FEDERAL COURT OF AUSTRALIA
Kumarina Resources Ltd, in the matter of Kumarina Resources Ltd
[2013] FCA 549
Citation: Kumarina Resources Limited, in the matter of Kumarina Resources Limited [2013] FCA 549 Parties: KUMARINA RESOURCES LIMITED (ACN 142 774 150) File number: WAD 78 of 2013 Judge: GILMOUR J Date of judgment: 4 June 2013 Catchwords: CORPORATIONS – scheme of arrangement – second hearing – objections to scheme - whether to make orders approving the scheme of arrangement between the plaintiff and its members – whether the requirement that 75% of votes cast be in favour of the scheme had been satisfied – whether the Court should exercise its discretion and refuse to approve the scheme Legislation: Corporations Act 2001 (Cth) ss 12(2)(c), 15(1)(c), 411(2), 411(4)(a)(ii), 411(4)(b), 411(11), 411(12), s 412(7)
Australian Securities and Investments Commission, Regulatory Guide 60: Schemes of arrangement, December 2009Cases cited: In the Matter of Chevron (Sydney) Ltd [1963] VR 249
Re Archaean Gold NL (1997) 23 ACSR 143
Re Aston Resources Limited [2012] FCA 229
Re Challenge Bank Ltd (1995) 19 ACSR 421
Re Hellenic & General Trust Ltd [1976] 1 WLR 123
Re Landmark Corporation Ltd [1968] 1 NSWR 759
Re Normandy Mining Ltd (No 4) (2002) 40 ACSR 474
Re oOh!Media Group Limited, in the matter of oOh!Media Group Limited [2012] FCA 26
Re Opes Prime Stockbroking Ltd (No 2) (2009) 179 FCR 20
Re Talison Lithium Ltd, in the matter of Talison Lithium Ltd [2013] FCA 194
Sovereign Life Assurance Company v Dodd [1892] 2 QB 573Date of hearing: 23 May 2013 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 62 Counsel for the Plaintiff: Mr G Donaldson SC with Mr M J Feutrill Solicitor for the Plaintiff: Hardy Bowen Counsel for the Objectors: Ms E C Hensler Solicitor for the Objectors: McKenzie and McKenzie
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 78 of 2013
IN THE MATTER OF KUMARINA RESOURCES LIMITED
ACN 142 774 150
KUMARINA RESOURCES LTD (ACN 142 774 150)
Plaintiff
JUDGE:
GILMOUR J
DATE OF ORDER:
24 MAY 2013
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1.Pursuant to section 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between the plaintiff and its members, a copy of which is on the Court file and marked ‘A’, is approved.
2.Pursuant to section 411(12) of the Act, the plaintiff be exempted from compliance with section 411(11) of the Act, in relation to the scheme of arrangement referred to in order 1.
3.These orders be entered forthwith.
4.The plaintiff is to lodge a copy of these orders with the Australian Securities and Investments Commission as soon as practicable.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 78 of 2013
IN THE MATTER OF KUMARINA RESOURCES LIMITED
ACN 142 774 150
KUMARINA RESOURCES LTD (ACN 142 774 150)
Plaintiff
JUDGE:
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- AGLC
- Kumarina Resources Limited, in the matter of Kumarina Resources Limited [2013] FCA 549
- Case
- [2013] FCA 549
- Decision Date
CaseChat Overview and Summary
The primary legal issues before the Court were whether the Objectors' shares should have been classified into different classes of shareholders and if the Court should exclude these shares when determining whether the 75% approval threshold had been met. The Objectors argued that, as their interests were affected differently by the scheme, they should form separate classes of shareholders and that their votes should not be counted towards the 75% approval threshold. The Court considered the definition of "class" under section 411 of the Corporations Act and relevant case law, particularly Re Opes Prime Stockbroking Ltd (No 2), which held that differences in rights, rather than interests, determined whether separate classes of creditors were required.
The Court found that the Objectors' shares did not form separate classes, as the difference in their interests did not translate to a difference in their rights. The Court adopted a practical business-like approach and held that the Objectors' shares could be counted towards the 75% approval threshold. The Court was satisfied that the approval threshold had been met, and therefore, it approved the scheme of arrangement.
The Court approved the scheme of arrangement between the plaintiff and its members and exempted the plaintiff from compliance with section 411(11) of the Corporations Act. The Court ordered that the plaintiff lodge a copy of the orders with the Australian Securities and Investments Commission as soon as practicable. The orders were to be entered forthwith, in accordance with Rule 39.32 of the Federal Court Rules 2011.
Orders
Orders of the court
1. Pursuant to section 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between the plaintiff and its members, a copy of which is on the Court file and marked ‘A’, is approved.
2. Pursuant to section 411(12) of the Act, the plaintiff be exempted from compliance with section 411(11) of the Act, in relation to the scheme of arrangement referred to in order 1.
3. These orders be entered forthwith.
4. The plaintiff is to lodge a copy of these orders with the Australian Securities and Investments Commission as soon as practicable.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
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
Accordingly, the Objectors submit first that at the meeting of Shareholders there should have been 2 or more classes of shareholder and approval in terms of s 411(4)(a)(ii)(B) in all classes: Utilico, ICM and Peter Sullivan each should have been in a different class from the other Shareholders. Their second submission is that the Court, exercising its residual discretion, should not count these three sets of shares in considering approval of the Scheme.Consideration The Scheme Meeting was convened on the basis that all Shareholders were members of a single class for the purposes of s 411(1) and (4). Section 411 does not define “class”. In Sovereign Life Assurance Company v Dodd [1892] 2 QB 573 at 583, Bowen LJ observed that the term ought to be given such a meaning:… as will prevent the section being so worked as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest. The Objectors’ submission is that members who are affected differently by a scheme form separate classes. They contend that in a scheme that produces a take-over, members related to or associated with the bidder have interests that are different to other members and, therefore, either must form a separate meeting class or the votes of those members should not be counted when considering if the scheme has been approved by a majority of 75% of the votes cast. They point to Re Opes Prime Stockbroking Ltd (No 2) (2009) 179 FCR 20 for the proposition that, even though a proposed scheme according to its terms may operate the same with respect to all scheme shareholders, if some of them will, in reality, be affected differently then they should form a different class. As is evident from Re Opes Prime at [64], it is differences in rights and not interests which are relevant to determining if separate classes exist and the extent of that difference will determine if separate classes are required. Separate classes were called for in that case because, although the proposed scheme treated all creditors in the same manner, the scheme affected the existing rights of different types of creditor differently. One type stood to recover 100% of their claims, the other type would recover significantly less than 100% of their claims, but both types were to receive the same rights under the proposed scheme, 37% of their claims: Re Opes Prime at [67]-[69]. As Finkelstein J said in Re Opes Prime at [66]:Third, practical considerations are relevant. If a judge is too assiduous in identifying classes, it is possible to end up with any number of classes. In the end, schemes of arrangement are propounded in a business context. The judge should adopt a practical business-like approach to the issue, as would the creditors if they were to decide the matter. This admonition extends to the present context, in my opinion, although it does not concern classes of creditors.