Re Sundance Energy Australia Ltd

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FEDERAL COURT OF AUSTRALIA

Sundance Energy Australia Limited, in the matter of Sundance Energy Australia Limited [2019] FCA 1944

File number(s): NSD 1503 of 2019
Judge(s): FARRELL J
Date of judgment: 14 November 2019
Date of publication of reasons: 20 November 2019
Catchwords:

CORPORATIONS – members’ scheme of arrangement – application under ss 411(1) and 1319 of the Corporations Act 2001 (Cth) – first court hearing for members’ scheme of arrangement to effect re-domiciliation of corporate group to the USA by interposing a new holding company incorporated in Delaware – application granted

CORPORATIONS – application under s 411(4) of the Corporations Act 2001 (Cth) for orders to approve scheme – where judgment will be relied upon by the plaintiff and new holding company in seeking to qualify new holding company’s shares for exemption from the registration requirements of the Securities Act of 1933 (USA) under s 3(a)(10) of that Act – application granted

Legislation:

Corporations Act 2001 (Cth) ss 411 and 1319

Corporations Regulations 2001 (Cth), regs 5.6.11 – 5.6.36A (repealed)

Corporations and Other Legislation Amendment (Insolvency Law Reform) Regulation 2016 (Cth)

Federal Court (Corporations) Rules 2000 (Cth) rr 2.15, 3.4

Insolvency Practice Rules (Corporations) 2016 (Cth)

Securities Act of 1933 (USA), s 3(a)(10)

Cases cited:

Amcor Limited, in the matter of Amcor Limited (No 2) [2019] FCA 842

Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; 177 CLR 485

Capilano Honey Limited, in the matter of Capilano Honey Limited [2018] FCA 1568; 31 ACSR 9

CSR Limited, in the matter of CSR Limited [2010] FCAFC 34; 183 FCR 358

Excelsior Gold Limited, in the matter of Excelsior Gold Limited [2018] FCA 2064

Decimal Software Limited, in the matter of Decimal Software Limited (No 2) [2018] FCA 2040

Dulux Group Ltd, in the matter of Dulux Group Ltd [2019] FCA 961

In the Matter of Foundation Healthcare Limited [2002] FCA 742

In the matter of Wiggins Island Coal Export Terminal Pty Ltd [2018] NSWSC 1342

Re Matine Limited (1998) 28 ACSR 268

Re Wesfarmers Ltd; ex parte Wesfarmers Ltd [2018] WASC 308

Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited (No 3) [2010] FCA 400

Simavita Holdings Limited, in the matter of Simavita Holdings Limited [2013] FCA 1274

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

Viralytics Limited, in the matter of Viralytics Limited [2018] FCA 637

Date of hearing: 1 October 2019
14 November 2019
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 53
Counsel for the Plaintiff: Mr M Izzo SC with Ms S Scott
Solicitor for the Plaintiff: Baker McKenzie

ORDERS

NSD 1503 of 2019

IN THE MATTER OF SUNDANCE ENERGY AUSTRALIA LIMITED ACN 112 202 883

SUNDANCE ENERGY AUSTRALIA LIMITED ACN 112 202 883

Plaintiff

JUDGE:

FARRELL J

DATE OF ORDER:

1 OCTOBER 2019

THE COURT ORDERS THAT:

1.Pursuant to ss 411(1) and 1319…

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Details
Case
[2019] FCA 1944
Decision Date

CaseChat Overview and Summary

Sundance Energy Australia Ltd applied for approval of a scheme of arrangement to effect the re-domiciliation of its corporate group to the USA. The scheme involved interposing a new holding company incorporated in Delaware. The application was made under sections 411(1) and 1319 of the Corporations Act 2001 (Cth) and was the first court hearing for the scheme. Sundance and the new holding company intended to rely on the Court’s approval of the scheme for the purpose of qualifying for exemption from the registration requirements of the US Securities Act of 1933, provided for by section 3(a)(10) of that Act. The Court needed to decide whether the scheme was fair and reasonable and whether it warranted the approval of the Court. The Court also needed to consider whether the scheme was contrary to public policy or had no utility.

The Court considered the evidence provided by the parties, including affidavits and an independent expert report. The Court noted that the scheme involved the issue of securities in exchange for Sundance shares and that the independent expert report concluded that the proposal was in the best interests of Sundance shareholders as a whole. The Court also considered the fairness and reasonableness of the proposed scheme and held a hearing to which each shareholder to whom Holdco shares were to be issued had standing to appear. The Court was satisfied that all matters required to be satisfied at the first and second court hearing were met, and the Court determined to make the orders sought by Sundance. The Court approved the scheme of arrangement made between the plaintiff and the holders of ordinary shares in the plaintiff. The Court also exempted Sundance from compliance with s 411(11) of the Corporations Act in relation to the scheme. The Court noted that the plaintiff and Sundance Energy Inc. would rely on the Court’s approval of the scheme for the purpose of qualifying for exemption from the registration requirements of the US Securities Act of 1933.

The Court made orders approving the scheme of arrangement made between the plaintiff and the holders of ordinary shares in the plaintiff. The Court also exempted Sundance from compliance with s 411(11) of the Corporations Act in relation to the scheme. The Court noted that the plaintiff and Sundance Energy Inc. would rely on the Court’s approval of the scheme for the purpose of qualifying for exemption from the registration requirements of the US Securities Act of 1933. The Court also ordered Sundance to lodge a copy of the approved scheme with the Australian Securities and Investments Commission at the time of lodging a copy of these Orders.

Orders

Orders of the court

1. Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) the scheme of arrangement made between the plaintiff and the holders of ordinary shares in the plaintiff in the form of Annexure E of the document which has been tendered and marked Exhibit 1 is approved.

2. The plaintiff lodge with the Australian Securities and Investments Commission a copy of the approved scheme at the time of lodging a copy of these Orders.

3. Pursuant to s 411(12) of the Corporations Act, the plaintiff is exempted from compliance with s 411(11) of the Corporations Act in relation to the scheme.

THE COURT NOTES THAT:

1. The plaintiff and Sundance Energy Inc. will rely on the Court’s approval of the scheme for the purpose of qualifying for exemption from the registration requirements of the US Securities Act of 1933, provided for by section 3(a)(10) of that Act, in connection with the implementation of, and provision of consideration under, the scheme.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

The application for leave to convene a scheme meeting is in the nature of an interlocutory proceeding and is a preliminary to the final determination which is to be made when the matter comes back to the Court for approval after the holding of the meetings which have been directed: Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; 177 CLR 485 at 504-505. By granting leave, the Court does not give its imprimatur to the proposed scheme. At the stage of ordering a scheme meeting, the Court does not ordinarily go very far into the question of whether the arrangement is one that warrants the approval of the Court; that question is to be answered when the scheme returns to the Court for final approval. That is not to exclude the possibility that a scheme may appear on its face so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further: see In the Matter of Foundation Healthcare Limited [2002] FCA 742; 42 ACSR 252 at [36] and [44] (French J), cited with approval in CSR Limited, in the matter of CSR Limited [2010] FCAFC 34; 183 FCR 358 at [58] (Keane CJ and Jacobson J). Chief Justice Keane and Jacobson J went on to say (at [59] and [61]) that the adverb “blatantly” and the term “contrary to public policy” emphasise that the enquiry under s 411(1) is not intended to resolve difficult questions on which reasonable minds may differ, although it has long been recognised that a clear want of utility in putting in train the process of s 411(1) is a good reason to decline to order the convening of the first meeting.EVIDENCE The following evidence was read at the first court hearing. First, the affidavit of Heather Lindsay Sandell, an employed solicitor at Baker McKenzie, sworn 17 September 2019. Baker McKenzie is Sundance’s legal representative in relation to the scheme proposal. Ms Sandell’s affidavit is in support of originating process. Annexure “HLS-1” is an historical extract from ASIC’s register relating to Sundance and demonstrates that it is a Part 5.1 company. Second, the affidavit of Michael Damer Hannell affirmed 27 September 2019. Mr Hannell is Sundance’s chairman of the board. Mr Hannell gives evidence that he is a director of Sundance and a director of Holdco. He deposes to the identity of the directors of Sundance and their relevant interests in Sundance shares, the reasons for the proposed scheme, the number of issued Sundance shares, the number of Sundance shareholders and the number of shareholders who have elected to receive electronic communications, notifications to ASX concerning substantial holdings, the manner in which the Sundance board proposes to deal with RSUs; the incorporation of Holdco; the sale facility, and conditions precedent under the Scheme Implementation Agreement (SIA). He consents to act as chairman of the scheme meeting. In the last regard, Mr Hannell discloses to his interests in Sundance shares and declares that he has no relationship of conflict. The following annexures are included with his affidavit:(1)Annexure “MH-1” is Sundance’s constitution; (2)Annexure “MH-2” is an historical company extract from ASIC’s records in relation to Sundance which provides proof that Sundance is a Part 5.1 company;(3)Annexure “MH-3” is an ASX Announcement by Sundance dated 11 September 2019 attaching the SIA. The SIA provides prima facie evidence that Sundance has committed itself to propounding the scheme and that accordingly the scheme is bona fide and has been properly proposed: Viralytics Limited, in the matter of Viralytics Limited [2018] FCA 637 at [22] (Gleeson J) (Re Viralytics); and(4)Annexure “MH-4” which contains the Long Term Incentive Plan pursuant to which the RSUs are offered.

Decision

Reasons for decision

It should be apparent from these reasons that:(1)The scheme contemplates the issue of securities (being Holdco shares) in exchange for Sundance shares;(2)The Court has been advised, before the commencement of the second court hearing, that Sundance and Holdco intend to rely on the exemption under s 3(a)(10) of the Securities Act of 1933. The Court made a notation to the orders made on 14 November 2019 to that effect in accordance with a practice adopted in similar matters: see Re Seven Network Limited (No 3) at [64]; Simavita Holdings Limited, in the matter of Simavita Holdings Limited [2013] FCA 1274 at [50]-[52] (Farrell J); Re Amcor Limited at [32]-[38];(3)The Court has been informed of the securities to be offered in exchange for Sundance shares and an independent expert report has concluded that, on balance, the proposal is in the best interests of Sundance shareholders as a whole;(4)The Court has held a hearing to consider the fairness and reasonableness of the proposed scheme. The hearing was open to the public and each shareholder to whom Holdco shares are to be issued had standing to appear. Notice of the date of the hearing has been included in the scheme booklet sent to all shareholders of Sundance prior to the proposal being considered by the scheme meeting, and was advertised in a daily newspaper circulating throughout the country. There was no appearance by any shareholder.CONCLUSION As the Court was satisfied of all of the matters of which it was required to be satisfied at the first and second court hearing as noted in these reasons, the Court determined to make the orders sought by Sundance.

Ratio Decidendi

Legal Principle Established

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