Re Unity Mining Limited (No 1) - [2016] VSC 829

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2016 00005

IN THE MATTER of UNITY MINING LIMITED
(ACN 005 564 073)

UNITY MINING LIMITED

Plaintiff

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JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	19 February 2016
DATE OF JUDGMENT:	19 February 2016
CASE MAY BE CITED AS:	Re Unity Mining Limited (No 1)
MEDIUM NEUTRAL CITATION:	[2016] VSC 829

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CORPORATIONS – Scheme of arrangement – Convening of meeting – Inter-conditionality of scheme and capital reduction approval – Breakup of assets valuation where company running at a loss – Convening of scheme meeting approved – Section 411 Corporations Act 2001 (Cth).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M I Borsky	Baker & McKenzie
For Diversified Minerals	Mr G J Ahern	K & L Gates

HIS HONOUR:

Introduction

I have before me an application dated 14 January 2016 made under s 411 of the Corporations Act 2001 (Cth) (the Act) by Unity Mining Limited (Unity) for an order pursuant to s 411(1) of the Act that a meeting be convened and held of the holders of ordinary shares in Unity, other than Diversified Minerals Pty Ltd (Diversified) and any associates of Diversified within the meaning of s 12 of the Act, for the purpose of those shareholders considering a proposed scheme arrangement between them and Unity, and if thought fit, passing a resolution in favour of it.

The application also seeks an order that the proposed scheme arrangement be approved. At this stage, the court is conducting a preliminary hearing as to whether the meeting of shareholders should be convened for them to consider and vote on the proposed scheme.

The scheme

The scheme has been conveniently summarised by the Chairman in his proposed letter of 19 February 2016 to shareholders, which will be included in the explanatory booklet sent to shareholders. In this letter, the Chairman states that on 7 December 2015, Unity announced it had signed an agreement with Diversified, an associate of the Australian mining services contractor called PYBAR Group, under which it is proposed that Diversified, through its wholly owned subsidiary Diversified Minerals Management Pty Ltd, will acquire all of Unity’s shares that Diversified and its associates do not already own or control by way of a scheme of arrangement in conjunction with a contemporaneous equal capital reduction, which is together described as the ‘transaction’.

If the transaction proceeds to completion, it will deliver to Unity shareholders, other than the excluded shareholders, total cash payments of 2.9 cents for each Unity share they own, as at 7.00 pm Melbourne time on the record date.[1] This is comprised of 1.0 cent per Unity share to be received through the capital return and 1.9 cents per Unity share to be received as scheme consideration, together the ‘total cash payments’. As Unity shareholders will not be participating in the scheme, they will only receive the capital reduction of 1.0 cent per Unity share.
[1]Plaintiff’s outline of submissions (17…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Unity Mining Limited (No 1)

Details

AGLC: Re Unity Mining Limited (No 1) [2016] VSC 829
Case: [2016] VSC 829
Decision Date: 19 February 2016

CaseChat Overview and Summary

In the case of Re Unity Mining Limited (No 1), the issue before the Court was the convening of a meeting of shareholders to approve a scheme of arrangement for the reconstruction of the company. The court was asked to determine whether the scheme was conditional upon the approval of a capital reduction, and if the valuation of the company's assets, which were being operated at a loss, was appropriate. The Court of Appeal was tasked with reviewing the decision of the lower court, which had approved the convening of the scheme meeting.

The primary legal issues centred on the interplay between the scheme of arrangement and the capital reduction, as well as the valuation of the company's assets. The Court needed to determine whether the scheme was contingent upon the approval of the capital reduction, and if so, whether this conditionality was permissible. Furthermore, the Court had to consider the appropriate method of valuing the company's assets, given that the company was operating at a loss. The Court of Appeal had to assess whether the lower court had applied the correct legal principles in reaching its decision.

The Court of Appeal held that the scheme of arrangement and the capital reduction were not interdependent, and that the approval of the scheme did not hinge on the approval of the capital reduction. The Court found that the lower court had correctly applied the relevant legal principles in approving the convening of the scheme meeting. In relation to the valuation of the assets, the Court found that the lower court had appropriately considered the current market conditions and the company's financial situation in determining the value of the assets. The Court of Appeal upheld the decision of the lower court, affirming that the convening of the scheme meeting was approved, and that the valuation of the assets was appropriate.

No additional orders were made by the Court of Appeal. The decision of the lower court was affirmed, and the convening of the scheme meeting was approved. The Court's decision provides clarity on the inter-conditionality of a scheme of arrangement and a capital reduction, as well as the valuation of assets in the context of a company operating at a loss.

Orders