Re Texon Petroleum Ltd (No 2)

Case [2013] FCA 147

FEDERAL COURT OF AUSTRALIA

Texon Petroleum Limited, in the matter of Texon Petroleum Limited (No 2) [2013] FCA 147

Citation: Texon Petroleum Limited, in the matter of Texon Petroleum Limited (No 2) [2013] FCA 147
Parties: TEXON PETROLEUM LIMITED
(ABN 24 119 737 772)
File numbers: NSD 2228 of 2012
NSD 2230 of 2012
Judge: FARRELL J
Date of judgment: 27 February 2013
Catchwords: CORPORATIONS – schemes of arrangement – second court hearing – whether to approve scheme of arrangement
Legislation: Corporations Act 2001 (Cth) s 411, 741
Securities Act of 1933 (US)
Cases cited:

Aston Resources Limited, in the matter of Aston Resources Limited (No 2) [2012] FCA 401
Central Pacific Minerals NL [2002] FCA 239
Re CSR Ltd (2010) 183 FCR 358
RePermanent Trustee Co Ltd (2002) 43 ACSR 601
Re Seven Network Ltd (ACN 052 816 789) (No 3) (2010) 267 ALR 583
Re Simeon Wines Ltd (2002) 42 ACSR 454
Texon Petroleum Limited, in the matter of Texon Petroleum Limited [2013] FCA 29

Australian Securities and Investments Commission, Regulatory Guide 60: Schemes of Arrangement, December 2009
Corporations and Markets Advisory Committee, Members’ Schemes of Arrangements, December 2009

Date of hearing: 27 February 2013
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 22
Counsel for the Plaintiff: Mr M Oakes SC
Solicitor for the Plaintiff: Minter Ellison
Counsel for Sundance Energy Australia Limited: Mr R A Dick SC with Mr J Redwood
Solicitor for Sundance Energy Australia Limited: Johnson Winter & Slattery

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 2228 of 2012

IN THE MATTER OF TEXON PETROLEUM LIMITED (ABN 24 119 737 772)

TEXON PETROLEUM LIMITED (ABN 24 119 737 772)
Plaintiff

JUDGE:

FARRELL J

DATE OF ORDER:

27 FEBRUARY 2013

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Pursuant to section 411(4)(b) of the Corporations Act 2001 (Cth) (Act) the Scheme of Arrangement between the Plaintiff, Texon Petroleum Limited ABN 24 119 737 772 (TPL) and its members, in the form of Exhibit 2 in this proceeding, be approved.

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

3.Pursuant to section 411(12) of the Act, TPL be exempted from compliance with section 411(11) of the Act in relation to the order in paragraph 1 above.

4.There be no order as to costs.

5.The Orders be entered forthwith.

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


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 2230 of 2012

IN THE MATTER OF TEXON PETROLEUM LIMITED (ABN 24 119 737 772)

TEXON PETROLEUM LIMITED (ABN 24 119 737 772)
Plaintiff

JUDGE:

FARRELL J

DATE OF ORDER:

27 FEBRUARY 2013

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Pursuant to section 411(4)(b) of the Corporations Act 2001 (Cth) (Act) the Scheme…

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Re Texon Petroleum Ltd (No 2) [2013] FCA 147
Case
[2013] FCA 147
Decision Date

CaseChat Overview and Summary

In the matter of Re Texon Petroleum Ltd (No 2), the court was tasked with evaluating the fairness and legality of a proposed demerger scheme involving Texon Petroleum Ltd. The plaintiff, a minority shareholder, contested the scheme, arguing that it failed to provide adequate disclosure to shareholders, potentially oppressed minority shareholders, and improperly handled the interests of non-party groups affected by the scheme.

The primary legal issues before the court were whether the scheme provided full and fair disclosure to shareholders, whether it would oppress minority shareholders, and whether it adequately addressed the interests of non-party groups affected by the scheme. The court was also required to consider whether the reduction of capital, a condition of the demerger scheme, materially prejudiced the company's ability to pay its creditors.

The court found that there was no evidence suggesting Texon shareholders were provided with inadequate information. ASIC, which had the authority to review the scheme, had no objections under the relevant section of the Act and had not raised any issues before the court. The court also accepted that the potential oppression of a small number of minority shareholders, who would receive no consideration due to rounding, was de minimis given the low value of each share. Furthermore, the court examined the reduction of capital, noting that while it did not require court approval, it was entitled to consider whether it would materially prejudice the company's ability to pay its creditors. The court found that the directors had considered this matter and provided verified disclosures in the scheme booklet, concluding that the reduction would not materially prejudice the company's financial obligations.

The court determined that the scheme met the legal requirements, providing adequate disclosure to shareholders, not oppressing minority shareholders to a significant extent, and appropriately addressing the interests of non-party groups. The court also concluded that the reduction of capital did not materially prejudice Texon's capacity to pay its creditors.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

I deal with the interests of creditors in the context of the reduction of capital later in these reasons at [14]–[16].Has there been full and fair disclosure to shareholders of all information material to their decision to approve or reject the Schemes? Nothing has been brought to my attention which would lead me to think that Texon shareholders have been provided with inadequate information. Before the first court hearing, ASIC required additional disclosures in relation to the Wandoo issue, including the need for an expert valuation of that interest which was ultimately included in the Demerger Scheme booklet as Appendix 8. ASIC has provided a letter advising that it has no objection under s 411(17) of the Act in relation to the Schemes and it has not raised any issue with the Court at this hearing. I note that it is the policy of ASIC to issue that letter if the requirements of Regulatory Guide 60: Schemes of Arrangement at [60.104] are satisfied: see also [60.103].Would minority shareholders be oppressed under the Schemes? Counsel for the plaintiff drew to the attention of the Court the fact that shareholders who hold only 1 or 2 Texon shares (69 shareholders in relation to an aggregate of 73 shares) will get no consideration because the entitlement to consideration under the Demerger Scheme is rounded down. Counsel submitted that because the value of each Texon share is 55 cents, this issue should be treated as de minimis and I accept that approach.Have groups who are not parties to the Schemes whose interests are affected by the Schemes been dealt with appropriately? Counsel for the plaintiff also drew my attention to the reduction of capital approved at the Extraordinary General Meeting – which was a condition of the Demerger Scheme. While there is no requirement that court approval be sought in relation to reductions of capital, where the reduction of capital is an integral part of the Demerger Scheme, the question as to whether the reduction would materially prejudice the capacity of the company to pay its creditors is a relevant consideration and the Court is entitled to take it into account: Re CSR Ltd (2010) 183 FCR 358. Counsel’s written submissions noted:27.The Texon directors have considered the matter and the following disclosure appears in Section 8.9(b) on page 67 of the Demerger Scheme Booklet “The Texon Directors consider that the Capital Reduction will not materially prejudice Texon’s ability to pay its creditors”. There is further disclosure in Sections 5.6 and 5.7 on page 47 of the Demerger Scheme Booklet, including in Section 5.7 that even if the Acquisition Scheme is not implemented Texon is expected to have cash reserves of approximately $8.7 million. The pro forma balance sheet on page 49 of the Demerger Scheme Booklet shows net assets in Texon after demerger of $47.6 million. As noted, the disclosures are verified.28.Assuming for argument that there was a failure to comply with s 256B(1), and considering the matter from the position of shareholders, by operation of s 256D(2), a contravention of s 256B(1) does not result in invalidity of the reduction of capital.

Ratio Decidendi

Legal Principle Established

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