Re Pensana Metals Ltd

[2020] WASC 17

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   RE PENSANA METALS LTD; EX PARTE PENSANA METALS LIMITED [No 2] [2020] WASC 17

CORAM:   HILL J

HEARD:   22 JANUARY 2020

DELIVERED          :   22 JANUARY 2020

PUBLISHED           :   23 JANUARY 2020

FILE NO/S:   COR 215 of 2019

EX PARTE

PENSANA METALS LIMITED

Plaintiff

Catchwords:

Corporations law - Scheme of arrangement - Application for orders approving scheme under s 411(b) of the Corporations Act 2001 (Cth) - Low shareholder turnout at scheme meeting - Orders made approving scheme

Legislation:

Corporations Act 2001 (Cth), s 411

Result:

Orders made approving scheme

Category:    B

Representation:

Counsel:

Plaintiff : Mr S K Dharmananda SC & Ms K J Hall

Solicitors:

Plaintiff : DLA Piper Australia - Perth

Case(s) referred to in decision(s):

Ex parte Pensana Metals Limited [2019] WASC 479

Re Auzex Resources Ltd [No 2] [2012] QSC 101

Re Avoca Resources Ltd [2011] FCA 208

Re Cortona Resources Ltd [No 2] [2013] FCA 302

Re Decimal Software Limited; in the matter of Decimal Software Limited [No 2] [2018] FCA 2040

Re Foundation Healthcare Ltd [No 2] [2002] FCA 973; (2002) 43 ACSR 680

Re Great Artesian Oil and Gas Ltd [No 2] [2008] FCA 1169

Re International Goldfields Ltd [2004] WASC 112

Re Rebel Sport Ltd [No 2] [2007] FCA 458

Re Seven Network Ltd [No 3] [2010] FCA 400; (2010) 267 ALR 583

Re Straits Resources Ltd [No 2] [2011] FCA 47

Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [2018] WASC 357

TriAusMin Limited, in the matter of TriAusMin Limited [No 2] [2014] FCA 833

HILL J:

1. The plaintiff, Pensana Metals Ltd (Pensana), applies for orders approving a proposed scheme of arrangement (Scheme).  The background to the matter is set out in the judgment that I gave following the first court hearing.[1]  At the first court hearing, I made orders for the Scheme meeting to be convened.

   [1] Ex parte Pensana Metals Limited [2019] WASC 479.

2. The Scheme meeting was convened and held on 15 January 2020.  At this meeting, the resolution was passed by the requisite statutory majorities.

3. 103 shareholders were present at the Scheme meeting in person and by proxy, comprising approximately 6.41% of the total number of shareholders by number and 37.08% of the voting shares in the plaintiff.[2]  91.26% of shareholders who voted at the meeting were in favour of the resolution.[3]  99.43% of votes cast on the resolution were cast in favour of the resolution.[4]

   [2] Affidavit of Scott Adrian Mison filed 20 January 2020 [5] - [6].

   [3] Affidavit of Scott Adrian Mison filed 20 January 2020 [9].

   [4] Affidavit of Scott Adrian Mison filed 20 January 2020 [8].

Approval of Scheme

1. This matter came back before me for the second court hearing on 22 January 2020.

2. In addition to the affidavits that were relied upon at the first hearing, Pensana relied on the following additional affidavits:

   (a)a second affidavit of Michael Ng filed 16 January 2020, the chairperson of the Scheme meeting, providing a report on the Scheme meeting;

   (b)a third affidavit of Christopher John George Seotis filed 16 January 2020, in relation to the lodgement with ASIC of the orders from the first court hearing, the registration of the scheme booklet and the advertisement of the second court hearing;

   (c)an affidavit of Rodney Rex Somes filed 17 January 2020, the relationship manager with Computershare Investor Services Pty Ltd, the share registry for the plaintiff, in relation to the printing of the scheme booklet and its dispatch, as well as the email broadcast to shareholders who had nominated an electronic address for service of notices of meeting;

   (d)an affidavit of Scott Adrian Mison filed 20 January 2020, the company secretary of the plaintiff, in relation to the number of shareholders who voted at the Scheme meeting, the 2019 annual general meeting, a general meeting on 9 August 2019 and the 2018 annual general meeting;

   (e)a fourth affidavit of Christopher John George Seotis filed 22 January 2020 annexing correspondence received from ASIC confirming that ASIC had no objection to the proposed scheme under s 411(17)(b) of the Corporations Act 2001 (Cth), confirming that neither Pensana nor its solicitors had received any notice of objection from any shareholder and annexing the joint certificate issued by Pensana and Pensana Rare Earths plc (Pensana UK) confirming that all conditions precedent (apart from the orders sought at the second court hearing) had been satisfied.

3. These additional affidavits address the matters that Pensana was required to establish at the second court hearing.

Legal Principles in respect of the Scheme Approval

1. The approval of the proposed Scheme pursuant to s 411(4)(b) of the Corporations 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.

2. At the second court hearing, the court has two tasks:[5]

   (a)to ensure that all statutory and procedural requirements have been satisfied.  This includes confirming that:[6]

   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.

   [5] Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [2018] WASC 357 [12].

   [6] Re International Goldfields Ltd [2004] WASC 112 [7].

3. The court has a discretion to approve a scheme under s 411(4)(b) 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.[7]  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.[8]

   [7] Re Wesfarmers Ltd; Ex Parte Wesfarmers Ltd [No 2] [13]; Re Seven Network Ltd [No 3] [2010] FCA 400; (2010) 267 ALR 583 [31].

   [8] Re Wesfarmers Ltd; Ex Parte Wesfarmers Ltd [No 2] [13]; Re Seven Network Ltd [No 3] [32] - [33].

4. The factors that inform the court's discretion whether or not to approve the scheme are:[9]

   (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 Corporations Act;

   (g)whether ASIC has an objection to the scheme; and

   (h)whether the scheme offends public policy.

   [9] Re Seven Network Ltd [No 3] [35] - [40], [50], [52].

Disposition

Compliance with statutory and procedural requirements

1. I am and was satisfied, on the basis of the additional affidavits that were filed by Pensana that:

   (a)a copy of the court's orders made on 29 November 2019 were lodged with ASIC that day;[10]

   (b)a copy of the scheme booklet that was approved for distribution by the court was lodged with ASIC and registered on 2 December 2019;[11]

   (c)the scheme booklet was dispatched to security holders in accordance with my orders of 29 November 2019;[12]

   (d)the Scheme meeting was convened and held on 15 January 2020 in accordance with my orders of 29 November 2019;[13]

   (e)the Scheme was approved by the requisite statutory majorities;[14]

   (f)notice of the second court hearing was given by way of advertisement in The West Australian and The Australian newspapers on 15 January 2020;[15] and

   (g)ASIC informed Pensana on 21 January 2020, pursuant to s 411(17)(b) of the Corporations Act, that it has no objection to the proposed Scheme.[16]

   [10] Third Affidavit of Christoper John George Seotis filed 16 January 2020 [3], 'CJS14'.

   [11] Third Affidavit of Christoper John George Seotis filed 16 January 2020 [4] - [5], 'CJS15'.

   [12] Affidavit of Rodney Rex Somes filed 17 January 2020 [8] - [34].

   [13] Affidavit of Michael Ng filed 16 January 2020; Affidavit of Scott Mison filed 20 January 2020.

   [14] Affidavit of Michael Ng filed 16 January 2020 [14].

   [15] Third affidavit of Christopher John George Seotis filed 16 January 2020 [7] - [8], 'CJS16', 'CJS17'.

   [16] Fourth affidavit of Christopher John George Seotis filed 22 January 2020 [2], 'CJS18'.

2. Mr Dharmananda, counsel for the plaintiff, drew my attention to the fact that only 103 of 1,604 eligible shareholders voted at the Scheme meeting (or approximately 6.41% of voters).  The shareholders who exercised their right to vote held 37.08% of the shares on issue.

3. As was stated by Farrell J in TriAusMin Limited, in the matter of TriAusMin Limited [No 2]:[17]

   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.

   [17] TriAusMin Limited, in the matter of TriAusMin Limited [No 2] [2014] FCA 833 [10] - [11].

4. I respectfully agree with her Honour's view.

5. Relatively low shareholder turnout does not prevent the court from making orders approving a scheme of arrangement.[18] 

   [18] See for example Re Foundation Healthcare Ltd [No 2] [2002] FCA 973; (2002) 43 ACSR 680 [22] (44.23% of shareholders voting); Re Rebel Sport Ltd [No 2] [2007] FCA 458 [6] (24.99% of shareholders holding 83.59% of shares) Re Avoca Resources Ltd [2011] FCA 208 [25] (11.49% of shareholders holding 72.38% of shares); Re Great Artesian Oil and Gas Ltd [No 2] [2008] FCA 1169 [3] (24.6% of shareholders voting); Re Straits Resources Ltd [No 2] [2011] FCA 47 [12] (10.8% of shareholders holding 74% of shares); Re Cortona Resources Ltd [No 2] [2013] FCA 302 [12] (17.5% of shareholders holding 45.2% of shares); Re Auzex Resources Ltd [No 2] [2012] QSC 101 [18] (9.75% of shareholders representing 42.3% of votes); TriAusMin Limited, in the matter of TriAusMin Limited [No 2] [9] (10.94% of shareholders holding 52.9% of shares); Re Decimal Software Limited; in the matter of Decimal Software Limited [No 2] [2018] FCA 2040 [15] - [16] (5.21% of shareholders holding 52.85% of shares).

6. I was and am satisfied that there was a sufficient turnout at each of the meetings. I do not consider that the low voter turnout, in itself, suggested there had been an error in the dispatch of the scheme booklet, nor that this should prevent the court from making orders under s 411(4)(b). It is my view that:

   (a)the shareholders who did vote at the meetings voted overwhelmingly in favour of the Scheme;

   (b)the number and percentage of shareholders who attended the Scheme meeting was higher or consistent with attendances at the 2019 annual general meeting of Pensana held 29 November 2019,[19] a general meeting held 9 August 2019[20] and at the 2018 annual general meeting held 21 November 2018;[21]

   (c)there are a significant number of shareholders of Pensana who hold small parcels of shares;[22]

   (d)there was nothing which suggested irregularity in the dispatch of the scheme booklets;

   (e)there was no evidence of any issue which would have deterred shareholders from voting at or attending the meeting.

   [19] Affidavit of Scott Adrian Mison filed 20 January 2020 [11] - [14] (5.67% of shareholders holding 36.93% of shares).

   [20] Affidavit of Scott Adrian Mison filed 20 January 2020 [15] - [18] (3.27% of shareholders holding 22.38% of shares).

   [21] Affidavit of Scott Adrian Mison filed 20 January 2020 [19] - [22] (4.55% of shareholders holding 37.03% of shares).

   [22] Affidavit of Scott Adrian Mison filed 20 January 2020 [23] (56.6% of shareholders hold parcels worth $2,000 or less).

7. Accordingly, I was and am satisfied that all statutory pre-conditions have been met.  I now turn to consider the discretionary considerations.

Good faith and proper purpose

1. There is no evidence that the shareholders voted for an improper purpose.  I am satisfied on the evidence that has been filed by Pensana that the members voted in good faith and for a proper purpose as:

   (a)the purpose of the proposed Schemes is to re‑domicile Pensana, which is a transaction ordinarily approved by courts.  It does not involve any novel treatment of rights of shareholders.  Rather, current shareholders will receive a proportionate interest in Pensana UK to their existing shareholding.  For this reason, voting in favour of the proposed Scheme is unlikely to be motivated by some improper purpose;

   (b)the independent expert opined that in the absence of an alternate proposal (and none has emerged), the Scheme is in the best interests of shareholders; and

   (c)neither ASIC nor any shareholder appeared at the second court hearing to object to approval of the proposed Scheme.

Fairness and reasonableness

1. At the first hearing, based on the evidence before the court, I was satisfied that the proposed re‑domicile of Pensana 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. 

2. Nothing has occurred since the date of the first hearing to change this view.  The shareholders who voted at the meeting overwhelmingly supported the proposed Scheme.  No shareholder appeared to oppose the orders sought at the second court hearing. I was and am satisfied that the proposed Scheme is fair and reasonable and is a Scheme that sensible business people might consider to be of benefit to shareholders. 

All relevant matters brought to the court's attention

1. At the first court hearing, counsel for Pensana drew my attention to a number of matters.  These are summarised in Ex parte Pensana Metals Limited at [48] ‑ [62].

2. There were two further matters that counsel drew my attention to at the second court hearing.  First, evidence was put before the court to demonstrate that the conditions precedent to the Scheme (apart from the court's approval at the second court hearing) had been satisfied or waived.[23] Second, Pensana sought an exemption from s 411(11) of the Corporations Act. In my view, there is no utility in requiring the court's orders approving the Scheme to be annexed to Pensana's constitution as the orders do not effect any change to the constitution. I considered it was and is appropriate in the circumstances of this case to make the orders sought under s 411(12) of the Corporations Act.

Full and fair disclosure

[23] Fourth affidavit of Christopher John George Seotis filed 22 January 2020 [4] - [5], 'CJS19'.

1. At the first court hearing, based on the evidence before the court, I was satisfied that the draft scheme booklet would provide full and fair disclosure to security holders.

2. The additional affidavit evidence filed by Pensana establishes that the scheme booklet dispatched to shareholders was 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

1. There was no evidence that any minority has been oppressed.

Satisfaction of s 411(17) and ASIC's view

1. 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 Corporations Act.[24] As a result, the requirements of s 411(17) have been satisfied. In any event, having regard to the nature of the proposed restructure, it cannot be said that the Scheme was proposed to avoid the operation of ch 6 of the Corporations Act.

Public Policy

[24] Fourth affidavit of Christopher John George Seotis filed 22 January 2020 [2], 'CJS18'.

1. 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. 

Conclusion and Orders

1. At the hearing before me, I was satisfied that the substantive and procedural requirements under s 411(1) of the Act had been satisfied and that I should approve the proposed Schemes.

2. For these reasons, at the conclusion of the hearing on 22 January 2020, 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.

ME

Associate to the Honourable Justice Hill

23 JANUARY 2020