner 3 attachment 'STT-17'; Turner 4 attachment 'STT-24'.
The scheme booklet itself comprises sections as follows:
1.Covering letters from the respective chairpersons of Exore and Perseus.
2.Key dates section.
3.A summary of the purpose of the scheme booklet, reasons to vote in favour of the scheme and reasons not to vote in favour of the scheme.
4.An explanation of next steps and how to vote.
5.Frequently asked questions.
6.Overview of the scheme.
7.Exore directors' recommendation.
8.Implementation of the scheme.
9.Scheme consideration.
10.Information about Exore.
11.Information about Perseus.
12.Information about the merged group.
13.An explanation of the risks associated with the scheme.
14.Taxation implications for Exore shareholders.
15.Additional information.
16.Glossary.
The scheme booklet will be accompanied by substantial attachments which form part of the scheme booklet. These will include the final IER, the terms of the scheme of arrangement, a copy of the executed deed poll and the notice of meeting to the Exore shareholders. The SID will also be included as an attachment. So too the scheme booklet will attach a sample proxy form and a sample small shareholders' election form.

Legal framework

I described the applicable legal framework for an application of the nature brought by Exore in Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd.[14] I do not intend to repeat what I stated in Re Wesfarmers Ltd. I adopt and will apply what I stated in Re Wesfarmers Ltd.
[14] Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [2018] WASC 308 [46] ‑ [78] (Re Wesfarmers Ltd).
There are usually said to be six matters to be proved at this first stage of the process under s 411 of the Act. Those matters are that:
1.The plaintiff is a part 5.1 body.
2.The proposed scheme is a compromise or arrangement within the meaning of s 411 of the Act. Here, relevantly, the question is whether the proposed scheme is an 'arrangement'.
3.The proposed scheme booklet will provide proper disclosure.
4.The scheme is bona fide and properly proposed.
5.The ASIC has had at least 14 days' notice of the proposed hearing date and has had a reasonable opportunity to examine the terms of the scheme and the scheme booklet and to make submissions.
6.The various procedural requirements of the Act and the Supreme Court (Corporations) (WA) Rules 2004 (WA) have been met.
It is also necessary that the court be satisfied that the scheme is of such a nature and cast in such terms that, if it receives a statutory majority at the scheme meeting, the court would be likely to approve the scheme at a hearing of an application which is unopposed. This does not require me to descend into the commercial merits or demerits of Exore's proposed scheme. It is enough if the scheme is such that it would be open to the members of Exore to adopt. I need only consider whether the proposed scheme is one that sensible business people might consider to be of benefit to the members.

Disposition: standard matters

Formal matters

The formal matters that Exore had to prove are satisfied.
Exore is a company; it is therefore a pt 5.1 body. The proposed scheme constitutes an 'arrangement'. This type of share acquisition scheme has been approved by courts as an arrangement on numerous occasions.
By letter dated 3 August 2020[15] the ASIC confirmed satisfaction of the service requirement and that it had been provided with the reasonable opportunity required under s 411(2) of the Act. The ASIC also gave notice that it did not propose to appear to make submissions or intervene to oppose the scheme at the first hearing.
[15] Turner 4 attachment 'STT-26'.
The various procedural requirements for making the orders were all attended to in the evidence; for example, there were the necessary consents and disclosures by the proposed chairperson of the scheme meeting and his alternate.

Properly proposed

On the materials there was nothing to suggest that the proposed scheme was unlawful or not properly proposed. There are no obvious flaws in the scheme such that it would be inappropriate for the scheme to be submitted to Exore's shareholders for their consideration.
As to the fact that there was proposed to be a single class of members, counsel for Exore drew my attention to the differential treatment proposed for Ineligible Foreign Holders and (at their election) the Small Shareholders. Differential treatment of this sort is commonplace in schemes of arrangement. It is not class creating as there is sufficient community of interest between the shareholders for them to consider whether the proposed scheme is in their collective interest.[16]
[16] Re Wesfarmers Ltd [91] ‑ [98].
Counsel for Exore drew my attention to various other matters concerning the proposed scheme. Mention of those matters is best deferred and will be dealt with in the next main section of these reasons.

Disclosure and scheme booklet

I have read through the initial draft of the scheme booklet (as provided to the ASIC) and considered the various amendments made to that draft as were reflected in the final scheme booklet relied on at the hearing before me. I was also provided with the communications between the ASIC and Exore's legal representatives consequential upon the ASIC's review of the contents of the draft scheme booklet. This resulted in a number of appropriate changes to the scheme booklet. Additionally, following my initial review of the draft scheme booklet, I raised - through my associate - other disclosure issues. This also saw a number of changes to the draft scheme booklet. While the contents of the scheme booklet remain a matter for Exore, I was and am satisfied that Exore has sought to supplement, and provide full disclosure, of matters within the scheme booklet that were of concern to me following my initial review of the draft scheme booklet.

In all the circumstances I was and am satisfied, to the necessary prima facie level given the interlocutory nature of the application before me, that there will be proper disclosure as to the effect of the proposed scheme and the material considerations to which shareholders ought to have regard.
The scheme booklet gives disclosure as to the reasons that a shareholder may wish to vote against approval of the proposed scheme (scheme booklet, par 2.3). These include:
1.Disagreement with the directors' recommendation and the independent expert's conclusion.
2.The uncertain value of the scheme consideration - a point which Exore emphasised by stating, on a number of occasions in bold, that the implied value of the scheme consideration will vary with the market value of the new Perseus shares.
3.The dilution of each shareholder's interest in Exore's assets.
There is also a comprehensive section on the risk factors, both general and specific, associated with the proposed scheme (scheme booklet, par 8).
I am satisfied that the draft scheme booklet is a detailed and comprehensive explanatory statement. It sets out the mechanics and terms of the scheme in an understandable way and describes in considerable detail the advantages and disadvantages of the scheme. The draft scheme booklet expressly considers whether the scheme is fair and reasonable from the perspective of the shareholders. It also provides, by way of the IER, an independent expert opinion that sets out detailed reasons for the conclusions reached and the methodologies used.
As to the due diligence and verification processes undertaken by Exore and Perseus, I had regard to, and accept, the evidence given by Mr Tremain (managing director of Exore)[17] and Mr Bosboom (general counsel and company secretary of Perseus).[18] In summary, there has been verification of the various statements in the draft scheme booklet. Steps have also been taken to satisfy Exore and Perseus that the scheme booklet does not omit any material information.
[17] Tremain 1 pars 66 - 69, 73 - 86; Tremain 2 pars 22 - 25.
[18] Bosboom 1 pars 17 - 31.
A due diligence committee and the directors of Exore have resolved to approve the scheme booklet.[19]
[19] Tremain 1 pars 84, 86.
Otherwise, as to disclosure, in being satisfied that the scheme booklet contained the prescribed information in accordance with s 412(1)(a) of the Act and sch 8 of the Corporations Regulations 2001 (Cth) I was assisted by a checklist provided by Exore's counsel as an attachment to Exore's written submissions. Those requirements have been modified in respect of certain items by the ASIC's further letter dated 3 August 2020.[20]
[20] Turner 4 attachment 'STT-25'.

Disposition: specific matters

In written submissions counsel for Exore drew a number of matters to my attention. These included the issue of performance risk, exclusivity provisions in the SID, certain benefits to officers of Exore and issues as to particular terms within the scheme.

Performance risk

I was and am satisfied that the nature and terms of the proposed scheme are such that the members are adequately protected against the risk that Perseus will not perform its obligations under the scheme. In that respect, I have had regard to the terms of the scheme and the terms of the deed poll.
The scheme terms are drafted appropriately to ensure that the transfer of the members' shares is subject to the provision of the scheme consideration (scheme terms, cl 2(d), cl 6.1, cl 6.2, cl 6.8, cl 9.3(b), cl 9.4). Perseus will not become beneficially entitled to the Exore shares until provision of the scheme consideration to the Exore shareholders.
By the deed poll Perseus covenants in favour of the Exore shareholders that Perseus will perform all actions attributed to it under the scheme (deed poll, cl 4.1(b)) and issue the scheme consideration to each scheme shareholder on the implementation date (deed poll, cl 4.1(a)). There is also an acknowledgement that the deed may be relied on and enforced by any scheme shareholder (deed poll, cl 1.3(a)) and that Exore and each of its directors may act as agent and attorney to enforce the deed poll on behalf of the shareholders (deed poll, cl 1.3(b)).
The deed poll will be enforceable by the Exore members as they are sufficiently identified within the deed poll.

Exclusivity provisions and break fee

The SID contains various standard exclusivity terms (SID, cl 8). These include 'no-shop' and 'no-talk' provisions (SID, cl 8.1 - 8.3), a 'notification' obligation (SID, cl 8.5) and a 'matching' right (SID, cl 8.6). Provision is also made for a reciprocal 'break fee' of $600,000 (SID, cl 9).
The 'no-talk' provision is subject to a standard directors' duty carve-out said to constitute a 'fiduciary exception' (SID, cl 8.4).
In considering the propriety of exclusivity arrangements, the authorities suggest that:
1.The exclusivity period should be certain and of reasonable duration.
2.The exclusivity arrangements should be subject to a directors' duty carve-out, ie the directors should be able to consider an alternative proposal if it may result in a potentially superior transaction that will better serve the members' interests.
3.The arrangements should be adequately disclosed in the explanatory statement.
4.Appropriate affidavit evidence should be adduced to justify the exclusivity arrangements.
The exclusivity period under the SID is six months. I am satisfied that this is reasonable. There is an appropriate directors' duty exception. The scheme booklet specifically discloses that failure to approve the scheme will not trigger an obligation to the pay the break fee (scheme booklet; FAQs, par 1.7(e)). There is otherwise adequate disclosure of the exclusivity arrangements and the break fee as a whole (scheme booklet; FAQs, pars 1.7(e), 2.4(e), 10.13(i) - (j)).
Mr Tremain provides commercial justification for the exclusivity provisions.[21] Justification also appears from Mr Bosboom's evidence that Perseus would not have entered into the SID or agreed to proceed with the scheme without provision of the break fee.[22] Otherwise Mr Tremain's evidence, which I accept, is that the exclusivity provisions followed arm's length commercial negotiations in which both parties were separately advised and represented by external legal advisers.[23] The amount of the break fee represents about 1% of the implied value of the scheme consideration. It is thus within generally accepted commercial parameters.[24]
[21] Tremain 1 pars 43 - 47.
[22] Bosboom 1 par 37.
[23] Tremain 1 par 47.
[24] Tremain 1 par 44.
In approving the convening of the scheme meeting I was satisfied - necessarily on a provisional basis given the nature of the first court hearing - that the presence of the exclusivity provisions and the break fee were unlikely to be coercive.

Director benefits

Counsel for Exore highlighted certain benefits that might become payable to officers of Exore, including Mr Tremain as managing director, in the event that the scheme was implemented. Counsel submitted that these benefits were not such as would make it inappropriate for Mr Tremain to join in the directors' recommendation that the members approve the scheme.
The potential director benefits are given prominence in the draft scheme booklet. For example, the Exore chairperson's letter states:
The Exore Directors hold Exore Options that will be dealt with in accordance with the arrangement described in section 3.8 of this Scheme Booklet in connection with the Scheme such that, if the Scheme becomes Effective, all of the Exore Directors' Exore Options will be exercised in exchange for Exore Shares before the Scheme Record Date, and the Exore Directors will receive the Scheme Consideration in respect of those Exore Shares held on the Scheme Record Date if the Scheme is implemented. In relation to Mr Tremain, the managing director of Exore, his employment is expected to be terminated if the Scheme is implemented. If that occurs, Mr Tremain may be entitled to certain payments in accordance with the terms of his employment agreement and applicable law, as described in section 10.10. Exore Shareholders should have regard to these arrangements when considering the Exore Directors' recommendation in relation to the Scheme, which appears throughout this Scheme Booklet. Each Exore Director considers that, despite these arrangements, it is appropriate for him to make a recommendation on the Scheme.
Additional references to these so-called 'director benefits' are found in the scheme booklet at the FAQs (in relation to the directors' recommendation) and sections 1.4, 2.1, 3.8, 10.9 and 10.10.
The arrangements for the options have already been described (see [19] above). There are no potential difficulties in relation to the options. Insofar as the option holders exercise the options, and become the holders of additional shares, those shares will participate in the scheme in a like manner to other shares. There is no benefit accruing to the directors from effectuation of the scheme that is different to the benefit available to members generally.
Nor, in the circumstances of the present case, does the fact that Mr Tremain is likely to receive a termination benefit impact on the propriety and appropriateness of his participation in the directors' recommendation to shareholders.
It is not necessary to survey the recent authorities as to the appropriateness of an individual director joining in a unanimous board resolution to support a scheme in circumstances where, by reason of a bonus or similar benefit, the director has an additional and different interest to the members in the approval of the scheme. I have already expressed my general views on that issue.[25] I adhere to those views and in particular to the view that the issue is always fact sensitive. In the present case the issue arises in the context of a pre-existing termination benefit that is provided for in Mr Tremain's employment contract. On termination Mr Tremain may be entitled to up to nine months' salary paid as a lump sum. The scheme booklet discloses that Mr Tremain's employment is expected to be terminated if the scheme is implemented.
[25] Re Nzuri Copper Ltd; Ex parte Nzuri Copper Ltd [2019] WASC 189 [83] ‑ [89]; Re Navitas Ltd; Ex parte Navitas Ltd [No 2] [2019] WASC 218 [31] ‑ [38]; Re MOD Resources Ltd; Ex parte MOD Resources Ltd [2019] WASC 326 [84] - [93].
I accept Exore's submission that this 'directors' benefit' ought not preclude Mr Tremain joining in the directors' recommendation. In particular:
1.The termination payment does not arise simply as a bonus payable on approval of the scheme. Rather, it is conditioned on another event - termination of employment.
2.The termination benefit is a pre-existing right in Mr Tremain's employment contract. This is not a case where Mr Tremain has been incentivised to bring about approval of the scheme.
3.The termination benefit is commercially reasonable and has a proper commercial rationale.
4.The termination payment is given prominent disclosure throughout the scheme booklet. Importantly, it is disclosed at a number of points where the scheme makes reference to the directors' recommendation. Accordingly, shareholders reading the recommendation would understand that implementation of the scheme might result in Mr Tremain receiving a termination benefit.
The disclosure is such that I am confident that shareholders will be able to come to an informed view as to whether the weight to be given to the directors' unanimous recommendation is affected by the potential termination benefit that Mr Tremain may receive should the scheme be approved and implemented with the expected consequence that his employment will be terminated.

Other matters

Counsel for Exore drew my attention to the 'deemed warranty' provision in the proposed scheme (scheme terms, cl 9.2(b)). The presence of the deemed warranty provision is disclosed (scheme booklet, par 10.19). Such deemed warranty clauses are not unusual and are acceptable provided that, as here, their presence is adequately disclosed.[26]
[26] Re Tawana Resources NL [2018] FCA 1456 [28] - [29].
Additionally, Exore sought orders for the electronic dispatch of the scheme booklet. I made such orders in Re Wesfarmers Ltd. For the reasons I gave there such orders are now commonplace.[27] Details were provided as to the terms of the proposed electronic notification.[28] Based on that material, an order for electronic dispatch of the scheme booklet was appropriate.
[27] Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [145] - [152].
[28] Turner 1 attachment 'STT-11'.

Conclusion

On the evidence presented, and after hearing from counsel for Exore and Perseus, I was satisfied that it was appropriate to make orders convening a scheme meeting to consider whether to approve the proposed scheme. The scheme is one that is fit for consideration by Exore's members in the sense that sensible business people might consider the scheme will be of benefit to those members. That is particularly the case given the opinion expressed in the IER. I also rely on the unanimous resolution of Exore's directors and the reasons given for that recommendation.
Given the matters I have mentioned as to being satisfied that the scheme booklet prima facie provides proper disclosure to Exore's members, I also considered it appropriate to approve the scheme booklet for distribution.
Accordingly, for these reasons, I made orders in the following terms:
1.Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Corporations Act), the plaintiff convene a meeting of its shareholders for the purpose of considering and, if thought fit, agreeing to (with or without modification), a scheme of arrangement between the plaintiff and its shareholders (Scheme), being the Scheme substantially in the form set out at attachment C of annexure STT-17 located at pages 251 to 267 of the affidavit of Sarah Terase Turner affirmed 31 July 2020 (Third Turner Affidavit), to be held at Parmelia House, 191 St Georges Terrace, Perth WA 6000 at 10:00am (Perth time) on Thursday, 10 September 2020 (Scheme Meeting).
2.The explanatory statement in relation to the Scheme, as required by s 412(1)(a) of the Corporations Act and as set out in the scheme booklet which is annexure STT-17 located at pages 16 to 434 of the Third Turner Affidavit (Scheme Booklet), is approved for distribution to shareholders, subject to:
(a)correction of any minor typographical or grammatical errors and final typesetting and formatting;
(b)any minor amendments required or approved by the Australian Securities and Investments Commission (ASIC) for registration under s 412(6) of the Act;
(c)correction or update of any relevant date references or last trading prices;
(d)amending page 169 of the Scheme Booklet (located at page 185 of the Third Turner Affidavit) in accordance with the amendment identified in annexure STT-24 of the affidavit of Sarah Terase Turner affirmed 3 August 2020;
(e)adopting as attachment D of the Scheme Booklet a copy of the executed deed poll (which is annexure MPB-7 located at pages 467 to 476 of the affidavit of Martijn Paul Bosboom affirmed 31 July 2020);
(f)adopting as attachment C of the Scheme Booklet a copy of the Scheme referred to in par 1 of these orders; and
(g)adopting as attachment E of the Scheme Booklet a signed version of the report of BDO Corporate Finance (WA) Pty Ltd (which is attachment E of the Scheme Booklet located at pages 279 to 428 of the Third Turner Affidavit) with any necessary changes contemplated by pars 2(a), (b) or (c) above.
3.Subject to these orders, pursuant to s 1319 of the Corporations Act, the Scheme Meeting is to be:
(a)convened, held and conducted in accordance with:
(i)the provisions of pt 2G.2 of the Corporations Act (as amended by s 5(1) of the Corporations (Coronavirus Economic Response) Determination (No.1) 2020 (Cth)) that apply to the members of a company; and
(ii)the provisions of the plaintiff's constitution which is annexure STT-3 located at pages 20 to 91 of the affidavit of Sarah Terase Turner affirmed on 16 July 2020 (First Turner Affidavit) (in particular, cl 12.3 of the constitution which permits a meeting to be held at two or more venues simultaneously using technology) that are not inconsistent with these orders and the provisions of the Act, that apply to the meeting of shareholders; and
(b)convened using the notice of meeting in the form or substantially to the effect of the notice of meeting contained in attachment A located at pages 206 to 209 of the Third Turner Affidavit; and
(c)convened, held and conducted as if rule 2.15 of the Supreme Court (Corporations) (WA) Rules 2004 (WA) (Rules) does not apply.
4.John Daniel Fitzgerald, or failing him Justin Albert Tremain, is appointed to act as chairperson of the Scheme Meeting (Chairperson) and is to report the result of the Scheme Meeting to the court.
5.The Chairperson may adjourn the Scheme Meeting in his absolute discretion to such time, date and place as he considers appropriate.
6.Two shareholders present in person or by proxy, corporate representative or attorney under power and entitled to vote shall constitute a quorum for the Scheme Meeting.
7.Voting on the resolutions to approve the Scheme at the Scheme Meeting is to be conducted by way of a poll.
8.Each shareholder present and entitled to vote will be entitled to one vote for each share that the Shareholder is registered as holding at 5.00pm (Perth time) on 8 September 2020.
9.Subject to registration of the Scheme Booklet with the ASIC pursuant to s 412(6) of the Corporations Act, the plaintiff is to despatch on or before 11 August 2020, a document substantially in the form of the Scheme Booklet (approved for distribution above), including:
(a)the applicable proxy form (utilising the proxy form, as personalised, contained at Attachment F of the Scheme Booklet located at pages 430 to 431 of the Third Turner Affidavit) (or a link to a website for any electronic proxy lodgement); and
(b)a small shareholder election form (as contained at Attachment G of the Scheme Booklet located at pages 433 to 434 of the Third Turner Affidavit),
to the shareholders who appear on the register of members maintained by the plaintiff as at 5:00pm (Perth time) on 10 August 2020, as follows:
(i)to each shareholder who has nominated an electronic address for the purposes of receiving notices of meeting from the plaintiff, by email to such address, such email to be substantially in the form of the draft email set out at Annexure STT-11 located at pages 718 to 719 of the First Turner Affidavit; and
(ii)to each other shareholder:
(A)who has a registered address in the register of the plaintiffs members in Australia, by pre-paid post, parcel post or courier; and
(B)who has a registered address in the register of the plaintiffs members outside Australia, by pre-paid airmail, airmail or air courier,
or any other address the Shareholder supplies to the plaintiff for giving notice.
10.Dispatch of the documents referred to in par 9 of these orders in accordance with the delivery methods stated in par 9 of these orders on or before 11 August 2020 is to be taken to be sufficient notice of the Scheme Meeting.
11.If it comes to the attention of the plaintiff that any email dispatched in accordance with par 9(i) of these orders has returned an undeliverable or undelivered receipt for a shareholder's nominated email address then, in respect of that shareholder, the plaintiff is to dispatch, within a reasonable time thereafter, a document substantially in the form of the Scheme Booklet, including the applicable proxy form, in accordance with par 9(ii) of these orders.
12.The time by which shareholders must return their proxy forms or lodge them online in relation to the Scheme Meeting is 10:00am (Perth time) on 8 September 2020.
13.The matter be relisted at 9:00am (Perth time) on 15 September 2020 for such hearing as is appropriate following the Scheme Meeting.
14.If the matter is to be relisted, the plaintiff is to give notice of the hearing of the application pursuant to s 411(4)(b) of the Corporations Act for orders approving the Scheme by publishing an advertisement in the public notices columns of 'The Australian' and The 'West Australian' newspapers, substantially in the form of Annexure A to these orders, and the plaintiff is otherwise exempt from compliance with rule 3.4 of the Rules.
15.A copy of these orders is to be lodged with the ASIC as soon as practicable after issue.

Annexure A
Deponent	Date	Deponent's role	Summary of affidavit
Sarah Turner (Turner 1)	Affirmed 16/07/20	Partner at Gilbert + Tobin, solicitors for the plaintiff, with conduct of the proposed transaction.	· Formal matters (certificate of registration; company search; company constitution; annual report; ASX listing; directors; registered office; share structure). · Overview of the proposed scheme (ASX announcement; SID; draft scheme booklet; disclosure checklist; proposed dispatch process). · Originating process. · Advertisement.
(Turner 2)	Affirmed 22/07/20	Service of court documents on the ASIC.
(Turner 3)	Affirmed 31/07/20	· Communications with the ASIC about the scheme and the draft scheme booklet. · Revised draft scheme booklet (marked up and clean copies).
(Turner 4)	Affirmed 03/08/20	· Service of court documents on the ASIC. · Minor changes to draft scheme booklet. · Finalisation of communications with the ASIC about the draft scheme booklet. · ASIC relief letter. · ASIC intent letter.
John Fitzgerald	Affirmed 22/07/20	Non-executive chairman of Exore.	· Nomination to act as chairperson of the scheme meeting. · Lack of relevant conflict of interest or duty if to act a chairperson of the scheme meeting.

Deponent	Date	Deponent's role	Summary of affidavit
Justin Tremain (Tremain 1)	Sworn 22/07/20	Managing director of Exore.	· Scheme overview. · Incorporation, registered office and ASX listing. · Exore capital structure (including options on issue); entry into option cancellation deed with L39 Pty Ltd; entry into option exercise deeds with Exore officer related option holders. · Exore directors. · Exore business. · Detail of the proposed scheme including scheme consideration, conditions precedent, exclusivity arrangements and effect on creditors and others. · Details for proposed scheme meeting. · Reasons why Exore seeks to proceed with the proposed scheme. · Interests of the directors. · Scheme documentation including process for compilation of the draft scheme booklet. · Verification of the statements made in the draft scheme booklet. · IER. · Future steps to be taken by Exore. · Liaison with the ASIC. · Nomination to act as alternate chairperson of scheme meeting.
(Tremain 2)	Sworn 31/07/20	· Amendments to disclosure in draft scheme booklet. · Exercise of options by Exore officer related option holders. · Confirmation as to disclosure in relation to options issued to L39 Pty Ltd. · Deed of variation in relation to the SID and the scheme terms. · Verification of the revised draft scheme booklet.
Martin Bosboom (Bosboom 1)	Affirmed 31/07/20	General counsel and company secretary of Perseus.	· Overview of Perseus. · Perseus election not to nominate a nominee. · Verification of Perseus information in the draft scheme booklet. · Conditions precedent. · Execution of deed poll. · Likely costs as justification for the break fee. · Ability of Perseus to issue scheme consideration to Exore shareholders domiciled in New Zealand, the United Kingdom, Singapore, Canada and Hong Kong. · Sale facility for ineligible shareholders and small shareholders.
Adam Myers (Myers 1)	Sworn 31/07/20	Partner and representative of BDO Corporate Finance (WA) Pty Ltd - author of the IER.	Verification of opinions expressed in the draft IER.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
OE
Research Orderly to the Hon Justice Vaughan
4 AUGUST 2020