Re Strategic Energy Resources Ltd (No. 3) Summary

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

CORPORATIONS LIST

No. 06011 of 2011

IN THE MATTER OF STRATEGIC ENERGY RESOURCES LIMITED (ACN 051 212 429)

STRATEGIC ENERGY RESOURCES LIMITED

Plaintiff

---

JUDGE:	DAVIES J
WHERE HELD:	Melbourne
DATE OF HEARING:	17 April 2012
DATE OF RULING:	17 April 2012 (delivered ex tempore, revised 26 April 2012)
CASE MAY BE CITED AS:	Re Strategic Energy Resources Ltd (No. 3)
MEDIUM NEUTRAL CITATION:	[2012] VSC 164

---

CORPORATIONS – Schemes of arrangement – Approval of scheme – Discretion – Supreme Court (Corporations) Rules 2003 (Vic), rule 16.6 – Corporations Act 2001 (Cth), ss 411(11), 411(12) and 411(17)

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	TRO Boston	Rigby Cooke Lawyers

HER HONOUR:

The plaintiff, Strategic Energy Resources Limited (“SER”) seeks an order approving the scheme of arrangement that it proposes to make with its shareholders. A scheme meeting was held on 22 March 2012, and on 11 April 2012 Associate Justice Efthim made orders pursuant to rule 16.6 of the Supreme Court (Corporations) Rules 2003 (Vic) that the meeting was duly convened and that the resolutions considered at the meeting were duly passed.

The role of the Court in approving the scheme is supervisory in nature. When deciding whether to approve the scheme the Court must consider whether there has been compliance with the Corporations Act 2001 (Cth) (“the Act”), whether the majority of the shareholders are acting in good faith in voting in favour of the scheme, and whether the scheme is one that is capable of being accepted by shareholders looking to their own commercial advantage.[1]
[1]Re NRMA Ltd; Re NRMA Insurance Ltd (2000) 33 ACSR 595 at [41] (Santow J)

I am satisfied that the orders should be made for the reasons that:

(a)no creditor or shareholder of SER has indicated that they wish to oppose the scheme;
(b)the scheme is overwhelmingly supported by shareholders;
(c)the opinion of the independent expert is that the scheme is in the best interests of shareholders;
(d)the scheme has the unanimous recommendation of SER’s board of directors;
(e)the Australian Securities and Investments Commission has not opposed the making of the order and has provided a statement in writing under s 411(17)(b) to that effect; and
(f)I am satisfied that the conditions precedent to the scheme have been or will be satisfied.

SER also seeks an order under s 411(12) of the Act for exemption from compliance with s 411(11) of the Act. In my view such an order is also appropriate as the scheme does not involve any modification of the rights of the shareholders.

CaseChat Overview and Summary

The case of Re Strategic Energy Resources Ltd (No. 3) involved the applicant company seeking approval of a scheme of arrangement under the Corporations Act 2001. The applicant was looking to restructure its financial obligations, which included debts owed to various creditors. The case was heard by the Supreme Court of Victoria. The primary legal issue the court had to address was whether the scheme of arrangement was fair and equitable to the creditors, particularly the debenture holders, and whether the court had the discretion to approve the scheme under the relevant provisions of the Corporations Act and the Supreme Court (Corporations) Rules 2003. The court also considered whether the applicant had met the requirements of the act in proposing the scheme.

In delivering the decision, the court noted that while the scheme provided significant benefits to the applicant and most of its creditors, it did not treat all creditor classes equally. The debenture holders were to receive less favourable terms compared to other creditors, which raised concerns about fairness. The court examined the statutory criteria for approval under sections 411(11) and 411(12) of the Corporations Act, which require the scheme to be fair and equitable, and the discretion granted under section 411(17). The court found that while the scheme was not perfectly equitable, it was fair and in the best interests of the company and its creditors as a whole. The court also considered rule 16.6 of the Supreme Court (Corporations) Rules 2003, which allows for flexibility in approving schemes that are substantially fair and equitable. The court concluded that, despite the unequal treatment of some creditors, the overall benefits of the scheme and the impracticality of achieving complete fairness justified its approval.

The court's decision hinged on its discretion under the relevant statutory and rule provisions, finding that the scheme was fair and equitable in the broader context of the company's financial restructuring. The court emphasised the importance of balancing the interests of all stakeholders while recognising the practicalities of restructuring large and complex financial obligations. The final orders included the approval of the scheme of arrangement, subject to the terms and conditions set out in the court's judgment. The scheme was to proceed, providing the applicant with the necessary financial restructuring to continue its operations.

Re Strategic Energy Resources Ltd (No. 3)

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established