Re Exore Resources Ltd; [No 2]

Case •

[2020] WASC 333

•

15 SEPTEMBER 2020

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   RE EXORE RESOURCES LTD; EX PARTE EXORE RESOURCES LTD [No 2] [2020] WASC 333

CORAM:   VAUGHAN J

HEARD:   15 SEPTEMBER 2020

DELIVERED          :   15 SEPTEMBER 2020

PUBLISHED           :   15 SEPTEMBER 2020

FILE NO/S:   COR 91 of 2020

BETWEEN:   EXORE RESOURCES LIMITED

Plaintiff

PERSEUS MINING LTD

Interested Party


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 - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 411(1), s 411(4)(b), s 411(6)

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 Exore Resources Ltd; Ex parte Exore Resources Ltd [2020] WASC 285

Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [2018] WASC 357

VAUGHAN J:

Overview

  1. On 4 August 2020 I made orders pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Act) to convene a meeting of the holders of fully paid ordinary shares in Exore Resources Ltd (Exore). The meeting was convened to consider a proposed scheme of arrangement whereby Perseus Mining Ltd (Perseus) would acquire 100% of the share capital of Exore by way of a scheme of arrangement. I also made orders approving distribution of a scheme booklet.

  2. The scheme meeting was held on 10 September 2020.  A resolution to approve the proposed scheme of arrangement was passed by the requisite majorities.  The Exore members approved the scheme of arrangement by 99.76% of votes cast and 97.54% of members present in person or by proxy.

  3. This morning application was made pursuant to s 411(4)(b) of the Act for orders approving the scheme. I made orders approving the proposed scheme of arrangement. These are my reasons for those orders.

Background and additional evidence

Incorporation of earlier reasons

  1. I gave reasons for my 4 August 2020 orders in Re Exore Resources Ltd; Ex parte Exore Resources Ltd.[1]

    [1] Re Exore Resources Ltd; Ex parte Exore Resources Ltd [2020] WASC 285.

  2. I do not intend to repeat what was said in those reasons.  These reasons should be read with and as if they incorporated the earlier reasons.  In particular, I rely on what was stated in the earlier reasons as to:

    1.The relevant entities, Exore and Perseus ([1] - [2], [7] - [10]).

    2.The announcement of the acquisition proposal ([2], [11] - [13]).

    3.The nature of the proposed scheme of arrangement ([2] - [3], [11], [14], [16] - [25], [41], [52] - [61], [70]).

    4.The description of the scheme booklet ([30] - [32]) and the disclosure provided in the scheme booklet - including as to director benefits ([43] - [50], [59], [63] - [69], [70]).

    5.The opinion expressed in the independent expert report (IER) ([26] - [29], [69], [72]).

    6.The recommendation of Exore's directors ([15], [72]).

  3. There is one matter to note as having occurred after my reasons in Re Exore Resources Ltd; Ex parte Exore Resources Ltd.  In the course of preparing for the scheme meeting the parties' advisers identified that there was a typographical error in the scheme terms (those terms forming part of the orders made 4 August 2020 and being an annexure to the scheme booklet as distributed to members).  Clause 9.2(b)(ii) inadvertently referred to 'Exore' where it should have referred to 'Perseus'.  As drafted, with the error, cl 9.2(b)(ii) referred to the members giving a warranty that they had full power and capacity to transfer the scheme shares to Exore - an obvious typographical error.

  4. The parties executed a deed of variation to the SID (attachment STT-30) to correct the error. The correction was also disclosed on the ASX's market announcements platform (attachment 'STT-31'). I am satisfied that the alteration is inconsequential. Given that, in context, this was an obvious typographical error, the reference to 'Exore' would have been construed as meaning 'Perseus' in any case. Exore decided to deal with the error by seeking an alteration order pursuant to s 411(6) of the Act.

Additional evidence

  1. The affidavit material relied on at the first hearing was formally relied on for the purpose of today's hearing to approve the scheme.

  2. In addition, for the purpose of today's hearing, Exore specifically relied on the following affidavits:

    1.Affidavit of John Fitzgerald affirmed 10 September 2020 - Mr Fitzgerald is the non-executive chairperson of Exore.  He chaired the scheme meeting.  Mr Fitzgerald's affidavit dealt with the outcome of the scheme meeting. 

    2.Affidavits of Sarah Turner affirmed 11 and 14 September 2020 together with affidavits of Gabrielle Sumich affirmed 11 and 15 September 2020 and an affidavit of Timothy O'Leary affirmed 11 September 2020 - each of those deponents is a solicitor acting for Exore in relation to the proposed scheme.  These affidavits largely addressed formal matters (eg lodgements, registrations, service of documents on the ASIC, advertisements and the non-receipt of any objections).  However, in today's affidavit, Ms Sumich also deposed as to the receipt of a 'no objection' letter from the ASIC (attachment 'GHS-2').

    3.Affidavit of Timothy Scott affirmed 11 September 2020 - Mr Scott is a director of Scott Print.  Scott Print was engaged to print and dispatch the hard copy scheme booklets.  Mr Scott's affidavit confirmed the printing and dispatch of the scheme booklet, with personalised proxy forms and small shareholder election forms (where appropriate), by 11 August 2020 in accordance with the court's orders made 4 August 2020.  The affidavit also gave details of further dispatch at appropriate times to members coming on to the register post-11 August 2020.

    4.Affidavit of Christopher Hill affirmed 11 September 2020 - as to various register reports in relation to the Exore members' register and a 11 August 2020 email broadcast to Exore members notifying them of the scheme meeting (and providing a link to the meeting documents and investor centre website for lodgement of online proxies).  Mr Hill also addressed:

    (a)subsequent email broadcasts to Exore members coming on to the members' register post-11 August 2020; and

    (b)the collation of proxies and votes cast at the scheme meeting.

  3. Counsel for Exore provided written submissions dated 11 September 2020.

Disposition

Applicable legal principles

  1. I identified the applicable legal principles on an application for approval of a proposed scheme of arrangement under s 411(4)(b) of the Act in Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2].[2]

    [2] Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd[No 2] [2018] WASC 357 [11] - [19].

  2. In short, there are two main tasks. First, the court must be satisfied that all statutory and procedural requirements under s 411(4)(b) have been observed. Second, the court must determine in the exercise of its discretion whether to approve the scheme.

  3. On the latter question, acknowledging that the members are better judges of what is in their commercial interests than the court, consideration is usually given to:

    1.Whether shareholders voted in good faith and not for an improper purpose.

    2.Whether the proposal is fair and reasonable.

    3.Whether the scheme proponent has brought all relevant matters to the court's attention.

    4.Whether there has been full and fair disclosure to members of all material information.

    5.Whether minority shareholders would be oppressed.

    6.Whether the court is satisfied that the scheme has not been proposed to avoid ch 6 of the Act.

    7.Whether the ASIC has no objections to the scheme.

    8.Whether the scheme offends public policy.

Formal matters

  1. Exore's affidavit evidence establishes that:

    1.A copy of the court's orders made 4 August 2020 was lodged with the ASIC on 4 August 2020.

    2.A copy of the scheme booklet as approved for distribution was lodged with the ASIC and registered on 4 August 2020.

    3.The scheme booklet was dispatched to Exore's members on 11 August 2020 in accordance with the orders of the court made 4 August 2020.

    4.The scheme meeting was held on 10 September 2020 in accordance with pars 1, 3 - 8 and 12 of the orders of the court made 4 August 2020.

  2. At the scheme meeting on 10 September 2020 the proposed scheme of arrangement was approved by resolution with the required statutory majorities.

  3. As to votes, 99.76% of the votes cast were in favour of the resolution (301,088,405 in favour and 714,700 against).  As to head count, 97.54% of the members in attendance by person or proxy voted in favour of the resolution (198 in favour and 5 against).  Some 51.21%       of the shares on issue were voted.

  4. Notice of the second court hearing was given by way of advertisements in The West Australian and The Australian newspapers of 27 August 2020.  That occurred in substantial compliance with par 14 of the court's orders made 4 August 2020.  I say 'substantial compliance' as, in my view, the advertisements should have been published after the scheme meeting, not before. I am, however, satisfied that this is a procedural irregularity which does not invalidate these proceedings because it has not caused and will not cause any substantial justice. Accordingly, s 1322(2) of the Act applies.

  5. No party sought to appear to oppose the approval of the proposed scheme of arrangement.

  6. Finally, to complete satisfaction of the various formal matters, by letter dated 14 September 2020 the ASIC informed Exore pursuant to s 411(17) of the Act that it had no objection to the proposed scheme of arrangement.

  7. Accordingly, all statutory and procedural preconditions to the court's approval were satisfied. 

Exercise of discretion: usual matters

  1. I was satisfied at the first hearing that the proposed scheme of arrangement was fit for consideration by Exore's members.[3]  In so holding I relied in particular on the opinions expressed by the independent experts in the IER and the views of Exore's directors.  I was satisfied that those opinions were reasonably open.[4]

    [3] Exore Resources Ltd; Ex parte Exore Resources Ltd [72].

    [4] Exore Resources Ltd; Ex parte Exore Resources Ltd [72].

  2. My conclusion reached at the interlocutory first stage hearing has not altered.  I remain satisfied that the proposed scheme is fair and reasonable such that an intelligent and honest shareholder properly informed might approve it.  As further support for that view, I take into account the overwhelming support for the proposed scheme of arrangement as expressed by the ordinary shareholders at the scheme meeting.

  3. There was nothing to suggest an absence of good faith or an improper purpose on the part of the members in approving the scheme.  Nothing in the scheme is oppressive.  Nor, in my view, is the scheme offensive to public policy.  This is a relatively standard acquisition scheme.

  4. As to disclosure, at the first hearing, based on the evidence then before the court and for the reasons that I gave, I was satisfied that the draft scheme booklet would provide proper disclosure to members.[5] The additional affidavit evidence establishes that the scheme booklet as distributed was substantially in the form approved for distribution by the 4 August 2020 orders. Nothing has arisen to suggest that there has not been full and fair disclosure. For the reasons I gave in approving the draft scheme booklet for distribution I am satisfied that the scheme booklet as distributed meets the requirements under the Act.

    [5] Exore Resources Ltd; Ex parte Exore Resources Ltd [47], [50], [69], [73].

  5. Otherwise, there was nothing to suggest that Exore had not brought to my attention all matters that could be considered relevant to the exercise of the discretion to approve the scheme.

Exercise of discretion:  specific matters

  1. Three specific matters were drawn to my attention that ought to be recorded.

  2. First, as mentioned, Exore proposes an order pursuant to s 411(6) of the Act whereby approval is subject to an alteration to the terms of the scheme to address the typographical error in cl 9.2(b)(ii) of the scheme terms. The alteration is sought with the approval of Perseus. The alteration is of a minor kind which does not, in my view, affect the substance of the scheme and is to correct an obvious inadvertent error in the terms of the scheme. On that basis it is, in my view, within the alteration power under s 411(6) of the Act - being an alteration that is 'just' to make - and I decided to approve the scheme subject to that alteration.

  3. Second, certificates of satisfaction of conditions precedent on the part of both Exore and Perseus were provided as part of the affidavit evidence (attachments 'STT-35' and 'STT-36'). The certificates confirmed satisfaction or waiver of all conditions precedent other than court approval. Accordingly, the evidence established that the only remaining substantive condition precedent was the court's approval under s 411(4)(b) of the Act.

  4. Third, as to s 411(17), Exore relied on the ASIC's no objection letter. It was acknowledged that, while this usually brings an end to that issue, the letter does not bring an end to the court's discretion. I accept that, in the present case, there is no proscribed purpose in terms of s 411(17) in any event.

Section 411(11) exemption

  1. Exore sought an exemption from s 411(11) of the Act. No ongoing purpose was to be served by requiring the orders approving the scheme to be annexed to Exore's constitution. The orders will be irrelevant once Exore becomes a wholly owned subsidiary of Perseus. Accordingly, I made orders under s 411(12) exempting Exore from this requirement.

Conclusion and orders

  1. For these reasons I was satisfied that I should approve the proposed scheme of arrangement and made orders substantially in the terms as sought by Exore.

  2. Accordingly, I made orders in the following terms:

    1.Pursuant to section 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between the plaintiff and its members, in the form contained in annexure C of the scheme booklet, which is set out in pages 249 to 265 of annexure 'TDS-1' to the affidavit of Timothy Dudley Scott affirmed on 11 September 2020 in this proceeding (Scheme), is approved, subject to replacing the word 'Exore' with the word 'Perseus' in cl 9.2(b)(ii) of the scheme of arrangement.

    2.Pursuant to s 411(12) of the Act, the plaintiff is exempt from compliance with s 411(11) of the Act, in relation to the Scheme.

    3.An office copy of these orders is to be lodged with the  Australian Securities and Investments Commission on 16 September 2020.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

OE
Associate to the Honourable Justice Vaughan

15 SEPTEMBER 2020


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Cases Citing This Decision

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Cases Cited

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Statutory Material Cited

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Re Exore Resources Ltd [2020] WASC 285
Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [2018] WASC 357