Re Nzuri Copper Ltd; Ex Parte Nzuri Copper Ltd [No 2]
[2019] WASC 214
•20 JUNE 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE NZURI COPPER LTD; EX PARTE NZURI COPPER LTD [No 2] [2019] WASC 214
CORAM: VAUGHAN J
HEARD: 12 JUNE 2019
DELIVERED : 12 JUNE 2019
PUBLISHED : 20 JUNE 2019
FILE NO/S: COR 109 of 2019
EX PARTE
NZURI COPPER LTD
Plaintiff
Catchwords:
Corporations law - Scheme of arrangement - Application for orders pursuant to s 1319 of the Corporations Act 2001 (Cth) - Whether supplementary disclosure required - Whether appropriate to make orders for dispatch of additional material to shareholders - Whether proxies to remain valid
Corporations law - Scheme of arrangement - Appointment of chairperson
Legislation:
Corporations Act 2001 (Cth), s 411, s 1319
Supreme Court (Corporations) (WA) Rules 2004, r 3.2
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | A J Papamatheos |
Solicitors:
| Plaintiff | : | Bellanhouse |
Case(s) referred to in decision(s):
Re Amcom Telecommunications Ltd (No 2) [2015] FCA 410
Re Amcom Telecommunications Ltd (No 3) [2015] FCA 496
Re Associated Advisory Practices Limited (No 2) [2013] FCA 979
Re Tawana Resources NL (No 2) [2018] FCA 1724
VAUGHAN J:
(These reasons were delivered orally at the conclusion of the hearing. They have been edited to correct matters of grammar and infelicity of expression. Authorities and other references have also been footnoted rather than appearing in the body of the reasons.)
Introduction
On 30 May 2019 I made orders convening a scheme meeting, pursuant to s 411(1) of the Corporations Act 2001 (Cth), on the application of the plaintiff Nzuri Copper Ltd (Nzuri). I also made orders approving the scheme booklet for distribution.[1]
[1] Re Nzuri Copper Ltd; Ex parte Nzuri Copper Ltd [2019] WASC 189 (Nzuri Copper Ltd).
Nzuri now makes further application in two discrete respects:
(1)First, Nzuri seeks orders to appoint a chairperson and alternate chairperson for the purpose of the scheme meeting.
(2)Second, Nzuri seeks orders to facilitate supplementary disclosure to members so that it may correct an error made in the scheme booklet.
Nzuri relies on the affidavits that were before me on 30 May 2019.[2] In addition, Nzuri relies on:
•affidavits sworn 10 June 2019 by the proposed chairperson Robyn Ferguson, and her alternate, Ryan White;
•an affidavit of Adam Smits affirmed 10 June 2019; and
•an affidavit of Deanna Carpenter affirmed 12 June 2019.
[2] Nzuri Copper Ltd, Annexure A.
Appointment of chairperson
On 30 May 2019 I declined to appoint two of Nzuri's executive directors as chairperson and alternate chairperson of the scheme meeting.[3]
[3] Nzuri Copper Ltd [5], [35], [72] - [82], [94].
I foreshadowed making orders to appoint a chairperson, and his or her alternate, administratively on the papers before the scheme meeting. However, Nzuri has had to bring the matter back before me for another reason. Accordingly, the opportunity has been taken to deal with the outstanding question of appointment of the chairperson and his or her alternate.
Nzuri proposes that Ms Ferguson, a partner of the law firm HopgoodGanim, be appointed as chairperson of the scheme meeting. Ms Ferguson is a very experienced corporate lawyer who has expertise in assisting in shareholders' meetings (in general) and scheme meetings (in particular). Mr White, also a partner of HopgoodGanim, is proposed as Ms Ferguson's alternate.
Both Ms Ferguson and Mr White have provided the necessary affidavit in accordance with r 3.2 of the Supreme Court (Corporations) (WA) Rules 2004 (WA). Neither Ms Ferguson nor Mr White hold shares in Nzuri. They have no previous relationship with Nzuri or Xuchen International Ltd. It is proposed that HopgoodGanim will charge for Ms Ferguson's or Mr White's services on the basis of their usual professional charges.
Ms Ferguson and Mr White are eminently qualified to act as chairperson of the scheme meeting. I will make orders to give effect to their appointment as chairperson and alternate chairperson respectively.
Supplementary disclosure: the issue
The more substantial reason for today's application is that Nzuri seeks orders to facilitate supplementary disclosure to members. Supplementary disclosure is necessary because Nzuri has identified that there is an error in the scheme booklet, as previously approved, and now distributed to members.
At section 6.4(c) of the scheme booklet the following statement is made:
As at the date of this Scheme Booklet, Nzuri is not a party to any legal claims, and is not aware of any potential claims.
That statement is incorrect. In fact Nzuri is a defendant to two separate legal proceedings. The first is a claim in the Magistrates Court which was commenced in November 2015 but not served until August 2016. No steps of any substance have been taken in those proceedings since 9 June 2017. The second proceedings are proceedings in this court. The substantive claim in those proceedings has been settled. However, the settlement was on the basis that Nzuri would pay the other party's taxed costs. Nzuri is finalising its objections to the bill of costs and a taxation is listed for 25 June 2019.
I am satisfied that the error in disclosure was inadvertent. Mr Smits deposes as follows:
I believe that the Claims were not disclosed in the Scheme Booklet by way of oversight, for the following reasons: (a) I had believed that the Dixon Claim had been transferred to the inactive cases list of the Magistrates Court; and (b) I had believed that the EGM claims had been settled and that the finalisation of the costs matter in CIV 2675 of 2017 was not a legal proceeding and immaterial.
Nzuri has already distributed the scheme booklet to shareholders in accordance with the 30 May 2019 orders. Now, having identified the incorrect statement, Nzuri wishes to make supplementary disclosure. Nzuri wishes to ensure that shareholders are not misled by the incorrect statement. To that end a short three page draft supplementary disclosure statement has been prepared.[4]
[4] Affidavit of Adam Smits affirmed 10 June 2019, attachment 'AGS-1'.
The proposed supplementary disclosure statement:
(1)identifies the error in the scheme booklet;
(2)corrects the error by disclosing the two proceedings to which Nzuri is a defendant and the current status of those two proceedings;
(3)refers to the views of the independent expert and Nzuri's directors in these terms:
Independent Expert's conclusions:
The Independent Expert's conclusions remain unchanged, that the Scheme is fair and reasonable, and is therefore in the best interests of Nzuri Shareholders, in the absence of a Superior Proposal.
Nzuri Directors recommendation:
The Nzuri Directors continue to unanimously recommend that you vote in favour of the Scheme, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of Nzuri Shareholders.
(4)says that there is no change to the proxy form, previously dispatched, and otherwise advises Nzuri shareholders that:
If you have already completed and returned the proxy form which was provided with the Scheme Booklet and you wish to change your vote, you must complete and return a new proxy form. Please contact Nzuri if you require a new proxy form.
If you have already completed and returned the proxy form which was provided with the Scheme Booklet and you do not wish to change your vote, you do not need to take any action as the earlier submitted proxy form will be accepted by Nzuri unless you submit a new proxy form.
The draft supplementary disclosure statement has been considered by Nzuri's solicitors with conduct of the two proceedings. They have confirmed that it contains an accurate summary of the current status of the two proceedings.
The claims have also been brought to the attention of the independent expert, Sherif Andrawes. Mr Andrawes has stated in correspondence that he does not consider the additional information to have a material impact on the analysis in the independent expert report (IER). Nor would it impact on his conclusion. Mr Andrawes does not consider it necessary to provide a supplementary IER. The opinion of the independent expert remains that the proposed scheme is fair and reasonable and in the best interests of Nzuri shareholders.
Nzuri has also conferred with the Australian Securities and Investments Commission (ASIC) about the terms of the proposed supplementary disclosure.
The terms of the draft supplementary disclosure statement were provided to the ASIC by email dated 10 June 2019. The ASIC has informed Nzuri's legal representatives that it does not propose to appear to make submissions, or to intervene to oppose the orders sought, in respect of the supplementary disclosure.
Supplementary disclosure: disposition
Nzuri was correct to bring the issue of supplementary disclosure before me. Where a scheme meeting has been convened under s 411 of the Corporations Act 2001 (Cth) only information approved by the court for distribution to shareholders should be provided to members.[5]
[5] Re Amcom Telecommunications Ltd (No 2) [2015] FCA 410 [12] (Amcom (No 2)); Re Amcom Telecommunications Ltd (No 3) [2015] FCA 496 [15] (Amcom (No 3)); Re Tawana Resources NL (No 2) [2018] FCA 1724 [2] (Tawana (No 2)).
There is ample power to make orders providing for appropriate supplementary disclosure. In particular, the authorities confirm that:
•The supervisory jurisdiction of the court under s 411(1) enables the court to order the dispatch of supplementary material after the first court hearing.[6]
•The court has power, pursuant to s 1319, to vacate or vary orders made under s 411(1) and to authorise the dispatch of further explanatory material in relation to a proposed scheme of arrangement.[7]
[6] Amcom (No 2) [12]; Amcom (No 3) [16].
[7] Amcom (No 2) [10], [13]; Amcom (No 3) [14]; Tawana (No 2) [20].
In Tawana (No 2) Banks-Smith J set out a list of matters that generally fall for consideration at the hearing of an application such as the one now made by Nzuri.[8] These include:
(1)Whether there remains utility in the proposed scheme being put to shareholders.
(2)Whether any proposed modification to the scheme is permissible.
(3)Whether the court should grant leave to dispatch any proposed supplementary disclosure to shareholders. This involves, among other things, having regard to whether the court is prima facie satisfied that there will be proper disclosure by sending the supplementary disclosure.
(4)Whether there has been notice to the ASIC and any indication of the ASIC's position.
(5)What procedural directions under s 1319 are appropriate.
(6)Whether there are any other matters relevant to the court's discretion to be considered.
[8] Tawana (No 2) [21].
I have no doubt that supplementary disclosure is required. Regrettably, the scheme booklet is incorrect. It might be that the error is such that it would not impact significantly on shareholders' decision‑making. Nevertheless, there is an error and shareholders may be misled. The incorrect statement may be remedied by supplementary disclosure. Moreover, the scheme meeting will not occur until 8 July 2019, some three and a half weeks away. Supplementary disclosure ought to be capable of being effected well prior to then. The proposed orders, as sought by Nzuri, contemplate dispatch occurring by this Friday (14 June 2019), ie some 24 days prior to the scheme meeting. That is a significantly longer period than the time that has been considered acceptable in previous cases where supplementary disclosure was authorised.[9]
[9] See eg Amcom (No 2) [20] (10 days); Tawana (No 2) [33] - [35] (15 days).
It is otherwise appropriate to make orders for supplementary disclosure.
First, there is continuing utility in the scheme meeting proceeding. The subject matter of the proposed supplementary disclosure does not undermine my earlier conclusion that the proposed scheme is fit for consideration by the members.[10] The scheme continues to be recommended for approval by the directors; and the independent expert has not altered the conclusions expressed in the IER.
[10] Nzuri Copper Limited [93].
Second, no modifications are proposed to the terms of the proposed scheme. Nor is there any effect on the scheme consideration; it remains a cash price of 37 cents. The supplementary disclosure is simply to correct an incorrect statement that has the potential to mislead shareholders.
Third, I am satisfied, prima facie, that the terms of the draft supplementary disclosure statement provide adequate disclosure of the two claims.
Fourth, the ASIC has had an opportunity to consider the draft supplementary disclosure statement. The ASIC has no comments and informed Nzuri that it did not intend to appear before the court.
Fifth, the orders sought under s 1319 provide for the supplementary disclosure and the means by which supplementary disclosure is to be effected. In part the proposed orders mirror the mechanism that was employed for the scheme booklet. In that respect the orders are uncontroversial. The orders also sought approval of the supplementary disclosure statement. In that respect the orders are consistent with orders as made in Amcom (No 2) and Tawana (No 2).
A final consideration is the issue of proxies and whether proxies received to date are to have continuing validity.
I was informed that as at 8.00 am this morning Nzuri had received 36 proxy forms representing 49.58 per cent of the shares currently on issue. This includes the proxy of Nzuri's largest shareholder, who accounts for 48.53 per cent of the shares on issue. Accordingly, the other 35 proxies as received only account for 0.05 per cent of the shares on issue.
Nzuri seeks an order to the effect that it will be entitled to treat proxy forms already received as being valid unless revoked. However, it will remain the case that shareholders who have submitted a proxy are able to revoke and resubmit their proxies. The supplementary disclosure statement clearly informs shareholders that a proxy form that has been submitted may be revoked.
The power conferred on the court by s 1319 has been held to be wide enough to authorise the court to give directions as to the return of proxies.[11]
[11] Amcom (No 2) [11]; Amcom (No 3) [14(c)], [38].
Essentially there are two options. I can make an order as sought by Nzuri. Then proxies received to date will, if otherwise valid, be deemed to still be valid. However, any member may revoke his, her or its proxy. The member must decide whether to change its vote and then take steps to do so. Alternatively, I could require that new proxies be submitted. That course has been followed in some cases. For example, in Re Associated Advisory Practices Ltd (No 2)[12] Farrell J considered it appropriate for new proxy forms to be dispatched with supplementary materials. An important consideration was that there was a change in the value of the scheme consideration being offered.[13]
[12] Re Associated Advisory Practices Limited (No 2) [2013] FCA 979.
[13] Re Associated Advisory Practices Limited (No 2) [18].
By contrast, in cases where there is no change to the scheme as proposed or the effective scheme consideration, the court has been prepared to make directions whereby existing proxies are deemed to be valid unless revoked.[14]
[14] See eg Amcom (No 2) [16]; Amcom (No 3) [39], [81] - [85]; Tawana (No 2) [38].
I am prepared to make a direction under s 1319 to the effect that valid proxies previously submitted by shareholders will, unless revoked, remain valid.
There has been no material change to the scheme or the scheme consideration. Shareholders who have submitted a proxy are able to revoke and resubmit their proxies. That is disclosed in the scheme booklet.[15] It is restated with greater clarity in the supplementary disclosure statement.[16]
[15] Scheme Booklet, page 251.
[16] See par 14(4) above.
In the circumstances it is, in my view, unnecessary for the proxy process to be recommenced. I see no need for shareholders who have voted to vote again even though they may have no intention of changing their vote. By contrast, to the extent that the additional disclosure means that a shareholder does wish to change his, her or its vote, the supplementary disclosure statement informs shareholders of how they may do so. There will also be ample time in which to do so.
Conclusion
Subject to hearing from counsel I propose to make orders in the following terms (which are adapted from the minute of proposed orders as sought by Nzuri):
1.Pursuant to s 1319 of the Corporations Act 2001 (Cth) (Act), at the meeting of holders of fully paid ordinary shares in the capital of the plaintiff convened pursuant to the orders of the court on 30 May 2019, Ms Robyn Anne Ferguson or, failing her, Mr Ryan Andrew White, is authorised to act as chairperson of the scheme meeting and report the result of the scheme meeting to the court.
2.The supplementary disclosure contained in Annexure AGS-1 (pages 8 - 10) to the affidavit of Adam Gerard Smits affirmed 10 June 2019 is approved for distribution to members, subject to:
(a)the correction of any minor typographical or grammatical errors;
(b)final typesetting, formatting and page numbering; and
(c)any minor amendments required or approved by the ASIC for registration under section 412(6) of the Corporations Act.
3.On or before 14 June 2019 the plaintiff is to dispatch a document substantially in the form of the supplementary disclosure (approved for distribution at par 2 above) 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, by an email to such address; 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.
4.If it comes to the attention of the plaintiff that any email dispatched in accordance with par 3(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 supplementary disclosure in accordance with par 3(b).
5.Valid proxy forms for the scheme meeting that have been lodged by shareholders are deemed to still be valid provided that the shareholder continues to be a registered shareholder as at 4.00pm (WST) 6 July 2019 unless:
(a) the proxy form is withdrawn;
(b) the proxy form is revoked; or
(c)a new proxy form is submitted by the same shareholder (which will be taken to revoke any previously submitted proxy form.)
6.A copy of these orders is to be lodged with ASIC as soon as practicable after issue.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ZC
Associate to the Honourable Justice Vaughan20 JUNE 2019
4
5
2