Re Oklo Resources Ltd
[2022] WASC 289
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE OKLO RESOURCES LTD; EX PARTE OKLO RESOURCES LTD [2022] WASC 289
CORAM: HILL J
HEARD: 28 JULY 2022
DELIVERED : 28 JULY 2022
FILE NO/S: COR 131 of 2022
MATTER: IN THE MATTER OF OKLO RESOURCES LTD
EX PARTE
OKLO RESOURCES LTD
Plaintiff
B2GOLD CORP
Interested Party
Catchwords:
Corporations law - Scheme of arrangement - Application for orders convening scheme meeting under s 411(1) of the Corporations Act 2001 (Cth) - Whether requirements to order scheme meeting are satisfied - Orders made convening scheme meeting
Legislation:
Corporations Act 2001 (Cth) s 411(1), s 412(1)(a), s 1319
Corporations Regulations 2001 (Cth) sch 8
Supreme Court (Corporations) (WA) Rules 2004 (WA) r 3.2
Result:
Orders made convening scheme meeting
Category: B
Representation:
Counsel:
| Plaintiff | : | A J Papamatheos & C E McKay |
| Interested Party | : | J Y Wang |
Solicitors:
| Plaintiff | : | Thomson Geer - Perth |
| Interested Party | : | King & Wood Mallesons |
Cases referred to in decision:
Re Amcom Telecommunications Ltd [2015] FCA 341
Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400
Re APN Property Group Ltd and APN RE Ltd [2021] VSC 389
Re Asaleo Care Ltd [2021] FCA 406
Re CannPal Animal Therapeutics Ltd [2021] WASC 37
Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358
Re David Jones Ltd [No 2] [2014] FCA 720; (2014) 101 ACSR 381
Re Doray Minerals Ltd [2019] WASC 57
Re DUET Management Company 1 Ltd [2013] NSWSC 817; (2013) 95 ACSR 34
Re Excelsior Gold Ltd [2018] FCA 2064
Re Hills Motorway Ltd [2002] NSWSC 897; (2002) 43 ACSR 101
Re Investa Properties Ltd [2007] FCA 1104
Re Kangaroo Resources Ltd [2018] WASC 327
Re Macquarie Private Capital A Ltd [2008] NSWSC 323
Re Nusantara Resources Ltd [2021] WASC 334
Re Nzuri Copper Ltd [2019] WASC 189
Re Opes Prime Stockbroking Ltd [2009] FCA 813; (2009) 179 FCR 20
Re Pacific Energy Ltd [2019] WASC 443
Re Palladium Group Holdings Pty Ltd [2020] FCA 1123
Re PetroNor E&P Ltd [2021] WASC 426
Re Piedmont Lithium Ltd [2021] WASC 76
Re Saracen Mineral Holdings Ltd [2020] WASC 483
Re Scarborough Equities Ltd [No 2] [2009] FCA 484
Re SRG Ltd [2018] FCA 1092
Re Swick Mining Services Ltd [2022] WASC 79
Re Vimy Resources Ltd [2022] WASC 233
Re Webster Ltd [2019] NSWSC 1907
Re Wesfarmers Ltd [2018] WASC 308
Re Western Areas Ltd [2022] WASC 193
HILL J:
The plaintiff, Oklo Resources Limited (Oklo) is an Australian public company listed on the Australian Securities Exchange (ASX). On 26 May 2022, Oklo entered into a Scheme Implementation Deed (SID) with B2Gold Corp (a company incorporated in British Columbia, Canada) (B2Gold), which was announced to the ASX on the same date.[1] It is proposed that B2Gold, through its wholly owned subsidiary B2Gold Oklo Resources Pty Ltd, will acquire all the issued ordinary shares in Oklo for a combination of cash ($0.0525) and scrip (0.0206 share in B2Gold) (Scheme) and become a wholly owned subsidiary of B2Gold.
[1]Affidavit of Simon James Robson Taylor filed 13 July 2022 [7]; Scheme booklet, Annexure B.
By an originating process dated 13 July 2022, Oklo sought orders pursuant to s 411 and s 1319 of the Corporations Act 2001 (Cth) (Act) convening a meeting of its members to consider the proposed scheme of arrangement. The application came before me for the first court hearing on 28 July 2022.
On that date, I made orders pursuant to s 411(1) of the Act to convene a meeting of Oklo's members to consider and vote on the proposed Scheme. Orders were also made approving the distribution of a Scheme booklet to Oklo's shareholders under s 412(1)(a) of the Act as well as ancillary orders as to the convening and conduct of the Scheme meeting under s 1319 of the Act.
In making those orders, I stated that I would subsequently publish written reasons for my orders. These are my reasons for decision.
Factual background
Oklo
Oklo is a junior gold exploration company with projects in West Mali, including its flagship project, the Dandoko project.[2]
[2] Scheme booklet [6.2].
As at 11 July 2022, Oklo had an issued capital of 504,496,497 fully paid ordinary shares (Shares) and 17,816,667 unlisted options (Options).[3] There are two different classes of Options, being:
(a)800,000 options with an exercise price of $0.20 and an expiry date of 23 November 2024; and
(b)17,016,667 options which have been issued to directors, key management personnel and employees of Oklo under a Performance Rights and Option Plan, with a zero exercise price and subject to certain voting conditions (ZEPOs).
B2Gold
[3] Affidavit of Simon James Robson Taylor filed 13 July 2022 [35].
B2Gold is a low cost, international gold producing company listed on the Toronto Stock Exchange (TSX), the NYSE American LLC and the Namibian Stock Exchange. B2Gold has operating gold mines in Mali, Namibia and the Philippines, as well as exploration and development projects in several countries including Mali, Colombia, Finland and Uzbekistan.[4]
Proposed Scheme
[4] Scheme booklet [7.2].
If the Scheme is implemented, B2Gold, through its wholly owned subsidiary, will acquire all of the Oklo Shares on issue as at the Scheme Implementation Date and Oklo will subsequently be delisted from the ASX. Oklo's shareholders will receive $0.0525 cash per share (Cash Consideration) and 0.0206 fully ordinary B2Gold shares for each Oklo Share (Scrip Consideration) as consideration for the acquisition of their Shares under the Scheme (collectively Scheme Consideration).[5] Ineligible Foreign Shareholders and Small Shareholders who elect not to receive B2Gold shares, will receive a pro-rata share of the net proceeds from the sale of their Scrip Consideration, which will be sold through a sale facility.[6] Small Shareholders (or Small Scheme Participants) are defined in the Scheme as Scheme participants who would be entitled to Scrip Consideration of 17,000 B2Gold Shares or less.
[5] Scheme cl 1.1.
[6] Scheme cl 6.9.
The Options are being dealt with outside the Scheme. Pursuant to the SID, Oklo must procure that all Options automatically vest in accordance with their terms, or are cancelled or extinguished prior to the Record Date.[7]
[7] SID cl 5.
Oklo's directors have unanimously recommended that in the absence of a superior proposal Shareholders vote in favour of the Scheme.
Oklo has retained an independent expert to provide an opinion and recommendation on the proposed Scheme. The independent expert, Grant Thornton Corporate Finance Pty Ltd (Grant Thornton), has concluded that, in the absence of a superior proposal, the proposed Scheme is fair and reasonable and in the best interests of shareholders.[8]
[8] Scheme booklet, Annexure A.
Evidence for the first court hearing
Oklo and B2Gold relied on 11 affidavits that were filed prior to the first hearing. These were:
(a)an affidavit of Simon James Robson Taylor filed 13 July 2022. Mr Taylor is the managing director of the plaintiff. His affidavit outlined the nature of the proposed Scheme, gave a brief overview of the plaintiff and B2Gold, described the drafting and verification process of the Scheme booklet, the loan facility agreement, and the recommendations of directors in relation to the Scheme. Attached to his affidavit were, among other things, copies of the draft Scheme booklet, the SID, the loan facility agreement, Oklo's constitution, and a company search of Oklo obtained from ASIC;
(b)an affidavit of Scott Douglas Gibson filed 13 July 2022, the nominated chairperson of the Scheme meeting and a partner of Thomson Geer Lawyers, the solicitors for the plaintiff. By his affidavit, Mr Gibson consented to act as chairperson of the Scheme meeting and provided the necessary disclosures required by r 3.2 of the Supreme Court (Corporations) (WA) Rules 2004 (WA) (Corporations Rules). Mr Gibson confirmed he would report the results of the Scheme meeting to the court at the second court hearing;
(c)an affidavit of Michael Choon Ming Ng filed 13 July 2022. Mr Ng is also a partner at Thomson Geer and is proposed as the alternate chairperson of the Scheme meeting. By his affidavit, Mr Ng consented to act as chairperson in the event Mr Gibson is unable to and provided the necessary disclosures required by r 3.2 of the Corporations Rules;
(d)an affidavit of Michael Xiao Li filed 26 July 2022, a partner of Lawson Lundell LLP in British Columbia, Canada. Mr Li provided an expert legal opinion to the Australian solicitors for B2Gold on the validity of the execution of the Deed Poll and its compliance with the laws of Canada. His affidavit annexed his legal opinion;
(e)a second affidavit of Mr Ng filed 26 July 2022. Mr Ng confirmed the draft Scheme booklet had been lodged with the Australian Securities and Investments Commission (ASIC) on 12 July 2022, and that the court documents had been served on ASIC. His affidavit annexed the correspondence between Thomson Geer and ASIC in relation to the draft Scheme booklet, and the proposed script for inbound calls from shareholders;
(f)an affidavit of Randall Calvin Chatwin filed 26 July 2022, the senior vice president, legal and corporate communications, of B2Gold. Mr Chatwin's affidavit gave a brief overview of B2Gold and attested to the verification process undertaken by B2Gold in relation to the Scheme booklet. His affidavit annexed, among other things, the relevant verification certificates;
(g)a third affidavit of Mr Ng filed 27 July 2022 which annexed further correspondence between Thomson Geer and ASIC, as well as an amended Scheme booklet;
(h)an affidavit of Andrea De Cian filed 28 July 2022, a partner of Grant Thornton, the independent expert engaged by the plaintiff. Mr De Cian's affidavit annexed the independent expert report produced by Grant Thornton and confirmed that he was not aware of any matters that would cause him to change his opinion;
(i)a fourth affidavit of Mr Ng filed 28 July 2022, which annexed ASIC's letter of intention confirming that ASIC did not intend to appear or oppose the Scheme at the first court hearing;
(j)an affidavit of Jacob Ronald Carmody filed 28 July 2022, a senior associate of King & Wood Mallesons, the solicitors for B2Gold, annexing an executed deed poll by B2Gold; and
(k)a second affidavit of Mr Taylor filed 28 July 2022. Mr Taylor confirmed that the interests of each of the Oklo directors in the Scheme, including his own, were raised at a board meeting of the plaintiff which considered entry into the Scheme and that a resolution was passed in his absence that he should not be disqualified from voting at the meeting or considering and approving the SID, prior to the Scheme being considered by the directors. He annexed copies of the notice of annual general meeting of Oklo and the minutes of this meeting which approved the Performance Rights and Options Plan.
Nature of the proposed Scheme
The proposed Scheme contemplates that B2Gold will acquire all of the Shares in Oklo and Shareholders will receive the Scheme Consideration for every Oklo Share held.[9] The effect of the proposed Scheme is to make Oklo a wholly owned subsidiary of B2Gold and for Oklo to be delisted from the ASX.[10]
[9] Scheme cl 1.1.
[10] Scheme booklet [1.1].
Oklo shareholders who do not have a residential address in Australia, New Zealand, Canada and the United States are Ineligible Foreign Shareholders and will not receive the Scrip Consideration. The Scrip Consideration that would have been issued to these shareholders will be issued to a Sale Agent and sold as soon as is reasonably practicable and in any event not more than 15 trading days after the Scheme Implementation Date on a 'best endeavours' basis.[11] The net proceeds will be paid by B2Gold to these shareholders on a pro rata basis. As at 11 July 2022, there were 20 Ineligible Foreign Shareholders holding a total of 1,194,257 Oklo Shares (being approximately 0.24% of the Shares on issue).[12]
[11] Scheme cl 6.9.
[12] Affidavit of Simon James Robson Taylor filed 13 July 2022 [24].
The Scheme also provides for a sale facility for Small Shareholders. Clause 1.1 of the Scheme allows each Small Shareholder to elect on or before the Record Date to have their Scrip Consideration issued to the Sale Agent, who will sell those shares and remit the proceeds to them in a similar matter as proposed for Ineligible Foreign Shareholders. As at 11 July 2022, there were 1,189 Small Shareholders (comprising 95.19% of the registered Shareholders) holding a total of 62,323,632 shares (being 12.35% of the Shares on issue).[13]
[13] Affidavit of Simon James Robson Taylor filed 13 July 2022 [30].
The Options are being dealt with outside of the Scheme. The SID requires the Options to vest if the court approves the Scheme.[14] That is, the Shares that are issued on vesting will form part of the Scheme.
[14] SID cl 5.
The Scheme will not be implemented unless and until a number of conditions precedent are satisfied or waived.[15] The conditions precedent which are required to be satisfied or waived are disclosed in the Scheme booklet.[16]
[15] SID cl 3.
[16] Scheme booklet [11.12], Annexure B.
The SID between Oklo and B2Gold sets out the procedures which have been agreed for the implementation of the proposed Scheme. An amended SID was entered into on 27 July 2022 to address a matter that had been raised by ASIC.[17]
[17] Third affidavit of Michael Choon Ming Ng filed 27 July 2022 'MCN-10'.
The obligations of B2Gold under the Scheme are supported by a Deed Poll executed on 26 May 2022 (Deed Poll).[18]
[18] Affidavit of Jacob Ronald Carmody filed 28 July 2022 'JRC-1'.
An independent expert report (IER) has been prepared by Grant Thornton. The IER expresses the opinion that, in the absence of a superior proposal, the Scheme is fair and reasonable and in the best interests of shareholders.[19] The IER determined that the range of a Share on a control basis was between $0.1139 (low) and $0.1652 (high) and that the value of the Scheme Consideration was between $0.1545 (low) and $0.1638 (high). The basis for the valuation and the methodology used are set out in the IER. The consideration of advantages, disadvantages and other factors that are likely to impact shareholders are set out comprehensively in the IER.
[19] Scheme booklet, Annexure A.
I was provided with the draft Scheme booklet which was submitted to ASIC on 12 July 2022 and the amendments that have been made to the Scheme booklet since then.[20]
[20] Second affidavit of Michael Choon Ming Ng filed 26 July 2022 [11] - [16].
The Scheme booklet contains the following sections:
(a)a letter from the chairman of Oklo;
(b)a letter from the president, chief executive officer and director of B2Gold;
(c)a timetable of the important dates and times for the Scheme;
(d)a summary of the Scheme;
(e)a section on considerations relevant to the vote of shareholders, including reasons to vote in favour of or against the Scheme;
(f)a 'frequently asked questions' table, which addresses all essential matters;
(g)a section on the Scheme meeting and how to vote;
(h)an overview of Oklo and B2Gold;
(i)a section on risk factors;
(j)a section on the Australian taxation implications for Oklo shareholders;
(k)information about the Scheme;
(l)a section on additional information, which includes details of the relevant interests of Oklo's directors and the benefits they will obtain if the Scheme is approved; and
(m)a glossary of defined terms.
The Scheme booklet includes several important annexures which will form part of the Scheme booklet. These include the IER, the SID, the Scheme, the Deed Poll and a comparison of the legal regimes in Australia and Canada.
Legal principles in respect of the scheme
Pursuant to s 411 of the Act, a scheme of arrangement can be used to re‑organise a company in a manner which will be binding on its members, provided that:
(a)the arrangement is agreed by the requisite majorities as prescribed by s 411(4)(a) of the Act, namely 75% of shareholders by value and 50% by number; and
(b)the court approves the arrangement pursuant to s 411(4)(b) of the Act.
There are three stages to an application under s 411 of the Act. First, the court approves the convening of a scheme meeting and the draft explanatory statement to be sent to the scheme members. Second, the members vote on the proposed scheme at the scheme meeting. Third, assuming the first two stages have occurred, the court approves the proposed scheme.[21]
[21] Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358 [7].
There are well‑established principles which apply to the first stage of proceedings. The court will order the convening of the scheme meeting and approve the dispatch of the scheme booklet if it is satisfied that:[22]
(a)there is a pt 5.1 body;
(b)there is a compromise or arrangement within the meaning of s 411 of the Act;
(c)the proposed scheme booklet contains the prescribed information[23] and provides proper disclosure;[24]
(d)the scheme is bona fide and properly proposed;
(e)ASIC has had at least 14 days' notice of the proposed hearing date and a reasonable opportunity to examine the terms of the scheme and the scheme booklet and make submissions;[25]
(f)the procedural requirements of the Act and the Corporations Rules have been met; and
(g)the scheme is of such a nature that, if it receives the necessary statutory majority at the scheme meeting, the court will be likely to approve it.
[22] Re SRG Ltd [2018] FCA 1092 [11]; Re Wesfarmers Ltd [2018] WASC 308 [60].
[23] Corporations Act 2001 (Cth) s 412(1)(a)(ii); Corporations Regulations 2001 (Cth) reg 5.1.01, Sch 8 cl 8301 ‑ 8310.
[24] Corporations Act 2001 (Cth) s 412(1)(a)(i).
[25] Corporations Act 2001 (Cth) s 411(2)(b).
Any issue about classes of members is usually determined at the first hearing.[26] This is so that costs and court time are not wasted which would otherwise occur if this issue was left to the second hearing.[27]
[26] Re CSR Ltd [73].
[27] Re Opes Prime Stockbroking Ltd [2009] FCA 813; (2009) 179 FCR 20 [20].
The standard of review that is undertaken by the court at the first hearing is whether the proposed scheme is not inappropriate and is one that sensible businesspeople might consider is of benefit to its members.[28] If the proposed arrangement is one that appears fit for consideration by a meeting of members and is a commercial proposition likely to gain the court's approval if passed by the necessary majority, leave should be given to convene the meeting.[29]
[28] Re Amcom Telecommunications Ltd [2015] FCA 341 [10].
[29] Re SRG Ltd [12]; Re Wesfarmers Ltd [72] - [76].
Disposition
The formal matters that Oklo has to prove are satisfied.
Oklo is a company and, accordingly, is a pt 5.1 body. The proposed Scheme constitutes an 'arrangement' of a type that has been approved by courts as an arrangement on numerous occasions.
Oklo has filed an affidavit, as required by r 3.2 of the Corporations Rules, from the persons nominated to be the chairperson and alternate chairperson for the Scheme meeting.[30]
[30] Affidavit of Scott Douglas Gibson filed 13 July 2022; Affidavit of Michael Choon Ming Ng filed 13 July 2022.
By letter dated 28 July 2022, ASIC confirmed it had been given 14 days' notice of the hearing and a reasonable opportunity to examine the terms of the Scheme and the draft explanatory statement or Scheme booklet. ASIC also gave notice that it did not propose to appear at the first court hearing to make submissions or intervene to oppose the Scheme.[31]
[31] Fourth affidavit of Michael Choon Ming Ng filed 28 July 2022, 'MCN-14'.
On the materials before me, there was nothing to suggest the Scheme was not properly proposed. The constitution of Oklo[32] does not prevent the Scheme.
[32] Affidavit of Simon James Robson Taylor filed 13 July 2022, 'SJT-8'.
No class issues arise in relation to the Scheme. The treatment of the Ineligible Foreign Shareholders is commonplace and is not class creating.[33]
[33] See Re Wesfarmers Ltd [96], Re Hills Motorway Ltd [2002] NSWSC 897; (2002) 43 ACSR 101 [9] ‑ [13]; Re Excelsior Gold Ltd [2018] FCA 2064 [37] - [43].
In relation to Small Shareholders (as they are defined under the proposed Scheme), each may elect, by written notice to Oklo, to have their entitlement to the Scrip Consideration issued to the Sale Agent, who will sell those shares and remit the proceeds in a similar manner as proposed for Ineligible Foreign Shareholders.[34]
[34] Scheme booklet [5.3].
While provisions addressing small shareholders are commonplace,[35] there has been no judicial consideration of a similar scenario to that which arises in this case. In respect of Oklo, the definition of 'Small Shareholder' means that shareholders holding up to approximately $150,000 of Shares fall within the definition, which comprises approximately 95% of the register by number of shareholders.
[35] See Re Swick Mining Services Ltd [2022] WASC 79 (29% of shareholding by number); Re Palladium Group Holdings Pty Ltd [2020] FCA 1123 (15% of shareholding by number).
Counsel submitted that an important factor in the proposed Scheme is that, by default, the Small Shareholders will receive the Scheme Consideration, comprising both the Scrip Consideration and the Cash Consideration, but that they have an election to have the Scrip Consideration issued to the Sale Agent and receive the pro rata proceeds of the sale of these Shares. That is, under the proposed Scheme, Shareholders have the power to elect to 'cash out' their Scrip Consideration.[36] Counsel for Oklo emphasised that this proposal was to the benefit of Shareholders who may not wish to hold TSX listed securities or establish an overseas trading account.
[36] ts 25.
Prior to the first court hearing, I queried, through my associate, whether this matter had been specifically drawn to the attention of ASIC. While this matter had not been the subject of specific discussions, the court's query, together with the supplementary submissions filed by Oklo were provided to ASIC. ASIC did not raise any concerns, withdraw their letter of intention, or appear at the first court hearing to address this matter. Prior to the hearing, ASIC confirmed it had no further comments or queries for Oklo in relation to the Small Shareholders.[37]
[37] Exhibit 1.
Ultimately, I accept that the treatment of Small Shareholders is not class creating. The default position is that all Shareholders will receive the same Scheme Consideration. The Small Shareholders' rights under the Scheme are the same as each other Scheme participant; namely the right to receive the Scheme Consideration. However, given the importance of this issue, while I was satisfied that there was sufficient disclosure of the right of election in the Scheme booklet,[38] I required the date by which the election is to be made to also be prominently disclosed.
[38] Scheme booklet, 'Chairman's Letter', 'Frequently Asked Questions', [1.2], [5.3], [5.4].
There are a number of conditions precedent to the Scheme.[39] Oklo has deposed it is not aware of any basis to believe that any condition precedent will not be satisfied or waived prior to implementation of the Scheme.[40]
Disclosure and Scheme booklet
[39] SID cl 3.
[40] Affidavit of Simon James Robson Taylor filed 13 July 2022 [101].
I have read the initial draft of the Scheme booklet (as provided to ASIC). I have also been provided with the correspondence between ASIC and Oklo's solicitors relating to ASIC's review of the draft Scheme booklet.[41] The amended Scheme booklet was provided to ASIC on 26 July 2022.[42]
[41] Second affidavit of Michael Choon Ming Ng filed 26 July 2022 'MCN-3'.
[42] Second affidavit of Michael Choon Ming Ng filed 26 July 2022 [16].
I was and am satisfied that there will be proper disclosure as to the effect of the proposed Scheme and the material considerations for shareholders of Oklo.
There is evidence before me as to the due diligence and verification process that was undertaken by both Oklo and B2Gold. On the basis of this evidence, I accept that:
(a)Oklo undertook a process of due diligence and verification to verify the accuracy of statements attributable to Oklo in the Scheme booklet;[43]
(b)B2Gold undertook a similar process to verify the statements attributable to them;[44] and
(c)appropriate steps have been taken to satisfy Oklo and B2Gold that the Scheme booklet does not omit any material information.
[43] Affidavit of Simon James Robson Taylor filed 13 July 2022 [56] - [60].
[44] Affidavit of Randall Calvin Chatwin filed 26 July 2022 [14] - [25].
Based on the checklist provided by counsel for Oklo,[45] I was satisfied the Scheme booklet contained the prescribed information in accordance with s 412(1)(a)(ii) of the Act and sch 8 of the Corporations Regulations 2001 (Cth).
[45] Annexure to the Submissions for the first court hearing.
In written and oral submissions, counsel for the plaintiff drew my attention to some specific matters. I address each of these below.
Performance risk
I was and am satisfied that the nature and terms of the proposed Scheme is such that the shareholders are adequately protected against the risk that they will not receive the Scheme Consideration and have no capacity to sue B2Gold to recover their shares or damages.
In that respect, I have had regard to the terms of the Scheme and the Deed Poll. Pursuant to these documents:
(a)B2Gold must allot and issue (or procure the allotment and issue of) the Scrip Consideration to each eligible shareholder for each Oklo Share that they hold on the Scheme implementation date;[46]
(b)B2Gold must issue to the Sale Agent the new B2Gold Shares to which each Ineligible Foreign Shareholder or Electing Small Shareholder would otherwise have been entitled as Sccrip Consideration;[47]
(c)B2Gold must procure on the Scheme Implementation Date that each Scheme Shareholder (other than an Ineligible Foreign Shareholder or non-electing Small Shareholder) and the Sale Agent (for the Ineligible Foreign Shareholders and Electing Small Shareholders) is entered into the B2Gold register of members;[48]
(d)in respect of the Cash Consideration, no later than two business days prior to the Scheme implementation date, B2Gold is required to deposit in cleared funds the amount equal to the total Cash Consideration into an Australian denominated trust account operated by Oklo with an authorised deposit-taking institution within the meaning of the Banking Act 1959 (Cth);[49]
(e)Oklo is required to pay the Cash Consideration to its shareholders on the Scheme implementation date;[50] and
(f)transfer of the Scheme shares is subject to provision of the Scheme Consideration.[51]
[46] Scheme cl 6.
[47] Scheme cl 6.9.
[48] Scheme cl 6.3(a), 6.9(c).
[49] Scheme cl 6.2(a).
[50] Scheme cl 6.2(b);
[51] Scheme cl 5.2(a).
The statements made in the Scheme booklet as to the funding available to satisfy the Cash Consideration have been verified by B2Gold.[52]
[52] Scheme booklet [7.15].
The arrangements under the terms of the proposed Scheme are supported by the Deed Poll. By the Deed Poll, B2Gold covenants in favour of each Oklo shareholder that it will perform all actions attributed to it under the Scheme.[53] There is also an acknowledgement that the Deed Poll may be relied on and enforced by any Scheme shareholder in accordance with its terms.[54] In my view, the shareholders are sufficiently identified within the Deed Poll to enable them to enforce the Deed Poll as against B2Gold.
[53] Deed Poll cl 4.
[54] Deed Poll cl 2(a).
There is evidence from a Canadian lawyer to the effect that the Deed Poll has been duly executed in accordance with the relevant laws of British Columbia and federal laws of Canada and that the Deed Poll constitutes a legal, valid and binding obligation of B2Gold which is enforceable against it.[55]
Exclusivity provisions and Reimbursement Fee
[55] Affidavit of Michael Xiao Li filed 26 July 2022, 'MXL-4'.
The SID contains the customary lock up devices in the form of 'no shop', 'no talk', 'no due diligence' and 'matching right' provisions.[56]
[56] SID cl 8.
The 'no talk' and 'no due diligence' provisions are subject to a fiduciary carve out.[57] The original clause required the Oklo Board to determine 'in good faith and acting reasonably' that any competing transaction would be a Superior Proposal and that failing to respond to it would likely constitute a breach of fiduciary duties. This was the subject of extensive conferral between Oklo and ASIC and ultimately, on 27 July 2022, Oklo and B2Gold entered into a Deed to remove the obligation to act reasonably.[58]
[57] SID cl 8.7.
[58] Third affidavit of Michael Choon Ming Ng filed 27 July 2022 'MCN-10'.
In considering whether the exclusivity provisions impact on completion of the transaction and the duties of directors, the court has regard to: [59]
(a)the period of the exclusivity, which should be no more than a reasonable period and capable of precise ascertainment;
(b)whether the provisions are subject to an overriding obligation that the directors not breach their fiduciary duties or are otherwise unlawful; and
(c)whether there is adequate prominence given to these provisions in the Scheme booklet.
[59] Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400 [29] - [35]; Re Kangaroo Resources Ltd [2018] WASC 327 [57] - [61]; RePacific Energy Ltd [2019] WASC 443 [58].
In this case, the exclusivity period is, at most, a period of approximately six months.
The affidavit of Mr Taylor sets out the commercial justification for the exclusivity provisions and the Reimbursement Fee.[60] I accept his evidence that the inclusion of these provisions in the SID followed arm's-length commercial negotiations in which all parties were separately advised and represented by external legal advisers.[61]
[60] Affidavit of Simon James Robson Taylor filed 13 July 2022 [82] - [83].
[61] Affidavit of Simon James Robson Taylor filed 13 July 2022 [83(a)].
In certain circumstances, a Reimbursement Fee of $899,000 is payable by Oklo to B2Gold.[62] This amount is approximately 0.99% of the equity value of Oklo based on the Scheme Consideration at the date of entering into the SID and is within generally accepted commercial parameters for reimbursement fees. The Reimbursement Fee is intended to compensate the parties for the costs if the Scheme does not proceed (both costs incurred and opportunity costs) and is not payable if shareholders do not vote in favour of the Scheme.[63] Accordingly, I consider the amount of the Reimbursement Fee in this case is unlikely to influence shareholders in their decision to vote on the Scheme.
[62] SID cl 9.1(d).
[63] SID cl 9.2(a).
Importantly, the exclusivity arrangements and Reimbursement Fee provisions are prominently disclosed in the Scheme booklet.[64]
Loan Facility
[64] Scheme booklet [11.13], [11.15].
Oklo and B2Gold entered into a Loan Facility on 26 May 2022 under which B2Gold agreed to provide Oklo with an unsecured loan of up to $2,000,000 to assist Oklo with the transaction costs of the Scheme and for working capital. [65]
[65] Affidavit of Simon James Robson Taylor filed 13 July 2022, 'STJ-3'.
In Re Nzuri Copper Ltd, Vaughan J summarised the relevant considerations for the court where a bidder has provided a loan to the target in the following terms:[66]
There are authorities in which the court has been concerned to ensure that a loan between bidder and target does not operate as a lock‑up device. For example, in Re Cortona Resources Ltd, a loan term sheet was entered into on the morning of the first hearing. The loan was a drawdown facility and was not repayable on demand. If the scheme was not implemented the target would be provided to give security. Barker J stated:
'There is nothing obvious in that transaction, in my view, to suggest that it is a 'lock up' device or in the nature of a break fee by a side wind, which might prevent the free consideration by members of the scheme proposal.
…
I do not consider that the term sheet transaction identified is a reason not to make the orders convening a meeting of members. It too is a matter that the members may properly consider at the meeting in light of the disclosure made.'
In Re Anatolia Energy Ltd McKerracher J also adopted the touchstone of whether the loan agreement would prevent free consideration of the proposed scheme by members. [citations omitted]
[66] Re Nzuri Copper Ltd [2019] WASC 189 [67] - [68].
In this case, counsel drew my attention to the following factors:
(a)the Loan Facility was the subject of arm's length negotiations between Oklo and B2Gold where both parties were independently advised as to both legal and corporate matters;[67]
(b)the Loan Facility includes reasonable and commercial terms, including that it is unsecured, has an interest rate of 8% per annum and could be reasonably expected to be repaid or refinanced if required;[68]
(c)Oklo is yet to draw upon the Loan Facility and expects that it will only do so if Shareholders approve the Scheme at the Scheme Meeting;[69]
(d)the terms of the Loan Facility have been disclosed in the Scheme booklet;[70]
(e)the Loan Facility is not an amount that is a significant proportion of the market capitalisation of Oklo which would compel shareholders to vote on the Scheme in a particular way; and
(f)neither the independent expert nor ASIC has expressed any concern as to the Loan Facility.
[67] Affidavit of Simon James Robson Taylor filed 13 July 2022 [84].
[68] Affidavit of Simon James Robson Taylor filed 13 July 2022 [85].
[69] Scheme booklet [6.13].
[70] Scheme booklet [6.13].
For these reasons, I was and am satisfied that the Loan Facility was not a lock-up device that would have a coercive effect on Shareholders and prevent them from considering the merits of the proposed Scheme. Given there has been sufficient disclosure of the Loan Facility and its terms, this is, in my view, a matter for the Shareholders to consider at the Scheme meeting.
No collateral benefit which should prevent approval of the Scheme
The court must examine whether a benefit exists for one shareholder in particular, so as to bring into question the overall fairness of the Scheme.[71] To determine whether there is a collateral benefit, the court considers the 'net benefits' test, to ensure that there is no overall disparity in favour of the party to the non‑Scheme transaction.[72] If no net benefit is present, then, prima facie, the equality principle under s 602(c) of the Act is satisfied.
[71] Re David Jones Ltd [No 2] [2014] FCA 720; (2014) 101 ACSR 381 [16] - [21] (Farrell J).
[72] Takeovers Panel, Guidance Note 21: Collateral Benefits [15].
On the evidence before me, no issue of collateral benefit arises in this Scheme application.
Director benefits and recommendations
Oklo directors have unanimously recommended that, in the absence of a superior proposal, Shareholders vote in favour of the Scheme.
Counsel drew my attention to the fact that:[73]
(a)Mr Taylor (managing director) holds 7,060,000 Shares (or 1.4% of the total Shares on issue), and 7,000,000 ZEPOs (valued at $1,043,000);
(b)Dr Diallo (director and country manager) holds 7,111,355 Shares (or 1.41% of the total Shares on issue), and 2,500,000 ZEPOs (valued at $372,500); and
(c)Mr Connelly (non-executive chairman) holds 1,083,334 Shares (or 0.21% of the total Shares on issue), and 466,667 ZEPOs (valued at $69,533.38).
[73] Scheme booklet [6.4(c)], [12.1].
If the Scheme becomes effective, the ZEPOs will vest and each of the directors will be issued with Shares. In addition, B2Gold may procure the resignation of the directors of Oklo as soon as practicable after the Implementation Date. If this were to occur, Mr Taylor will receive a termination payment up to a maximum of $345,000, an amount equivalent to 12 months of his ordinary annual remuneration,[74] and Dr Diallo would receive a payment equivalent to three months of his monthly fee.[75]
[74] Submissions [124].
[75] Dr Diallo's annual remuneration was equivalent to $278,204 at the time of Oklo's 2021 Annual Report: Affidavit of Simon James Robson Taylor filed 13 July 2022, 'SJT-9'.
Counsel drew my attention to the following matters:
(a)out of an abundance of caution, Mr Taylor recused himself from the meeting of the directions to consider entry into the SID.[76] The board of Oklo (in the absence of Mr Taylor) considered the matter and resolved that Mr Taylor's interests should not disqualify him from being present while the matter was being considered by directors or prevent him from voting on the matter;[77]
(b)each of the directors, including Mr Taylor, individually considered their ability to make a recommendation in relation to the proposed Scheme and determined they could make a recommendation;[78]
(c)the benefits and potential benefits that each will receive is prominently disclosed in the Scheme booklet, including the value of the ZEPOs.
[76] Counsel for the plaintiff submitted (correctly in my view) that given these interests arose in relation to Mr Taylor's remuneration as a director of the company, Mr Taylor was not required to give notice under s 191(2)(a)(ii) of the Act.
[77] Affidavit of Simon James Robson Taylor filed 13 July 2022 [78]; Second affidavit of Simon James Robson Taylor filed 28 July 2022.
[78] Affidavit of Simon James Robson Taylor filed 13 July 2022 [79].
For the following reasons, it was and is my view that it was not inappropriate for each of these directors to make a recommendation in respect of the Scheme.
First, the Board of Oklo was aware of the relevant remuneration or benefits that each director would receive at the time the Board resolved to enter into the SID on 26 May 2022. Each of the directors has specifically considered their position.
Second, in relation to the termination payment that may be received by Mr Taylor, the payment is within the scope of what might be considered commercially not unreasonable. Any payment that is made will occur as a result of a pre‑existing contractual arrangement that was entered into prior to the SID.
Third, in relation to the termination payment that may be made in relation to Dr Diallo's consultancy agreement, the payment is also not excessive and is part of pre‑existing executive remuneration, entered into prior to the SID.
Fourth, the Shares that will be issued to each of the directors on the vesting of the ZEPOs arise in respect of pre-existing arrangements that were approved by shareholders in 2020, well before entry into the SID.
Fifth, none of the proposed payments are of such a magnitude that lead to an inference that they are excessive, unwarranted, or provide an inappropriate incentive for the directors to recommend to shareholders to vote in favour of the Scheme.
Finally, and importantly, each of these matters (including the quantum of benefits that may be received by each director) are prominently disclosed in the Scheme booklet.[79] I am satisfied that given this disclosure, the Shareholders are able to assess the weight they should give to each of the directors' recommendations.
No liability when acting in good faith
[79] Scheme booklet, 'Chairman's Letter', [1.4], [2.2], [5.7], [12.2].
Counsel for Oklo drew to my attention the inclusion of cl 8.11 in the Scheme which provides Oklo and B2Gold with an exclusion from liability for acts or omissions done in good faith in performance of the Scheme or Deed Poll.
On its proper construction, it is my view that this clause will not exclude liability for acts or omissions in breach of the Scheme or the Deed Poll. Any such acts or omissions could not be in performance of the Scheme or Deed Poll. For this reason, I do not consider that this clause will deprive members of their intended benefits under the Scheme.
Electronic despatch of the Scheme booklet
Oklo sought orders pursuant to s 1319 of the Act for electronic despatch of the Scheme booklet and applicable proxy form by email to those Oklo Shareholders that have nominated an electronic address for the purpose of receiving shareholder communications (Email Shareholders). These orders are now common.[80] Details were provided as to the terms of the proposed electronic notification, namely that email notices would be sent to Oklo's shareholders containing a link to a website from which shareholders can download the Scheme booklet and complete and lodge a proxy form, as well as a Small Shareholder election form.
[80] See, for example, Re SRG Ltd [48]; Re Doray Minerals Ltd [2019] WASC 57 [72]; Re Saracen Mineral Holdings Ltd [2020] WASC 483 [81]. See too Re CannPal Animal Therapeutics Ltd [2021] WASC 37 [73] - [75]; Re Piedmont Lithium Ltd [2021] WASC 76 [69] (given the uncertainties of COVID‑19); Re Nusantara Resources Ltd [2021] WASC 334 [66] - [68]; Re PetroNor E&P Ltd [2021] WASC 426 [64] ‑ [65]; Re Swick Mining Services Ltd [79]; Re Western Areas Ltd [2022] WASC 193 [82]; Re Vimy Resources Ltd [2022] WASC 233 [164] - [167].
I was and am satisfied that an order for electronic despatch of the Scheme booklet to the Email Shareholders is appropriate.
In respect of the Oklo Shareholders who have elected to only receive physical copies of shareholder communications, these shareholders will receive a hard copy of the Scheme booklet, a proxy form and a Small Shareholder election form.
In respect of the remaining Oklo shareholders (who have not made an election in relation to the manner in which they will receive documents from Oklo), Oklo proposed the despatch of a hardcopy letter by post with the relevant forms and a link to the Scheme booklet (Non‑Email Shareholders).
I was and am satisfied that the proposed orders in relation to the hardcopy despatch to these Shareholders is appropriate.
Deemed warranty provision and no encumbrances provision
Counsel for Oklo drew my attention to the 'clear title' and 'Warranty by Scheme Participants' provisions in the proposed Scheme.[81]
[81] Scheme cl 6.7, 8.5.
The Scheme provides that, to the extent permitted by law, the Shares will transfer free from all security interests.[82] The terms of this clause is in standard terms and includes the opening words 'To the extent permitted by law'. The inclusion of these words addresses the concern that has previously been expressed as to whether third parties may otherwise gain the impression that their rights have been extinguished.[83]
[82] Scheme cl 8.5(a)(ii).
[83] Re Investa Properties Ltd [2007] FCA 1104 [25] - [30]; Re Scarborough Equities Ltd [No 2] [2009] FCA 484 [9] - [10].
In relation to the warranty provision, this provision is disclosed in the Scheme booklet.[84] Deemed warranty clauses are not unusual and are acceptable provided there is adequate disclosure that it is a condition.[85]
[84] Scheme Booklet [2.2], [3].
[85] Re APN News and Media Ltd [57] - [63]; Re DUET Management Company 1 Ltd [2013] NSWSC 817; (2013) 95 ACSR 34 [23]; Re Nzuri Copper Ltd [90]; Re Macquarie Private Capital A Ltd [2008] NSWSC 323 [13] - [14]; Re Doray Minerals Ltd [71].
I was and am satisfied that adequate disclosure has been given of these clauses.
Shareholder script
Oklo also sought orders pursuant to s 1319 of the Act to cause a telephone information line for inbound calls from shareholders of Oklo to be operated by Georgeson Shareholder Communications Australia Pty Ltd.[86]
[86] Second affidavit of Michael Choon Ming Ng filed 26 July 2022 [21] - [23].
I have reviewed the script proposed to be used in this matter,[87] and am satisfied that it is consistent with the disclosure in the Scheme Booklet and does not contain any new information or information that is misleading. The proposed script is balanced and seeks to fully and fairly inform shareholders of relevant information concerned the Scheme.
Scheme meeting
[87] Second affidavit of Michael Choon Ming Ng filed 26 July 2022, 'MCN-7'.
Oklo proposed that the Scheme meeting scheduled to take place at 10.00 am on 1 September 2022 be held both in person and electronically. I accept that this arrangement is appropriate and consistent with the conduct of recent scheme meetings.[88]
Exemption under Securities Act 1933 (USA)
[88] See for example Re NTM Gold Ltd; Re Piedmont Lithium Ltd; Re APN Property Group Ltd and APN RE Ltd [2021] VSC 389 [35]; Re Asaleo Care Ltd [2021] FCA 406 [77].
Counsel for Oklo informed the court that, if the proposed Scheme is approved, B2Gold intends to rely on s 3(a)(10) of the Securities Act 1933 (USA), which provides an exemption from certain registration requirements under that legislation.
A condition of the exemption is the court consider the fairness of the scheme of arrangement, which occurs at the second court hearing.
In line with my decision of Re Piedmont Lithium Ltd,[89] and Strk J in Re Vimy Resources Ltd,[90] for the purposes of the first court hearing, it is sufficient to record that I have been informed that B2Gold intends to rely on the exemption provided by s 3(a)(10).[91] Further consideration of this matter will otherwise be dealt with at the second hearing (assuming that the members approve the proposed Scheme by the requisite statutory majorities).
[89] Re Piedmont Lithium Ltd [71].
[90] Re Vimy Resources Ltd [122].
[91] Originating Process filed 13 July 2022 [13]; Affidavit of Simon James Robson Taylor filed 13 July 2022 [18]; Submissions [141] - [145].
Conclusion and orders
At the first hearing before me, I was satisfied that the substantive and procedural requirements under s 411(1) and s 1319 of the Act had been satisfied and that the proposed Scheme was fit for consideration by Oklo's members.
For these reasons, at the conclusion of the hearing on 28 July 2022, I made orders in terms of 'Annexure A' to this judgment in respect of the Scheme.
ANNEXURE A
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
FD
Associate to the Honourable Justice Hill
31 AUGUST 2022
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