JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE NZURI COPPER LTD; EX PARTE NZURI COPPER LTD [2019] WASC 189
CORAM: VAUGHAN J
HEARD: 30 MAY 2019
DELIVERED : 30 MAY 2019
PUBLISHED : 5 JUNE 2019
FILE NO/S: COR 109 of 2019
BETWEEN: NZURI COPPER LTD
Plaintiff
Catchwords:
Corporations law - Scheme of arrangement - Proposed share acquisition - Application for orders convening scheme meeting under s 411(1) of the Corporations Act 2001 (Cth) - Whether appropriate for executive director to be meeting chairperson when also standing to receive a bonus if scheme approved
Legislation:
Corporations Act 2001 (Cth), s 411, s 412
Supreme Court (Corporations) (WA) Rules 2004 (WA)
Result:
Application granted in part
Category: B
Representation:
Counsel:
| Plaintiff | : | A J Papamatheos |
Solicitors:
| Plaintiff | : | Bellanhouse |
Case(s) referred to in decision(s):
Re Anatolia Energy Ltd [2015] FCA 1134
Re Cortona Resources Ltd [2012] FCA 1295
Re Gazal Corporation Ltd [2019] FCA 701
Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [2018] WASC 308
VAUGHAN J:
The plaintiff, Nzuri Copper Ltd (Nzuri), is an Australian public company listed on the official list as conducted by the ASX Ltd (ASX).
On 27 February 2019 Nzuri made an ASX announcement that it had entered into a scheme implementation deed (SID) with Xuchen International Ltd (Xuchen). Xuchen is a subsidiary of Chengtun Mining Group Co Ltd (Chengtun). Under the SID it was proposed that Xuchen would acquire 100% of the share capital of Nzuri by way of a scheme of arrangement.
The proposal provided for ordinary shareholders to receive a cash consideration of 37 cents per Nzuri share.
By originating process dated 10 May 2019 Nzuri 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 30 May 2019.
After hearing from counsel for Nzuri I made orders pursuant to s 411(1) of the Act to convene a meeting of Nzuri's members to consider and vote on the proposed scheme. Ancillary orders were made as to the convening and conduct of the scheme meetings. Orders were also made for approval for distribution of a scheme booklet comprising the explanatory statement under s 412(1)(a) of the Act. However, I declined to make orders providing for Nzuri's executive directors to be appointed as chairperson and alternate chairperson of the scheme meeting.
I said that I would prepare written reasons for my orders. These are my reasons for the orders made on 30 May 2019.
Evidence and background facts
Nzuri relied on 12 affidavits from nine deponents. Annexure 'A' to these reasons summarises the deponents, their relationship with Nzuri and Xuchen and the nature of the evidence in the affidavits. Based on that affidavit evidence I record the following matters.
Nzuri, formerly Regal Resources Ltd, was incorporated on 11 September 2003 and was admitted to the official list of the ASX on 23 June 2005. Nzuri's ordinary shares are listed for quotation. As at…
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- AGLC
- Re Nzuri Copper Ltd [2019] WASC 189
- Case
- [2019] WASC 189
- Decision Date
CaseChat Overview and Summary
The central legal issue was whether it was appropriate for an executive director, who was also to receive a bonus if the scheme was approved, to chair the meeting at which the scheme was to be considered. This issue was complicated by the need to balance the interests of the company and its shareholders with the potential for conflict of interest inherent in having an executive director in the chair. The court also had to consider whether the scheme booklet provided adequate disclosure to the shareholders and whether the proposed electronic notification of shareholders was appropriate.
The court found that while it would be better practice for scheme proponents to heed the observations of Farrell J in Re Gazal Corporation Ltd, the company had entered into the scheme before the decision in that case. The court was satisfied that the scheme booklet provided proper disclosure, including details of the bonus to be paid to the executive director. The court also found that the use of electronic notification for shareholders was appropriate. Consequently, the court made orders convening the scheme meeting, approving the scheme booklet for distribution, and allowing for electronic notification of shareholders. The court deferred making orders to appoint a chairperson for the scheme meeting until administrative matters were resolved.
The court made orders convening a meeting of Nzuri's shareholders to consider the proposed scheme of arrangement. The orders included the approval of the scheme booklet for distribution, subject to certain amendments and corrections. The court also allowed for electronic notification of shareholders and deferred the appointment of a scheme meeting chairperson. The proceedings were stood over for the hearing of any application to approve the proposed scheme. A copy of the orders was to be lodged with ASIC, and the orders were to be entered forthwith.
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 the future it would be better practice for scheme proponents to take heed of the observations of Farrell J in Re Gazal Corporation Ltd. I acknowledge, however, that Nzuri entered into the SID well before the decision in Re Gazal Corporation Ltd. There is likely to be some lag in adoption of her Honour's observations. In the meantime, in the present case the matters I have referred to - and in particular the disclosures in the scheme booklet as to the bonus to be payable to Messrs Arnesen and Smits - meant that I was satisfied that I should make orders convening the scheme meeting despite the executive directors joining in the board's recommendation to the shareholders. Counsel for Nzuri drew my attention to the 'deemed warranty' provision in the proposed scheme of arrangement (Scheme, cl 8.5). The presence of the warranty provision is disclosed in the scheme booklet (Scheme Booklet, par 3.5). Such deemed warranty clauses are not unusual and are acceptable provided that, as here, their presence is adequately disclosed. In addition the scheme provides that, to the extent permitted by law, the Nzuri shares will transfer free from encumbrances and restrictions on transfer of any kind (Scheme, cl 8.6). That sort of clause is also permissible. Additionally, Nzuri sought orders for electronic dispatch of the scheme booklet. Such orders are now commonplace. Details were provided as to the terms of the proposed electronic notification (attachment 'DJC-22' to the Second Carpenter Affidavit). I was satisfied, having read the terms of the proposed email communication to shareholders, that an order for electronic dispatch of the scheme booklet was appropriate in relation to Nzuri's proposed scheme. On the evidence presented, and after hearing from counsel for Nzuri, 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 Nzuri'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 have, however, deferred making orders to appoint a chairperson for the scheme meeting. That will be dealt with administratively ‑ on the papers - before the scheme meeting. Given the matters I have mentioned as to being satisfied that the scheme booklet prima facie provides proper disclosure to Nzuri's members, I also considered it appropriate to approve the final draft scheme booklet for distribution. Accordingly, for these reasons, I made orders in the following terms:1.Pursuant to section 411(1) of the Corporations Act 2001 (Cth) the plaintiff convene a meeting of holders of fully paid ordinary shares in the capital of the plaintiff to be held at The Subiaco Hotel, Mezzanine Level, 465 Hay Street, Subiaco, Western Australia, on 8 July 2019 at 3.00pm (WST) (scheme meeting), for the purpose of considering and, if thought fit, approving (with or without modifications) the proposed scheme of arrangement (scheme) being the document contained in Annexure DJC-3 (pages 99-110) to the affidavit of Deanna Jayne Carpenter affirmed on 10 May 2019.2.The scheme booklet contained in Annexure DJC-20 (pages 88‑348) to the affidavit of Deanna Jayne Carpenter affirmed on 27 May 2019 (including all annexures and the notice of scheme meeting), which contains the explanatory statement required by section 412(1)(a) of the Corporations Act 2001 (Cth), be and is approved for distribution to members, subject to:(a)the deed poll annexed at pages 338-343 of Annexure DJC-20 being replaced with the deed poll annexed as Annexure XFC-1 at pages 4-9 of the affidavit of Xiaofei Chen affirmed on 29 May 2019;(b)the amendments contemplated in the affidavit of Deanna Jayne Carpenter affirmed on 29 May 2019 at Annexure DJC-3 at pages 21 and 22;(c)the amendment contemplated by par 3(c) below;(d)correction of any minor typographical or grammatical errors; (e)final typesetting, formatting and page numbering;(f)any minor amendments required or approved by the ASIC for registration under section 412(6) of the Corporations Act; and(g)correction or update of, or as a result of, any relevant date or market price reference.3.Subject to these orders, the scheme meeting is to be:(a)convened, held and conducted in accordance with the plaintiff's constitution and to the extent not inconsistent with the constitution, the provisions of Part 2G.2 of the Corporations Act that apply to members of a company and in particular the provisions that apply to meetings of members; (b)convened, held and conducted as if rule 2.15 of the Supreme Court (Corporations) Rules 2004 (WA) does not apply, but that Rule 75-15(2) of the Insolvency Practice Rules (Corporations) 2016 (Cth) does apply; and(c)convened using the notice of meeting substantially in the form of the notice contained in Annexure DJC-20 (pages 344-348) to the affidavit of Deanna Jayne Carpenter affirmed on 27 May 2019; but omitting therefrom the second paragraph on page 344. 4.Subject to registration of the scheme booklet with ASIC, pursuant to section 412(6) of the Corporations Act, the plaintiff is to dispatch, on or before 6 June 2019, a document substantially in the form of the scheme booklet (approved for distribution at order 2 above) and any applicable proxy form (or a link to a website for any electronic proxy lodgement) to members of the plaintiff as follows:(a)to each member who has nominated an electronic address for the purposes of receiving notices of meeting from the plaintiff, an email to such address with a covering email text substantially in the form of Annexure DJC-22 (page 613) of the affidavit of Deanna Jayne Carpenter affirmed on 27 May 2019; and(b)to each other member, by pre-paid or ordinary post, mail or courier to the address as set out in the register of the plaintiff's members.5.Dispatch in accordance with order 4 on or before 6 June 2019 is taken to be sufficient notice of the scheme meeting.6.If it after comes to the attention of the plaintiff that any email dispatched in accordance with order 4(a) above has returned an undeliverable or undelivered receipt for a member's nominated email address then, in respect of that member, the plaintiff is to dispatch, within a reasonable time thereafter, a document substantially in the form of the scheme booklet and any applicable proxy form in accordance with order 4(b).7.The plaintiff has liberty to apply as to the identity of the person who is to be authorised to act as chairperson of the scheme meeting.8.The chairperson may adjourn the scheme meeting in his or her absolute discretion to such time, date and place as he or she considers appropriate.9.Two members present in person or by proxy, corporate representative or attorney under power and entitled to vote will constitute a quorum for the scheme meeting.10.At the scheme meeting, each shareholder present and entitled to vote, will be entitled to one vote for each fully paid ordinary share in the capital of the plaintiff that the shareholder is registered as holding at 3:00pm (WST) on 6 July 2019. 11.Voting on the resolutions to approve the scheme at the scheme meeting is to be conducted by way of poll.12.The time by which proxy forms must be returned or lodged online in accordance with any instructions given on the proxy form is 3:00pm (AWST) on 6 July 2019.13.If this matter is to be relisted, then after 8 July and on or before 10 July 2019 the plaintiff is to publish a completed notice of hearing substantially in the form of Annexure 'A' to these orders once in The Australian newspaper, and the plaintiff is otherwise, to the extent necessary, relieved from compliance with rule 3.4 of the Supreme Court (Corporations) (WA) Rules 2004 (WA).14.The proceedings be stood over to 10.00am (AWST) on 15 July 2019 for the hearing of any application to approve the proposed scheme.15.A copy of these orders be lodged with ASIC as soon as practicable after issue. 16.These orders be entered forthwith.