JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	27 April 2016
DATE OF JUDGMENT:	27 April 2016
CASE MAY BE CITED AS:	Re Unity Mining Limited (No 2)
MEDIUM NEUTRAL CITATION:	[2016] VSC 830

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CORPORATIONS – Application for further despatch of materials in connection with a proposed amendment of a scheme of arrangement – Scheme involved purchase by offeror of all shares in target company – Target company agreed with the offeror to amend the scheme to buy the shares for a higher price but subject to a condition that if the scheme was rejected by its shareholders, then the target company sell its major asset to the offeror, subject to the approval of target’s shareholders in general meeting – Whether agreement for sale of major asset in those circumstances constituted improper coercion on members to vote in favour of scheme – Held coercion unacceptable – Application refused – 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

On 27 April 2016, I gave preliminary reasons, subject to revision, amendment and elaboration. I now publish my revised reasons.

On 19 February 2016, Unity Mining Limited (Unity), applied, under s 411(1) of the Corporations Act 2001 (Cth) (the Act), for orders to convene a meeting of its shareholders, other than Diversified Minerals Pty Ltd (Diversified) and any associate of Diversified (the excluded shareholders), for the purpose of considering, and if thought fit, passing a resolution in favour of a proposed scheme of arrangement between Unity and its shareholders, other than the excluded shareholders (scheme shareholders).

The scheme, if approved, would effect the acquisition by Diversified, through its wholly owned subsidiary, of all of the shares in Unity not already held by the excluded shareholders. Diversified is associated with the PYBAR Group. The PYBAR Group is an Australian provider of mining services.

If the scheme is approved, the scheme shareholders will receive 2.9 cents for each share they held in Unity at the scheme record date, proposed to be on 15 April 2016. Of the total consideration of 2.9 cents, 1.9 cents per share is proposed to be paid in cash by Diversified and 1 cent per share is proposed to be received by all shareholders in the form of a contemporaneous capital reduction by Unity under Part 2J.1 of the Act. The scheme and the capital return are inter-conditional. Neither will proceed without the other.

Excluded shareholders are not eligible to vote on the scheme, but will be eligible to vote on an ordinary resolution to approve the capital return, which is to be considered and voted upon at a special general meeting to be held on the same day…

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 2)

Details

AGLC: Re Unity Mining Limited (No 2) [2016] VSC 830
Case: [2016] VSC 830
Decision Date: 27 April 2016

CaseChat Overview and Summary

In the matter of Re Unity Mining Limited (No 2), the court was presented with an application to approve the further despatch of materials in connection with a proposed amendment to a scheme of arrangement. The scheme involved a purchase by an offeror of all shares in the target company. The target company had agreed with the offeror to amend the scheme to buy the shares for a higher price but included a condition that if the scheme was rejected by its shareholders, the target company would sell its major asset to the offeror, subject to approval by the target’s shareholders in a general meeting. The central issue before the court was whether the agreement for the sale of the major asset under those circumstances constituted improper coercion on the members to vote in favour of the scheme.

The court considered the nature of the amendment and the conditions attached to the sale of the major asset. It was noted that the amendment included a provision that would significantly impact the target company’s operations and value if the scheme was rejected. The court held that the condition requiring the target company to sell its major asset, if the scheme was not approved, amounted to improper coercion. This coercion was deemed unacceptable as it unduly influenced the shareholders' decision-making process by introducing a significant risk that could only be mitigated by voting in favour of the scheme. Consequently, the court ruled that the application for the further despatch of materials in connection with the amended scheme was refused under section 411 of the Corporations Act 2001 (Cth).

Orders