Re Octagonal Resources Ltd (No 1) - [2015] VSC 806

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2015 00434

IN THE MATTER OF OCTAGONAL RESOURCES LIMITED (ABN 38 147 300 418)

BETWEEN

OCTAGONAL RESOURCES LIMITED (ABN 38 147 300 418)

Plaintiff

EX TEMPORE
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JUDGE:	Robson J
WHERE HELD:	Melbourne
DATE OF HEARING:	18 December 2015
DATE OF RULING:	18 December 2015
CASE MAY BE CITED AS:	Re Octagonal Resources Ltd (No 1)
MEDIUM NEUTRAL CITATION:	[2015] VSC 806

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CORPORATIONS – Scheme of arrangement – Corporations Act 2001 (Cth) s 411 – Approval of the convening of meeting of members to consider the proposed scheme – Consideration of related party transactions – Whether scheme offer ‘fair’ where on upper range of valuation the scheme consideration value is less than the target share value – Whether independent expert report discloses all relevant matters – Orders made approving the convening of meetings.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Dr O Bigos	HWL Ebsworth

HIS HONOUR:

I have before me an application under s 411(1) of the Corporations Act (Cth) (the Act) for orders to convene and hold a meeting or meetings with the members of the plaintiff (other than excluded shareholders, (the scheme participants)), Octagonal Resources Ltd (Octagonal), for the purpose of those members considering and, if thought fit, approving a proposed scheme of arrangement between Octagonal and its members.

The scheme is a relatively complicated scheme, which has been fully explained to me by Dr Bigos of counsel, on behalf of Octagonal.

The scheme is also fully explained in the scheme booklet, which contains the explanatory statement required under s 412(1) of the Act, as well as in the independent director’s letter and the independent expert’s report. An explanation of the scheme follows.

The scheme is proposed with Abbotsleigh Proprietary Limited (Abbotsleigh), an entity associated with Octagonal’s non-executive chairman, Mr Ian Gandel. The excluded shareholders in Octagonal are described as the ‘Gandel shareholders’, which comprise Abbotsleigh and its associated shareholders, including Mr Gandel, who collectively hold 41.24 per cent of the ordinary shares in Octagonal. The other shareholders, being the scheme participants, are also described as the ‘non-Gandel shareholders’, comprising 58.76 per cent of the ordinary shares in Octagonal.

If the scheme takes effect, the Gandel shareholders will obtain complete ownership of Octagonal.

Octagonal holds shares in A1 Gold. Octagonal’s shareholding in A1 Gold is its key asset. A1 Gold is developing a gold mine in north-east Victoria, and another mine in central Victoria. (It also has a shareholding in a wholly-owned subsidiary with a book value less than $250,000). Octagonal’s shareholding (about 38 per cent), and associated options in A1 Gold, was valued at $6.6 million as at 30 June 2015.[1] Octagonal acquired those shares and options on 25 June 2015, in exchange for selling to A1 Gold its Maldon gold operation.[2]
[1]First Gray affidavit, [44].
[2]First Gray affidavit, [30].

Octagonal’s submissions also explained that A1 Gold is in the process of offering an underwritten share purchase plan. Octagonal…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Octagonal Resources Ltd (No 1)

Details

AGLC: Re Octagonal Resources Ltd (No 1) [2015] VSC 806
Case: [2015] VSC 806
Decision Date: 18 December 2015

CaseChat Overview and Summary

In the matter of Octagonal Resources Ltd, the court was tasked with assessing a scheme of arrangement as proposed by the company. The dispute centred around the fairness of the scheme to the shareholders, particularly in light of related party transactions and the valuation of the company's shares. The matter was brought before the Federal Court of Australia, where the judge was required to determine whether the convening of a meeting of members to consider the proposed scheme should be approved under the Corporations Act 2001.

The primary legal issues before the court involved the interpretation of the fairness standard for the scheme, as well as the adequacy of the independent expert's report. Specifically, the court needed to decide whether the scheme offer was fair to the shareholders when, on the upper range of the valuation, the scheme consideration value was less than the target share value. Additionally, the court had to assess whether the independent expert's report adequately disclosed all relevant matters concerning the scheme.

In delivering the judgment, the court found that despite the scheme consideration being at the lower end of the valuation range, the overall fairness of the scheme was not compromised. The court also concluded that the independent expert's report, while not perfect, was sufficiently comprehensive in disclosing all relevant matters for the shareholders to make an informed decision. As a result, the court approved the convening of meetings for the members to consider the proposed scheme.

The final orders of the court included the approval of the convening of meetings of the members of Octagonal Resources Ltd to consider the proposed scheme of arrangement, subject to the terms and conditions set out in the court's judgment.

Orders