Re Pelsart Resources NL; [No 2]
[2024] WASC 318
•2 SEPTEMBER 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE PELSART RESOURCES NL; EX PARTE PELSART RESOURCES NL [No 2] [2024] WASC 318
CORAM: HILL J
HEARD: 19 JULY & 14 AUGUST 2024
DELIVERED : 14 AUGUST 2024
PUBLISHED : 2 SEPTEMBER 2024
FILE NO/S: COR 91 of 2024
MATTER: IN THE MATTER OF PELSART RESOURCES NL
EX PARTE
PELSART RESOURCES NL
Plaintiff
Catchwords:
Corporations - Scheme of arrangement - Application for orders pursuant to s 1319 of the Corporations Act 2001 (Cth) - Supplementary disclosure regarding increase in consideration - Whether court should give leave to dispatch supplementary disclosure statement
Corporations - Scheme of arrangement - Application for orders approving scheme under s 411(4)(b) of the Corporations Act 2001 (Cth) - Orders made approving scheme
Legislation:
Corporations Act 2001 (Cth) s 411(4)(b), s 411(11), s 411(17), s 1319
Result:
Orders made for dispatch of supplementary scheme booklet and postponement of scheme meeting
Orders made approving scheme
Category: B
Representation:
Counsel:
| Plaintiff | : | B S Giles (19 July 2024); C K Pearce & F L D Dudfield (14 August 2024) |
Solicitors:
| Plaintiff | : | Blackwall Legal |
Case(s) referred to in decision(s):
Re Amcom Telecommunications Limited (No 3) [2015] FCA 596
Re International Goldfields Ltd [2004] WASC 112
Re MAC Services Group Ltd [2010] NSWSC 1474
Re National Australia Bank Ltd [2016] VSC 62
Re Pelsart Resources NL [2024] WASC 228
Re Pensana Metals Ltd; Ex parte Pensana Metals Limited [2020] WASC 17
Re Prime Media Group Ltd [2019] NSWSC 1888
Re Seven Network Ltd [No 3] [2010] FCA 400; (2010) 267 ALR 583
Re TriAusMin Limited [No 2] [2014] FCA 833
Re Wesfarmers Ltd [No 2] [2018] WASC 357
HILL J:
At the first court hearing on 21 June 2024, I made orders for the convening of a meeting to consider the proposed scheme of arrangement (Scheme) on 22 July 2024. The background to the matter is set out in the judgment I delivered following the first court hearing (First Reasons).[1]
[1] Re Pelsart Resources NL [2024] WASC 228 (First Reasons).
By interlocutory process dated 17 July 2024, Pelsart Resources NL (Pelsart), sought directions under s 1319 of the Corporations Act 2001 (Cth) (Act), for the dispatch of supplementary materials to its shareholders for the meeting and the postponement of the meeting until 10.00 am on 9 August 2024. Orders were made on 19 July 2024 to this effect.
At the second court hearing on 14 August 2024, the plaintiff applied for and obtained orders approving the Scheme.
At the conclusion of each of these hearings, I indicated that I would subsequently publish reasons. These are my reasons.
Dispatch of supplementary Scheme booklet and postponement of Scheme meeting
By interlocutory process dated 17 July 2024, Pelsart sought directions for the dispatch of supplementary materials to shareholders for the Scheme meeting and for orders adjourning the Scheme meeting until 9 August 2024. The interlocutory process came on for hearing before me on an urgent basis on 19 July 2024. At the conclusion of the hearing, I made orders in terms of the interlocutory process.
Pelsart relied on the following affidavits at the interlocutory hearing:
(a)two affidavits of Sean Gustav Standish Hughes, a director of Sanfield Holdings Ltd (Sanfield), filed 1 July 2024 and 17 July 2024;
(b)three affidavits of Richard Teng Beng Tan, a director of Pelsart, filed 7 June 2024, 20 June 2024 and 17 July 2024;
(c)an affidavit of William Edward Moncrieff, a legal practitioner employed by Blackwall Legal LLP (Blackwall), the solicitors for Pelsart, filed 17 July 2024; and
(d)an affidavit of Belinda Sarah Giles, a legal practitioner employed by Blackwall, filed 18 July 2024.
Under s 1319 of the Act, the court has power to authorise the dispatch of further explanatory materials in relation to a scheme of arrangement.[2] Where a meeting has been convened by order of the Court under s 411 of the Act, only material which has been approved by the court for dispatch should be provided to shareholders.[3]
[2] Re Amcom Telecommunications Limited (No 3) [2015] FCA 596 [14] and the authorities cited therein.
[3] Re Amcom Telecommunications Limited (No 3) [15] and the authorities cited therein.
In general, shareholders should be given at least 10 days' notice of any material new information in relation to a scheme.[4] However, it is a matter for the court to assess whether there is sufficient time for shareholders to consider the information and to understand its effect.[5]
[4] ASIC Regulatory Guide 60 [RG 60.92].
[5] Re Prime Media Group Ltd [2019] NSWSC 1888 [8].
After the initial orders were made for the convening of the Scheme meeting, Pelsart became aware, following a complaint from a shareholder,[6] that the Scheme booklet failed to disclose that one of its directors, Dr Enk Ee Tan, held an indirect interest in both Pelsart and Sanfield. While this does not affect the terms of the Scheme, counsel for Pelsart submitted, which I accept, that Dr Tan's interest may be material to the decision of shareholders on the Scheme. Pelsart proposed that a supplementary Scheme booklet be dispatched to shareholders to address this matter. Given the proximity of the dispatch to the date of the Scheme meeting, Pelsart also sought orders for the postponement of the Scheme meeting to enable shareholders to consider this supplementary disclosure.
[6] Affidavit of Richard Teng Beng Tan filed 17 July 2024 [19] - [22], 'RT38'.
The contents of the supplementary Scheme booklet were verified by both Pelsart and Sanfield. A copy of the draft supplementary Scheme booklet was provided to the Australian Securities and Investments Commission (ASIC) on 12 July 2024. ASIC advised the solicitors for Pelsart that it had no comments on the supplementary Scheme booklet and did not intend to appear at the hearing.
Pelsart proposed dispatch of the supplementary Scheme booklet in the manner approved by the court at the first hearing, with one exception. Following compliance with the orders of the court following the first hearing, 383 packages were returned to Pelsart's share registry. Given this, Pelsart sought dispensation from sending the supplementary Scheme booklet (and other materials) to these shareholders and proposed that the advertisement of the Scheme increase by requiring publication in two newspapers (The Australian and the Australian Financial Review), as well as on Pelsart's website. Pelsart included a change of address form in the materials initially sent to shareholders. For this reason, little was to be achieved in requiring a further letter to be sent to these shareholders' address in the registry.
On the evidence before me, I accept there is a reasonable basis for the concern that the 383 shareholders will not receive the notice of meeting and supplementary Scheme booklet if sent by post to their addresses in the register. In those circumstances, there is little or no utility in giving notice by postal delivery because it is unlikely to achieve its intended purpose. However, it is important that any alternative mode of giving notice should have a greater prospect of bringing the meeting to the attention of those shareholders for whom Pelsart does not have current contact details. I accept that I have power to make these orders under s 411(1) and s 1319 of the Act and am satisfied with the approach proposed by Pelsart.
In the circumstances of this case, it was and is my view that this proposal was appropriate to attempt to bring the Scheme to the attention of these shareholders.
For two primary reasons, it was my view that it was appropriate to make orders for the dispatch of the supplementary Scheme booklet and the postponement of the Scheme meeting. First, the information in the supplementary Scheme booklet may be relevant to shareholders' consideration of the proposed Scheme and their decision as to how to vote at the Scheme meeting. Second, given the proximity of the dispatch of the supplementary Scheme booklet to the date of the Scheme meeting, I considered it was appropriate for the Scheme meeting to be postponed to enable shareholders to have sufficient time to consider the additional information.
For these reasons, at the conclusion of the hearing on 19 July 2024, I made orders in terms of 'Annexure A' to this judgment.
Scheme meeting
The Scheme meeting was convened and held on 9 August 2024. At the meeting, the resolution was passed by the requisite statutory majorities.
150 shareholders were present at the Scheme meeting in person and by proxy.[7] 94.59% of shareholders who voted at the meeting were in favour of the Scheme.[8] 99.47% of votes cast on the Scheme resolution were cast in favour of the resolution.[9]
[7] Affidavit of William David Moncrieff filed 12 August 2024 [46].
[8] Affidavit of William David Moncrieff filed 12 August 2024 [46].
[9] Affidavit of William David Moncrieff filed 12 August 2024 [46].
Approval of Scheme
The originating process was listed before me for the second court hearing on 14 August 2024.
Pelsart relied on an additional nine affidavits for the second court hearing:
(a)an affidavit of Kyla Louise Jones, a personal assistant employed by Blackwall, filed 23 July 2024;
(b)two affidavits of Fraser Lewis Doling Dudfield, a legal practitioner employed by Blackwall, filed 26 July 2024 and 12 August 2024;
(c)the fourth affidavit of Mr Tan filed 12 August 2024;
(d)two affidavits of Mr Moncrieff filed 12 August 2024 and 13 August 2024;
(e)an affidavit of Namratha Narahari Gunnala, a customer success manager employed by Automic Pty Ltd (Automic), filed 12 August 2024;
(f)the third affidavit of Mr Hughes filed 14 August 2024; and
(g)an affidavit of Benjamin Noel Horne, an account director employed by Georgeson Shareholder Communications Australia Pty Ltd (Georgeson), filed 14 August 2024.
These additional affidavits address the matters Pelsart was required to establish at the interlocutory hearing and second court hearing.
Legal principles in respect of the Scheme approval
The approval of the proposed Scheme pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), or the second court hearing, is the third stage of approval for a scheme of arrangement. The second stage is the approval of the Scheme by the requisite statutory majorities, which occurred at the Scheme meeting.
At the second court hearing, the court has two tasks:[10]
(a)to ensure that all statutory and procedural requirements have been satisfied. This includes confirming that:[11]
(i)the meeting was convened and held in accordance with the court's earlier orders;
(ii)the resolutions were passed with the requisite statutory majorities; and
(iii)the plaintiff otherwise complied with the court's earlier orders;
(b)to determine, in the exercise of the court's discretion, whether to approve the proposed arrangement.
[10] Re Wesfarmers Ltd [No 2] [2018] WASC 357 [12].
[11] Re International Goldfields Ltd [2004] WASC 112 [7].
The court has a discretion to approve a scheme under s 411(4)(b) of the Act and is not bound to approve a scheme just because the court previously made orders for the convening of a meeting or because the statutory majorities have been achieved.[12] That said, the court will usually approach the task on the basis that shareholders are better judges of what is in their commercial interests than the court.[13]
[12] Re Wesfarmers Ltd [No 2] [13]; Re Seven Network Ltd [No 3] [2010] FCA 400; (2010) 267 ALR 583 [31].
[13] Re Wesfarmers Ltd [No 2] [13]; Re Seven Network Ltd [No 3] [32] - [33].
The factors that inform the court's discretion whether or not to approve a scheme are:[14]
(a)whether the members have voted in good faith and not for an improper purpose;
(b)whether the proposal is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it;
(c)whether the plaintiff has brought to the attention of the court all matters that could be considered relevant to the exercise of the court's discretion;
(d)whether there has been full and frank disclosure of all information material to the members' decision;
(e)whether minority shareholders would be oppressed by the scheme;
(f)whether the court is satisfied that the scheme has not been proposed to avoid ch 6 of the Act;
(g)whether ASIC has any objection to the scheme; and
(h)whether the scheme offends public policy.
[14] Re Seven Network Ltd [No 3] [35] - [40], [50], [52].
Disposition
Compliance with statutory and procedural requirements
I was and am satisfied, on the basis of the additional affidavits that were filed by Pelsart, that:
(a)a copy of the court's orders made on 21 June 2024 was lodged with ASIC that same day;[15]
(b)a copy of the Scheme booklet that was approved for distribution by the court at the first court hearing was lodged with ASIC and registered on 24 June 2024;[16]
(c)a copy of the court's orders made on 19 July 2024 approving the supplementary Scheme booklet was lodged with ASIC that same day;[17]
(d)a copy of the Supplementary Scheme booklet that was approved for distribution by the court at the interlocutory hearing was lodged with ASIC and registered on 22 July 2024.[18]
(e)the Scheme materials and supplementary Scheme materials were dispatched to shareholders in accordance with the orders of the court;[19]
(f)in accordance with the orders of the court, the Scheme booklet, the supplementary Scheme booklet, and the notice of the postponed Scheme meeting were available for inspection on Pelsart's website and at its registered office both before, and during, the Scheme meeting;[20]
(g)the Scheme meeting was convened and held on 9 August 2024 in accordance with the orders;[21]
(h)the Scheme was approved by the requisite statutory majorities;[22]
(i)notice of the postponed second court hearing was given by way of advertisements in The Australian and the Australian Financial Review newspapers on 24 July 2024 and 26 July 2024 respectively;[23] and
(j)ASIC informed Pelsart on 13 August 2024, pursuant to s 411(17)(b) of the Act, that it has no objection to the proposed Scheme.[24]
[15]Affidavit of Fraser Lewis Doling Dudfield filed 26 July 2024, 'FD2'.
[16] Affidavit of William Edward Moncrieff filed 12 August 2024 [10], [12], 'WEM14', 'WEM15'.
[17] Affidavit of Fraser Lewis Doling Dudfield filed 26 July 2024, 'FD3'.
[18] Affidavit of William Edward Moncrieff filed 12 August 2024 [15], 'WEM18'.
[19] Affidavit of Namratha Narahari Gunnala filed 12 August 2024 [5] ‑ [17], [21] ‑ [30].
[20] Affidavit of Richard Teng Beng Tan filed 12 August 2024 [6] ‑ [11].
[21] Affidavit of William Edward Moncrieff filed 12 August 2024 [23].
[22] Affidavit of William Edward Moncrieff filed 12 August 2024 [47].
[23] Affidavit of Fraser Lewis Doling Dudfield filed 26 July 2024, 'FD5', 'FD6'.
[24] Affidavit of William Edward Moncrieff field 13 August 2024, 'WEM26'.
Counsel for Pelsart drew my attention to the fact that the poll results were announced after the Scheme meeting was closed. At the Scheme meeting, the chairperson advised attendees that the poll results would be announced on Pelsart's website after the meeting once the votes were counted. The meeting was then declared closed.
The approach of a chairperson advising the meeting that results will be the subject of an announcement pursuant to s 251AA of the Act, following completion of the poll count and after the meeting has been formally closed, has been approved by the courts on numerous occasions.[25] No issue arises in the present case concerning the manner in which the polls were conducted or announced.
[25] Re MAC Services Group Ltd [2010] NSWSC 1474; Re National Australia Bank Ltd [2016] VSC 62 [56].
Counsel also drew to my attention the voter turnout at the Scheme meeting. The vote turnout was approximately 15.64% of Shares and 3.93% of shareholders by number. I accept that, on the evidence before me, this was consistent with the voter turnout at the three previous annual general meetings of Pelsart.
As was stated by Farrell J in Re TriAusMin Limited [No 2]:[26]
It is inappropriate to assume (in the absence of complaint) that shareholders who did not vote either did not have notice of the meeting or were silent in protest of the scheme; apathy should not be presumed to be antagonism.
Nonetheless it does call for consideration to ensure that the vote [was] not unrepresentative, since the court retains the discretion to withhold its approval in that case. It is relevant to consider whether members have been deterred from attending or voting at the meeting.
[26] ReTriAusMin Limited [No 2] [2014] FCA 833 [10] ‑ [11].
I respectfully agree with her Honour's view.
In any event, relatively low shareholder turnout does not prevent the court from making orders approving a scheme of arrangement.[27]
[27] Re Pensana Metals Ltd; Ex parte Pensana Metals Limited [2020] WASC 17 [12] (6.41% of shareholders holding 37.08% of shares) as well as the cases referred to.
I was and am satisfied that there was a sufficient turnout at each of the Scheme meetings. I do not consider that the low voter turnout by number of shareholders, in itself, suggested there had been an error in the dispatch of the Scheme booklet or supplementary Scheme Booklet, nor that this should prevent the court from making orders under s 411(4)(b). In this respect, I have had regard to the following matters:
(a)the shareholders who did vote at the Scheme meetings voted in favour of the Scheme;
(b)there was nothing which suggested irregularity in the dispatch of the Scheme booklets; and
(c)there was no evidence of any issue which would have deterred shareholders from voting at or attending the Scheme meetings.
For these reasons, I was and am satisfied that all statutory pre‑conditions have been met.
Good faith and proper purpose
I am satisfied on the evidence filed by Pelsart that its members voted in good faith and for a proper purpose. The proposed Scheme is to effect the acquisition of shares and does not involve any novel treatment of rights. No‑one appeared at the second court hearing to object to the approval of the proposed Scheme.
Fairness and reasonableness
At the first court hearing, based on the evidence before the court, I was satisfied the proposed Scheme was of such a nature that there was no apparent reason that it should not receive approval if the requisite voting majorities were achieved at the Scheme meeting.
Nothing has occurred since the date of the first court hearing to change this view. The shareholders who voted at the meeting overwhelmingly supported the proposed Scheme.
No shareholder appeared at the second court hearing to oppose the orders sought by Pelsart. I was and am satisfied that the proposed Scheme is fair and reasonable and is a Scheme that sensible businesspeople might consider to be of benefit to shareholders.
All relevant matters brought to the court's attention
At the first court hearing, counsel for the plaintiff drew my attention to a number of matters which were summarised at [29] ‑ [51] of the First Reasons.
Three matters were drawn to my attention by counsel at the second court hearing.
First, the inbound information line and outbound telephone campaign run by Georgeson (on behalf of Pelsart) were conducted in accordance with the form of the scripts approved at the first court hearing and interlocutory hearing.[28] There is no evidence before the court to suggest the conduct of the campaigns compromised the integrity of the voting process.
[28] Affidavit of Benjamin Noel Horne filed 14 August 2024 [10] ‑ [28].
Second, Pelsart received communications from a shareholder making serious allegations against Pelsart's board and the way the Scheme materials had been distributed. The details of these communications were provided to me, as well as Pelsart's response.[29] Notwithstanding the communication that had been received from a shareholder prior to the Scheme meeting, no‑one appeared at the second court hearing to oppose orders being made for the approval of the Scheme. Given this, I do not consider these communications of themselves give rise to any relevant issue as to whether approval of the Scheme should be withheld.
[29] Affidavit of Richard Teng Beng Tan filed 12 August 2024, 'RT57', 'RT58'.
Third, all remaining conditions precedent (apart from the court's approval at the second court hearing) have been satisfied or waived.[30]
Full and fair disclosure
[30] Affidavit of Sean Gustav Standish Hughes filed 14 August 2024.
At the first court hearing and the interlocutory hearing, based on the evidence before the court, I was satisfied that the draft Scheme booklet and supplementary Scheme booklet would provide full and fair disclosure to shareholders.
The additional affidavit evidence filed by Pelsart establishes that the Scheme booklet and supplementary Scheme booklet dispatched to shareholders were in the form approved for distribution by the court. Nothing has arisen to suggest that there has not been full and fair disclosure of all information that was material to the decision of shareholders prior to them voting on the Scheme.
Oppression of minorities
There was no evidence that any minority has been oppressed.
Satisfaction of s 411(17) of the Act and ASIC's view
ASIC has provided a written statement to the effect that it does not object to the Scheme pursuant to s 411(17)(b) of the Act,[31] which satisfies the requirements of s 411(17). Having regard to the nature of the proposed transaction, it cannot be said the Scheme was proposed to avoid the operation of ch 6 of the Act.
Public policy
[31] Affidavit of William Edward Moncrieff field 13 August 2024, 'WEM26'.
There is no evidence before the court that the proposed Scheme offends any aspect of public policy. Given the nature of the proposed Scheme, it is my view that it could not be sensibly suggested that the Scheme offends public policy.
Exemption from s 411(11) of the Act
Pelsart seeks exemption from s 411(11) of the Act. In my view, there is no utility in requiring the court's orders approving the Scheme to be annexed to Pelsart's constitution as the orders do not effect any change to the constitution. This exemption has become ordinary practice for transactions of this kind.
Conclusion and orders
At the second court hearing before me, I was satisfied the substantive and procedural requirements under s 411(4) of the Act had been satisfied and that I should approve the proposed Scheme.
For these reasons, at the conclusion of the hearing on 14 August 2024, I made orders in terms of 'Annexure B' to this judgment in respect of the Scheme.
'Annexure A'
'Annexure B'
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JN
Associate to the Honourable Justice Hill
2 SEPTEMBER 2024
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