Re Valmec Ltd - [2021] WASC 420

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE VALMEC LTD; EX PARTE VALMEC LTD [2021] WASC 420
CORAM:   HILL J
HEARD:   31 AUGUST & 6 OCTOBER 2021
DELIVERED          :   31 AUGUST 2021
PUBLISHED           :   26 NOVEMBER 2021
FILE NO/S:   COR 133 of 2021
MATTER:   IN THE MATTER OF VALMEC LTD

EX PARTE
VALMEC LTD
Plaintiff

Catchwords:

Corporations law - Scheme of arrangement - Application for orders convening scheme meeting under s 411(1) of the Corporations Act 2001 (Cth) - Whether requirements to order scheme meeting are satisfied - Orders made convening scheme meeting

Corporations - Scheme of arrangement - Application for orders approving the scheme under s 411(b) of the Corporations Act 2001 (Cth) - Orders made approving scheme

Legislation:

Corporations Act 2001 (Cth), s 411(1), s 412(1)(a), s 1319

Supreme Court (Corporations) (WA) Rules 2004 (WA), r 3.2

Result:

Orders made convening scheme meeting

Orders made approving scheme

Category: B

Representation:

Counsel:

Plaintiff

J Park & RE Lennon

Solicitors:

Plaintiff

Dentons Australia

Cases referred to in decision:

First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116; (2017) 320 FLR 78
Re Amcom Telecommunications Ltd [2015] FCA 341
Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400
Re Asaleo Care Limited (No 2) [2021] FCA 636
Re Auzex Resources Ltd [No 2] [2012] QSC 101
Re Avoca Resources Ltd [2011] FCA 208
Re CannPal Animal Therapeutics Ltd [No 2] [2021] WASC 83
Re Cortona Resources Ltd [No 2] [2013] FCA 302
Re CSG Limited (No 2) [2020] NSWSC 39
Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358
Re David Jones Ltd [No 2] [2014] FCA 720; (2014) 101 ACSR 381
Re Decimal Software Limited [No 2] [2018] FCA 2040
Re Doray Minerals Ltd [2019] WASC 57
Re Dreamscape Networks Ltd [2019] WASC 412
Re DUET Management Company 1 Ltd [2013] NSWSC 817; (2013) 95 ACSR 34
Re DuluxGroup Ltd [2019] FCA 961
Re Foundation Healthcare Ltd [No 2] [2002] FCA 973; (2002) 43 ACSR 680
Re Great Artesian Oil and Gas Ltd [No 2] [2008] FCA 1169
Re Healthscope Ltd [2019] FCA 542; (2019) 139 ACSR 608
Re Hills Motorway Ltd [2002] NSWSC 897; (2002) 43 ACSR 101
Re International Goldfields Ltd [2004] WASC 112
Re Kangaroo Resources Ltd [2018] WASC 327
Re Kidman Resources Ltd [2019] FCA 1226
Re MAC Services Group Ltd [2010] NSWSC 1474
Re Macquarie Private Capital A Ltd [2008] NSWSC 323
Re National Australia Bank Ltd [2016] VSC 62
Re NRMA Ltd [2000] NSWSC 82; (2000) 156 FLR 349
Re Nusantara Resources Limited [2021] WASC 334
Re Nzuri Copper Ltd [2019] WASC 189
Re Opes Prime Stockbroking Ltd [2009] FCA 813; (2009) 179 FCR 20
Re Pacific Energy Limited [2019] WASC 443
Re Pensana Metals Ltd [2020] WASC 17
Re Piedmont Lithium Ltd [No 3] [2021] WASC 173
Re Rebel Sport Ltd [No 2] [2007] FCA 458
Re Saracen Mineral Holdings Ltd [No 2] [2021] WASC 32
Re Seven Network Ltd [No 3] [2010] FCA 400; (2010) 267 ALR 583
Re SRG Ltd [2018] FCA 1092
Re Straits Resources Ltd [No 2] [2011] FCA 47
Re TriAusMin Limited [No 2] [2014] FCA 833
Re Wesfarmers Ltd [2018] WASC 308
Re Wesfarmers Ltd [No 2] [2018] WASC 357
Re Zenith Energy Ltd [No 3] [2020] WASC 289

HILL J:

The plaintiff, Valmec Limited (Valmec) is an Australian public company listed on the official list of the Australian Securities Exchange (ASX).
On 19 July 2021, Valmec announced it had entered into a scheme implementation deed (SID) with Altrad Australia Pty Ltd (Altrad).[1] Under the Scheme, it is proposed that Altrad will acquire approximately 98% of the issued shares of Valmec. Each Valmec shareholder will receive $0.413 in cash for every share held in Valmec (Scheme Consideration).[2] The remaining 2% of shares will continue to be held by Cortina Holdings Pty Ltd as Trustee for the Glen Iris Superannuation Fund (Cortina Holdings) on trust for interests associated with Mr Steve Dropulich, the plaintiff's managing director (Excluded Shares).[3] If the proposed Scheme is approved, Valmec will become a 98% owned subsidiary of Altrad and will be subsequently delisted from the ASX.[4]
[1] Second affidavit of Steve Dropulich filed 27 August 2021 [21], 'SD4'.
[2] Scheme booklet [3.1].
[3] First affidavit of Steve Dropulich filed 27 August 2021 [7]; Scheme booklet [1] - [2], [11].
[4] Scheme booklet [3.1].
By originating process dated 4 August 2021, Valmec sought orders under s 411 of the Corporations Act 2001 (Cth) (Act) in relation to the proposed Scheme. The application came before me for the first court hearing on 31 August 2021.
On 31 August 2021, I made orders pursuant to s 411(1) of the Act to convene two meetings of Valmec's members to consider and vote on the proposed Scheme (Scheme Meetings). Orders were also made approving the distribution of a Scheme booklet to Valmec's shareholders under s 412(1)(a) of the Act. I also made ancillary orders as to the convening and conduct of the Scheme Meetings under s 1319 of the Act.
The Scheme Meetings were held on 1 October 2021. At these meetings, the Scheme was approved by the requisite majorities.
On 6 October 2021, I made orders approving the Scheme.
In making the orders on 31 August 2021 and 6 October 2021, I stated that I would subsequently publish written reasons for my orders. These are my reasons.

Factual background

Valmec

Valmec is a multi-disciplinary services group, which delivers design, construction, maintenance, and asset integrity services to the energy, water and resources sectors.[5]
[5] Scheme booklet [6.1].
As at August 2021, Valmec had 126,959,305 fully paid ordinary shares on issue (Shares), 1,130,462 employee performance rights (Performance Rights)[6] and a market capitalisation of approximately $52,434,192.97.[7]

Altrad

[6] Scheme booklet [6.4.1].

[7] Second affidavit of Steve Dropulich filed 27 August 2021 [43].

Altrad was incorporated in Western Australia on 15 July 2021 as a special purpose vehicle for the sole purpose of entering into the SID and undertaking the Scheme.[8] Altrad is a subsidiary of Altrad Investment Authority SAS (Altrad IA), a private company incorporated in France. Together with Altrad IA's other subsidiaries, Altrad and Altrad IA comprise the 'Altrad Group' (the Bidder Group).[9] The Bidder Group provide services to the oil and gas, energy, power generation, processes, environment and construction sectors.[10]

Proposed Scheme

[8] Scheme booklet [7.1].

[9] Scheme booklet [7.1].

[10] Scheme booklet [7.1].

The purpose of the proposed Scheme between Valmec and Altrad is to effect a merger of these entities.
If the Scheme is implemented, Altrad will acquire approximately 98% of the Shares on the Scheme Implementation Date. Valmec's shareholders will receive $0.413 in cash for each Share as consideration for the acquisition of their shares under the Scheme.[11]
[11] Scheme booklet [3.1].
The Performance Rights will be dealt with outside the Scheme. The terms of the SID require the Performance Rights to be cancelled.[12]
[12] Scheme booklet [3.2(b)].

Evidence for the first court hearing

Valmec relied on a significant number of affidavits that were filed prior to the first court hearing.
The first court hearing was initially scheduled for not before 3.00 pm on 30 August 2021. Ultimately, it took place at midday on 31 August 2021. The rescheduling occurred because of the late filing of material by the plaintiff's solicitors and the need to address a number of queries raised by the court ahead of the first court hearing, including the need to file additional affidavits to ensure all relevant material was before the court. No substantive affidavits were filed in support of the application until two business days prior to the scheduled hearing, for reasons which were not clear to the court. Four affidavits were filed two business days prior to the scheduled hearing and another four on the business day prior to the scheduled hearing. Collectively, these affidavits comprised more than 700 pages. While the court understands that in commercial matters, particularly those in the corporations list, it is not always possible to file all material significantly prior to the scheduled hearing, it is imperative that documents are filed at the earliest possible opportunity so that the court has time to consider the material and raise any queries in a timely fashion. Given the Australian Securities and Investments Commission (ASIC) is required to have 14 days to review the draft scheme booklet, the court expects the draft scheme booklet to be filed shortly after it is lodged with ASIC so that it can begin its consideration of the matter.
The affidavits that were relied upon by Valmec were:
(a)an affidavit of Andrew Alexander Shearwood filed 4 August 2021. Mr Shearwood is a partner at Dentons Australia, the Australian solicitors for Valmec. Mr Shearwood's affidavit did not contain any substantive information concerning the Scheme and simply attached a copy of the historical search for Valmec obtained from ASIC dated 4 August 2021;
(b)an affidavit of Harveer Singh filed 26 August 2021. Mr Singh is the company secretary of Valmec. Mr Singh outlined the current process for electronic communications with shareholders and provided details on the proposed Scheme Meetings. His affidavit attached copies of Valmec's issued capital report and a report outlining the communication preferences of Valmec shareholders;
(c)an affidavit of Stephen Zurhaar filed 26 August 2021. Mr Zurhaar is the non-executive chairman and a non-executive director of Valmec. By his affidavit, Mr Zurhaar consented to act as chairperson of the Scheme Meetings and provided the necessary disclosures required by r 3.2 of the Supreme Court (Corporations) (WA) Rules 2004 (WA) (Corporations Rules);
(d)an affidavit of Ryan Eamonn Lennon filed 26 August 2021. Mr Lennon is a solicitor employed by Dentons Australia. Mr Lennon's affidavit attached correspondence between Valmec and ASIC regarding the lodgement of the Scheme documents and ASIC's initial review of and comments on the Scheme booklet;
(e)an affidavit of Vincent Santostefano filed 26 August 2021. Mr Santostefano is an independent non-executive director of Valmec and the proposed alternate chairperson for the Scheme Meetings. By his affidavit, he consented to act as chairperson in the event that Mr Zurhaar was unable to act and provided the necessary disclosures pursuant to r 3.2 of the Corporations Rules;
(f)an affidavit of Eric Merven filed 27 August 2021. Mr Merven is an employee of Automic Pty Ltd (Automic), who maintains and administers the plaintiff's share register and has been engaged by the plaintiff to host the hybrid Scheme Meetings. Mr Merven's affidavit gave an overview of how the meetings will be conducted on the Automic Online Platform, including the conduct of polls, reporting and details as to electronic communication with shareholders;
(g)an affidavit of Neil Edward Sadler filed 27 August 2021. Mr Sadler is a director of Altrad. Mr Sadler gave a brief overview of Altrad and attested to the verification processes undertaken by Altrad in relation to the Scheme booklet. His affidavit attached copies of the current ASIC search of Altrad and Altrad's consent to be named in the Scheme booklet;
(h)an affidavit of Steve Dropulich filed 27 August 2021. Mr Dropulich is the managing director of Valmec and a director of Cortina Holdings. Mr Dropulich outlined his shareholdings in Valmec, including the shares he holds in his own name and those to which his interest arises as beneficiary of the S&D Investment Trust. His affidavit annexed copies of proxy forms signed by Mr Dropulich and Cortina Holdings respectively;
(i)a second affidavit of Mr Dropulich filed 27 August 2021, giving an overview of the proposed Scheme, including the negotiation of the exclusivity provisions and the Break Fee, and how the Performance Rights and Excluded Shares are to be dealt with under the Scheme. Mr Dropulich's second affidavit attested to the verification process undertaken by the plaintiff in relation to the Scheme booklet and attached copies of, among other things, Valmec's constitution, the indicative non-binding proposal received from Altrad on 18 May 2021, the draft Scheme booklet and the cancellation deeds for the Performance Rights;
(j)an affidavit of Neil Fenton Pace filed 30 August 2021. Mr Pace is a director of Moore Australia Corporate Finance (WA) Pty Ltd (Moore Australia), the independent expert engaged by Valmec to prepare the Independent Expert's Report (IER). Mr Pace's affidavit gave an overview of the preparation of and verification process in relation to the IER and the correspondence between ASIC and Moore Australia regarding the IER. His affidavit annexed a copy of the amended draft IER;
(k)a third affidavit of Mr Dropulich filed 30 August 2021. Mr Dropulich's third affidavit attested to the verification process undertaken by Valmec in relation to the Scheme booklet and outlined the vesting of Mr Dropulich's Performance Rights as well as the shares that were issued on 11 August 2021. His third affidavit annexed, among other things, copies of the verification packs sent to members of the plaintiff's board;
(l)a second affidavit of Mr Lennon filed 30 August 2021. Mr Lennon's second affidavit outlined Valmec's correspondence with ASIC in relation to the draft Scheme booklet and attached, among other things, copies of the correspondence between Valmec's solicitors and ASIC, the updated draft Scheme booklet, the executed Deed Poll and the Binding Heads of Agreement dated 16 July 2021;
(m)a third affidavit of Mr Lennon filed 31 August 2021. Mr Lennon's third affidavit gave details of the participation of Valmec's directors in the Executive Incentive Plan and attached, among other things, the Executive Incentive Plans for Mr Dropulich, Mr Singh and Mushfiq Rahman, the notice of the 2020 annual general meeting as well as email correspondence between Dentons Australia and Squire Patton Boggs, the solicitors for Altrad, regarding Mr Dropulich's interest in the plaintiff's shares.

Nature of the proposed scheme

The proposed Scheme contemplates that Altrad will acquire all of the issued Shares in Valmec (other than the Excluded Shares) and Valmec's shareholders will receive $0.413 in cash for every share held in Valmec.[13] That is, the effect of the proposed Scheme is to make Valmec a 98% owned subsidiary of Altrad. Altrad will be subsequently delisted from the ASX.[14]
[13] Scheme booklet [3.1].
[14] Scheme booklet [3.1].
The Performance Rights are being dealt with outside of the Scheme by entry into cancellation deeds with each of the relevant security holders. There are 1,130,462 Performance Rights which are required by the SID to be cancelled.[15] The Performance Rights are currently held by Mr Dropulich, Mr Singh and Mr Rahman (Rights Holders).
[15] Scheme booklet [3.2(b)].
On 28 July 2021, cancellation deeds were entered into between each of the Rights Holders, Valmec and Altrad. The Cancellation Deeds are subject to the Scheme becoming effective and to the extent required by the ASX Listing Rules, the ASX granting the relevant approval, consent or waiver in respect of the cancellation of the relevant Performance Rights or the Valmec shareholders approving the cancellation of the Valmec Performance Rights.[16]
[16] Scheme booklet [3.2(b)].
If the Scheme is implemented, Valmec will become a subsidiary of Altrad and will be delisted from the ASX. The Scheme will not be implemented unless and until several conditions precedent are satisfied or waived. The conditions precedent which are required to be satisfied are summarised in the Scheme booklet.[17]
[17] Scheme booklet, Frequently asked questions, [3.2(a)].
The SID between Valmec and Altrad sets out the procedures for the implementation of the proposed Scheme.
If the Scheme is approved by shareholders and by the court at the second court hearing, on the implementation date, all the existing shares (except for the Excluded Shares) will be transferred to Altrad, Altrad will be entered in the register as the holder of these Valmec shares,[18] and Altrad will provide the Scheme Consideration to shareholders in return for their shares in Valmec.[19]
[18] Scheme, cl 3.2.
[19] Scheme, cl 4.
The obligations of Altrad under the Scheme are supported by a Deed Poll which has been executed by Altrad (Deed Poll).[20]
[20] Scheme booklet, Annexure A.
The independent directors of Valmec unanimously recommend that shareholders vote in favour of the Scheme.[21]
[21] Scheme booklet, [1].
An IER has been prepared by Moore Australia. The IER expresses the opinion that, in the absence of a superior proposal, the Scheme is in the best interests of the shareholders.[22] In reaching this conclusion, the IER determined the range of the value of a Share was between $0.378 and $0.456 and the Scheme Consideration of $0.413 is in the mid-range of the valuation range, being $0.04 below the midpoint.[23] The basis for the valuation and the methodology used are outlined in the IER. The consideration of advantages, disadvantages and other factors that are likely to impact shareholders are set out in the IER.
[22] Scheme booklet, Annexure E.
[23] Scheme booklet, Annexure E.
I was provided with the draft Scheme booklet which was lodged with ASIC on 12 August 2021[24] and the various amendments that have been made to the document since then.[25]
[24] Affidavit of Ryan Eamonn Lennon filed 26 August 2021 [4], 'REL1'.
[25] Second affidavit of Steve Dropulich filed 27 August 2021 'SD5'; Second affidavit of Ryan Eamonn Lennon filed 30 August 2021 'REL5'.
The Scheme booklet contains the following sections:
(a)important notices, including the purpose of the Scheme booklet and advice to shareholders to obtain independent legal advice;
(b)a listing of all important dates and times for the Scheme;
(c)a letter from the Chairman of Valmec, Mr Zurhaar, to shareholders;
(d)a summary of reasons to vote in favour of or against the Scheme;
(e)a 'frequently asked questions' table, which addresses all essential matters;
(f)a summary of the Scheme;
(g)an outline of considerations relevant to the vote of shareholders;
(h)a section on how to attend and vote at the Scheme Meetings;
(i)information on Valmec and Altrad;
(j)a section on risk factors;
(k)a section on the taxation implications for Valmec shareholders;
(l)an outline of the implementation of the Scheme and other aspects of the proposed transaction; and
(m)a section on additional information, which includes details of the relevant interests of Valmec's directors and the benefits they will obtain if the Scheme is approved.
The draft Scheme booklet included a number of important annexures which will form part of the final Scheme booklet. These include the executed Deed Poll, the proposed Scheme, the notice of general Scheme Meeting, the notice of the Other Exiting Shareholders' Scheme Meeting, and the IER.

Legal principles in respect of the scheme

Pursuant to s 411 of the Act, a scheme of arrangement can be used to re-organise a company in a manner which will be binding on its members, provided that:
(a)the arrangement is agreed by the requisite majorities as prescribed by s 411(4)(a) of the Act, namely 75% of shareholders by value and 50% by number; and
(b)the court approves the arrangement pursuant to s 411(4)(b) of the Act.
There are three stages to an application under s 411 of the Act. First, the court approves the convening of a scheme meeting and the draft explanatory statement to be sent to the scheme members. Second, the members vote on the proposed scheme at the scheme meeting. Third, assuming the first two stages have occurred, the court approves the proposed scheme.[26]
[26] Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358 [7].

There are well‑established principles which apply to the first stage of proceedings. The court will order the convening of the scheme meeting and approve the dispatch of the scheme booklet if it is satisfied that:[27]
(a)there is a pt 5.1 body;
(b)there is a compromise or arrangement within the meaning of s 411 of the Act;
(c)the proposed scheme booklet contains the prescribed information[28] and provides proper disclosure;[29]
(d)the scheme is bona fide and properly proposed;
(e)ASIC has had at least 14 days' notice of the proposed hearing date and a reasonable opportunity to examine the terms of the scheme and the scheme booklet and make submissions;[30]
(f)the procedural requirements of the Act and the Corporations Rules have been met;
(g)the scheme is of such a nature that, if it receives the necessary statutory majority at the scheme meeting, the court will be likely to approve it.
[27] Re SRG Ltd [2018] FCA 1092 [11]; Re Wesfarmers Ltd [2018] WASC 308 [60].
[28] Corporations Act 2001 (Cth) s 412(1)(a)(ii); Corporations Regulations 2001 (Cth) reg 5.1.01 and Sch 8 cl 8301 ‑ 8310.
[29] Corporations Act2001 (Cth) s 412(1)(a)(i).
[30] Corporations Act2001 (Cth) s 411(2)(b).
Any issue about classes of members is usually determined at the first court hearing.[31] This is so that costs and court time are not wasted which would otherwise occur if this issue was left to the second court hearing.[32]
[31] Re CSR Ltd [73].
[32] Re Opes Prime Stockbroking Ltd [2009] FCA 813; (2009) 179 FCR 20 [20].
The standard of review that is undertaken by the court at the first court hearing is whether the proposed scheme is not inappropriate and is one that sensible business people might consider is of benefit to its members.[33] If the proposed arrangement is one that appears fit for consideration by a meeting of members and is a commercial proposition likely to gain the court's approval if passed by the necessary majority, leave should be given to convene the meeting.[34]
[33] Re Amcom Telecommunications Ltd [2015] FCA 341 [10].
[34] Re SRG Ltd [12]; Re Wesfarmers Ltd [72] - [76].

Disposition

The formal matters that Valmec had to prove are satisfied.
Valmec is a company and, accordingly, is a pt 5.1 body. The proposed Scheme constitutes an 'arrangement'. Share acquisition schemes have been approved by courts as an arrangement on numerous occasions.
Valmec filed the affidavits required by r 3.2 of the Corporations Rules regarding the persons who have been nominated to be the chairperson and alternate chairperson for the Scheme Meetings.[35]
[35] First affidavit of Stephen Zurhaar filed 26 August 2021 [6] - [12]; Affidavit of Vincent Santostefano filed 26 August 2021 [6] - [13].
By letter dated 30 August 2021, ASIC confirmed that it had been given 14 days' notice of the hearing and a reasonable opportunity to examine the terms of the Scheme and the draft explanatory statement or Scheme booklet.[36] ASIC also gave notice that it did not propose to appear at the first hearing to make submissions or intervene to oppose the Scheme.[37]
[36] Second affidavit of Ryan Eamonn Lennon filed 30 August 2021 [9], 'REL-4'.
[37] Second affidavit of Ryan Eamonn Lennon filed 30 August 2021 [9], 'REL-4'.
On the materials before me, there was and is nothing to suggest the Scheme was not properly proposed. The constitution of Valmec does not prevent the Scheme.[38]
[38] Second affidavit of Steve Dropulich filed 27 August 2021 'SD2'.
In written and oral submissions, Valmec's counsel drew my attention to some specific matters. I address each of these below.

Class issue

The Act does not define the term 'class'. To determine whether there are separate classes of members, the test involves three questions.[39] First, what are the rights which existing members have against the company and to what extent are they different. Second, to what extent are these rights affected differently by the scheme. Third, does the different treatment of rights make it impossible for the members in question to consider the scheme as one class.
[39] First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116; (2017) 320 FLR 78 [80].
The test is not one of identical treatment but of 'community of interest'.[40] It is necessary for the court to determine whether the rights of different groups, viewed in the context of the proposed scheme, are so dissimilar as to make it impossible for them to consult together with a view to their common interests.[41] Ordinarily, divergent commercial interests external to share membership will not be a factor which differentiates classes, although this is a question of degree.[42]
[40] Re Hills Motorway Ltd [2002] NSWSC 897; (2002) 43 ACSR 101 [12].
[41] Re Wesfarmers Ltd [95]; Re Healthscope Ltd [2019] FCA 542; (2019) 139 ACSR 608 [106] - [107].
[42] Re NRMA Ltd [2000] NSWSC 82; (2000) 156 FLR 349 [79]; Re Wesfarmers Ltd [95].
In approaching the issue of classes, a practical, business-like approach should be adopted by the court.[43] As Finkelstein J noted in Re Opes Prime Stockbroking, there is a built‑in safeguard against majority oppression in that the court is not bound by the decision of the meeting.[44]
[43] Re Healthscope Ltd [118].
[44] Re Opes Prime Stockbroking Ltd [66].
In this case, Valmec proposed, and I accepted, that given the terms of the proposed Scheme, there were two relevant classes of shareholders and that there should be two shareholders' meetings to consider the proposed Scheme.
The first class of shareholders is the shareholders associated with Mr Dropulich (Other Exiting Shareholders). As a company associated with Mr Dropulich is the only shareholder that will retain shares in Valmec, I accept these shareholders comprise a different class.
All Valmec shareholders other than the Other Exiting Shareholders have the same rights under the Scheme and will receive the Scheme Consideration. For this reason, I accept the other class of shareholders is all other Valmec shareholders.
I accept the difference in the Scheme consideration being offered to one of the Other Exiting Shareholders, as compared to all other Shareholders, means there is insufficient community of interest between all shareholders for them to consider in the one Scheme Meeting whether the Scheme is in their collective interests. Allowing the shareholders to vote as a class, excluding the Other Exiting Shareholders, will permit them to come to a collective view independent of the views of the Other Exiting Shareholders.
In respect of the Performance Rights, in Re Kidman Resources Ltd, O'Callaghan J expressed the view that holders of performance rights who are also shareholders of the scheme company do not constitute a separate class for the purposes of s 411(1) of the Act.[45] On this basis, I accept counsel's submission that the holders of Performance Rights do not constitute a separate class.

Conditions precedent

[45] Re Kidman Resources Ltd [2019] FCA 1226 [93].

There are a number of conditions precedent to the Scheme.[46] Mr Dropulich has deposed he is not aware of any basis to believe that any condition precedent will not be satisfied or waived by the necessary time.[47]

Scheme booklet

[46] SID cl 3.

[47] Third affidavit of Steve Dropulich filed 30 August 2021 [29] - [30].

I have read the initial draft of the Scheme booklet (as provided to ASIC). I have also been provided with correspondence between ASIC and Valmec's solicitors relating to ASIC's review of the draft Scheme booklet.[48] Clarification was sought by ASIC in relation to the following matters:[49]
(a)whether the arrangement between Altrad and Mr Dropulich, specifically relating to the value of the benefits Mr Dropulich may obtain from the Excluded Shares and the cancellation of his performance rights, constitutes a collateral benefit;
(b)why the performance rights issued to Mr Singh and Mr Rahman to be cancelled pursuant to the Scheme were not treated as a separate class for the purposes of the Scheme;
(c)submissions as to the appropriateness of Mr Dropulich making a recommendation in respect of the Scheme;
(d)given that statements of intention to vote in favour of the Scheme by two shareholders representing 18.8% of the shares in Valmec were disclosed in an ASX announcement dated 19 July 2021 but not in the Scheme booklet, whether Valmec intended to update the Scheme booklet to include the statements of intention;
(e)whether additional disclosure would be made regarding Altrad IA's ability to fund the Scheme consideration including disclosure of Altrad IA's cash reserves; and
(f)comments on the IER which were provided directly to Moore Australia.
[48] First affidavit of Ryan Eamonn Lennon filed 26 August 2021, 'REL1' - 'REL4'; Second affidavit of Ryan Eamonn Lennon filed 30 August 2021, 'REL1' - 'REL4'.
[49] Second affidavit of Ryan Eamonn Lennon filed 30 August 2021, 'REL1'.
Ultimately, these issues were resolved to the satisfaction of ASIC.
Subject to the matters set out at [52] below, I was and am satisfied that there will be proper disclosure as to the effect of the proposed Scheme and the material considerations on the proposed Scheme by shareholders of Valmec.
A notable feature of the proposed Scheme is that Mr Dropulich, the managing director of Valmec, through a related entity, will retain a small shareholding in the event the Scheme is implemented. In my view, the Scheme booklet did not sufficiently or prominently disclose this or provide shareholders with any explanation as to why this was a term of the Scheme. It was and is my view that this aspect of the proposed Scheme needed to be explained and drawn to the attention of shareholders. For this reason, I required amendments to be made to the Scheme booklet to address these matters. Valmec accepted it was appropriate for these changes to be made.
There is evidence before me as to the due diligence and verification process that was undertaken by both Valmec and Altrad.[50] On the basis of this evidence, I accept that:
(a)Valmec undertook a process of due diligence and verification to verify the accuracy of statements attributable to Valmec in the Scheme booklet;
(b)Altrad undertook a similar process to verify the statements attributable to it;
(c)appropriate steps have been taken to satisfy Valmec and Altrad that the Scheme booklet does not omit any material information.
[50] Affidavit of Neil Edward Sadler filed 27 August 2021 [9] - [11]; Second affidavit of Steve Dropulich filed 27 August 2021 [54] - [56]; Third affidavit of Steve Dropulich filed 30 August 2021 [5] - [26].
The directors of Valmec have resolved to approve the Scheme booklet in its final form.[51]
[51] Third affidavit of Steve Dropulich filed 30 August 2021, 'SD3'.
Based on the checklist provided by Valmec,[52] I was satisfied the Scheme booklet contained the prescribed information in accordance with s 412(1)(a)(ii) of the Act and sch 8 of the Corporations Regulations 2001 (Cth).
[52] Second affidavit of Steve Dropulich filed 27 August 2021 'SD7'.
Counsel drew my attention to the differing practices between the courts as to whether the court will make an order approving the explanatory statement.[53] Section 411(1) of the Act provides that if the court has made an order convening a meeting or meetings of members or creditors, the court 'may approve the explanatory statement.' Where the courts have declined to approve the explanatory statement, this has been done on the basis that, given the requirement for the Scheme booklet to be registered by ASIC and the criteria applied by ASIC, it was more appropriate that the Scheme booklet be dealt with in this manner and the court note this has occurred but otherwise decline to approve the explanatory statement.
[53] Re DuluxGroup Ltd [2019] FCA 961 [63] and the cases cited therein.
The practice in this court is for the court to make orders approving the explanatory statement. This is the practice I propose to adopt in this case, particularly in circumstances where, in my view, amendments to the Scheme booklet were required prior to its dispatch.

Performance risk

I was and am satisfied that the nature and terms of the proposed Scheme are such that shareholders are adequately protected against the risk they will not receive the Scheme Consideration and have no capacity to sue Altrad to recover their shares or damages.
In that respect I have had regard to the terms of the Scheme and the Deed Poll. Pursuant to these documents:
(a)Altrad must allot and issue (or procure the allotment and issue of) $0.413 in cash to each eligible shareholder for each Share they hold on the implementation date;[54]
(b)Altrad is required to issue the Scheme Consideration by no later than the business day before the implementation date, by depositing (or procuring the deposit of) the Scheme Consideration into the trust account for payment by Valmec to the Scheme Shareholders;[55]
(c) transfer of the Shares is subject to provision of the Scheme Consideration;[56]
(d)beneficial title in the Shares does not pass unless the Scheme Consideration has been paid in accordance with the Scheme;[57] and
(e)Valmec and each Scheme participant will have individual rights against Altrad in the event that Altrad fails to provide the Scheme Consideration.[58]
[54] Scheme cl 4.1.
[55] Scheme cl 4.2.
[56] Scheme cl 4.3; SID cl 4.2(b).
[57] Scheme cl 4.2.
[58] Property Law Act 1969 (WA) s 11.
The resignation of the current directors and appointment of the nominees of the Bidder group to the board of Valmec is subject to and conditional upon the Scheme Consideration having been paid.[59] Accordingly, there was no concern that the incoming board could interfere with the implementation of the Scheme or payment to shareholders.
[59] SID cl 7.1 and 7.3.
The arrangements under the terms of the proposed Scheme are supported by the Deed Poll. By the Deed Poll, Altrad covenants in favour of each Valmec shareholder that it will perform all actions attributed to it under the Scheme. There is also an acknowledgement that the Deed Poll may be relied on and enforced by any Scheme shareholder in accordance with its terms.[60] In my view, the shareholders are sufficiently identified within the Deed Poll to enable them to enforce the Deed Poll as against Altrad. On the evidence before me, I was and am satisfied that the Deed Poll has been validly executed and is binding on Altrad.

Director benefits and director recommendations

[60] Deed Poll cl 1.3.

Clause 6.1 of the SID requires Valmec to use its best endeavours to procure that each director recommend shareholders vote in favour of the Scheme resolution in the absence of a Superior Proposal and provided the IER continues to confirm the Scheme is in the best interests of shareholders. All directors have made this recommendation in the Scheme booklet.
Counsel drew my attention to the fact that four of Valmec's five directors (including Mr Dropulich) hold shares in the plaintiff.[61] Each of these directors, excluding Mr Dropulich, are entitled to vote at the Scheme Meeting. If the Scheme is implemented, each will receive the Scheme Consideration along with other shareholders.[62]
[61] Scheme booklet [11.1].
[62] Scheme booklet [11.1].
In relation to Mr Dropulich, counsel drew my attention to the following additional matters. First, some of the shares that he has an interest in are excluded from the Scheme. Second, Mr Dropulich holds Performance Rights which will be dealt with outside of the Scheme by way of cancellation.[63] Third, Mr Dropulich's employment as managing director will continue in the event the Scheme is implemented. Fourth, Mr Dropulich and the Bidder Group have entered into a put and call option deed in respect of the Excluded Shares and intend to enter into a shareholders agreement which will include 'good leaver', 'intermediate leaver', 'bad leaver' and 'drag along' provisions.
[63] Scheme booklet [3.2].
As I noted in Re Dreamscape Networks Ltd, in a number of recent decisions, courts have considered the appropriateness of a director, who is to receive an additional financial benefit if the scheme is approved, making a recommendation to shareholders about voting in favour of the scheme.[64] It is not necessary for me to repeat what I said there. Those reasons for decision reflect my views on this matter.
[64] Re Dreamscape Networks Ltd [2019] WASC 412 [78] - [80].
For the following reasons, it was and is my view that it was not inappropriate for each of the directors, including Mr Dropulich, to make a recommendation in respect of the Scheme.
First, the exclusion of the Excluded Shares from the Scheme was a term proposed by the Bidder Group and not Mr Dropulich. The Independent Expert notes that the value attributed to these Shares is the Scheme Consideration.[65] The exclusion of these Shares and the reason for it will be disclosed to shareholders in the Scheme booklet and can be taken into account by shareholders in considering the Scheme.
[65] Affidavit of Neil Fenton Pace filed 30 August 2021 'NFP1', p 57.
Second, the Performance Rights of Mr Dropulich arise as a result of the cancellation of performance rights which were issued under a plan approved by shareholders in 2019.[66] I accept that they were issued for the genuine and ordinary commercial rationale of incentivising his performance as managing director and not to incentivise any recommendation in respect of the Scheme.
[66] Second affidavit of Steve Dropulich filed 27 August 2021 [27], 'SD6'.
Third, in relation to the renumeration proposed to be paid by Altrad to Mr Dropulich if the Scheme is implemented, this amount is the same as his current entitlement. The Independent Expert's conclusion in relation to the arrangement is that it is reasonable in the circumstances and does not constitute a net benefit.[67]
[67] First affidavit of Neil Fenton Pace filed 30 August 2021, 'NFP1', p 58.
Fourth, Mr Dropulich's rights under the Put and Call Option Deed, as described in [11.4(b)] of the Scheme booklet, are linked to and dependent on his employment and performance for between five to eight years. His right to the Performance Rights is linked to and dependent on his employment and performance for between two to three years.[68] The Independent Expert's conclusion in relation to this Deed is that it is reasonable and reflects reasonable and commercial remuneration conditions designed to reward future performance.[69]
[68] Second affidavit of Ryan Eamonn Lennon filed 30 August 2021, 'REL9'.
[69] First affidavit of Neil Fenton Pace filed 30 August 2021, 'NFP1', p 57.
Finally, and importantly, each of these matters are fully and prominently disclosed in the Scheme booklet.[70]

No collateral benefit which should prevent approval of the Scheme

[70] Scheme booklet, Letter from the Valmec Chairman, [1] - [3], [11].

The court must examine whether a benefit exists for one shareholder in particular, so as to bring into question the overall fairness of the Scheme.[71] To determine whether there is a collateral benefit, the court considers the 'net benefits' test, to ensure that there is no overall disparity in favour of the party to the non-Scheme transaction.[72] If no net benefit is present, then, prima facie, the equality principle under s 602(c) of the Act is satisfied.
[71] Re David Jones Ltd [No 2] [2014] FCA 720; (2014) 101 ACSR 381 [16] - [21] (Farrell J).
[72] Takeovers Panel, Guidance Note 21: Collateral Benefits [15].
Counsel for Valmec drew my attention to a number of matters that may constitute a collateral benefit. These are the same matters as set out above at [63] - [64].
Counsel for Valmec submitted that these arrangements needed to be considered in the context of Mr Dropulich's employment as managing director, his conditions of employment and the proposal that he will continue in this role in the event the Scheme is implemented. As set out above, the Independent Expert has concluded in relation to each of these matters that they do not provide Mr Dropulich or his associated entities with a net benefit.

On the evidence before me, I accept that no issue of collateral benefit arises.

Exclusivity provisions and break fee

The SID contains the customary lock up devices in the form of 'no shop', 'no talk', 'no due diligence', 'notification obligations' and 'matching right' provisions.[73] The 'no talk' and 'no due diligence' provisions are subject to a fiduciary carve out.[74] In certain circumstances, a break fee of $517,000 is payable by Valmec to Altrad.[75]
[73] SID cl 9.
[74] SID cl 9.5.
[75] SID cl 10.
In considering whether the exclusivity provisions impact on completion of the transaction and the duties of directors, the court has regard to:[76]
(a)the period of the exclusivity, which should be no more than a reasonable period and capable of precise ascertainment;
(b)whether the provisions are subject to an overriding obligation that the directors not breach their fiduciary duties or are otherwise unlawful; and
(c)whether there is adequate prominence given to these provisions in the Scheme booklet.
[76] Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400 [29] - [35]; Re Kangaroo Resources Ltd [2018] WASC 327 [57] - [61]; Re Pacific Energy Limited [2019] WASC 443 [58].
In this case, the exclusivity period in the SID is defined and, at most, is a period of six months. The no‑talk and no due diligence provisions contain appropriate fiduciary carve-outs.[77] The exclusivity arrangements are prominently disclosed in the Scheme booklet at [4.4].[78]
[77] SID cl 9.5.
[78] Scheme booklet [4.4].
The second affidavit of Mr Dropulich sets out the commercial justification for the exclusivity provisions and the Break Fee.[79] I accept his evidence that the exclusivity provisions are reasonable and appropriate for a transaction of this nature. The inclusion of these provisions in the SID followed commercial negotiations in which Valmec and its board received advice from external advisors.[80]
[79] Second affidavit of Steve Dropulich filed 27 August 2021 [41] - [49].
[80] Second affidavit of Steve Dropulich filed 27 August 2021 [48] - [49]; Affidavit of Neil Edward Sadler filed 27 August 2021 [9] - [10].
The amount of the Break Fee is $517,000, which is approximately 0.99% of the equity value of Valmec of $52,434,192 (being the aggregate value of all Valemc shares, calculated on a per share basis of $0.413).[81] As such, it is within generally accepted commercial parameters for break fees. The Break Fee is intended to compensate the parties for the costs (both costs incurred and opportunity costs) if the Scheme does not proceed. The Break Fee is not payable if shareholders do not vote in favour of the Scheme.[82] Accordingly, I consider it is unlikely to influence shareholders in their decision to vote on the Scheme.

Electronic dispatch of the Scheme booklet and proxy form

[81] Second affidavit of Steve Dropulich filed 27 August 2021 [43].

[82] SID cl 10.2.

Valmec sought orders for the electronic dispatch of the Scheme booklet and applicable proxy form by email to those Valmec shareholders who have nominated an electronic address for the purpose of receiving Shareholder communications from Valmec (Email Shareholders). These orders are now common.[83] Details were provided as to the terms of the proposed electronic notification, namely that email notices would be sent to Valmec shareholders containing links to the Scheme booklet and proxy form.[84]
[83] See, for example, Re SRG Ltd [48]; Re Doray Minerals Ltd [2019] WASC 57[72].
[84] First affidavit of Harveer Singh filed 26 August 2021 [13] - [15].
Having had my attention drawn to the terms of the proposed email communication to shareholders, I was and am satisfied that an order for electronic dispatch of the Scheme booklet was appropriate.
In respect of the remaining Valmec shareholders (who were not Email Shareholders and those Email Shareholders in respect of whom electronic delivery has been notified as been ineffective), Valmec proposed the dispatch of hardcopy documents by post including a notice containing the links to the Scheme booklet and proxy form.[85]
[85] First affidavit of Harveer Singh filed 26 August 2021 [12], [17].

Other Matters

Counsel for Valmec drew my attention to the 'deemed warranty' provision in the proposed Scheme.[86] The warranty provision is disclosed in the Scheme booklet.[87] Deemed warranty clauses are not unusual and are acceptable provided there is adequate disclosure that it is a condition.[88]
[86] Scheme cl 7.2.
[87] Scheme booklet [10.4].
[88] Re APN News and Media Ltd [57] - [63]; Re DUET Management Company 1 Ltd [2013] NSWSC 817; (2013) 95 ACSR 34 [23]; Re Nzuri Copper Ltd [2019] WASC 189 [90]; Re Macquarie Private Capital A Ltd [2008] NSWSC 323 [13] - [14]; Re Doray Minerals Ltd [71].
Taking into account all of these matters, I considered that there was no apparent reason why the Scheme should not, if the necessary special resolution of shareholders is passed, receive the court's approval.

Conclusion on First Hearing

At the first hearing before me, I was satisfied that the substantive and procedural requirements under s 411(1) and s 1319 of the Act had been satisfied and that the proposed Scheme was fit for consideration by Valmec's members.
For these reasons, at the conclusion of the hearing on 31 August 2021, I made orders in terms of 'Annexure A' to this judgment in respect of the Scheme.

Scheme Meetings

On 1 October 2021, each of the Scheme Meetings were convened and held both in person and electronically. At these meetings, the resolution was passed by the requisite statutory majorities.
102 shareholders (excluding the Other Exiting Shareholders) were present at the General Scheme Meeting in person and by proxy, comprising approximately 17.62% of shareholders by number.[89] 93.14% of shareholders who voted at the General Scheme Meeting were in favour of the resolution and 99.93% of votes cast on the Scheme resolution were cast in favour of the resolution.[90] 90,279,916 of the 121,644,185 Valmec shares on issue were voted on the Scheme resolution, representing approximately 74.22% of the total number of voting shares.[91]
[89] Second affidavit of Eric Merven filed 4 October 2021 [68].
[90] Second affidavit of Stephen Zurhaar filed 4 October 2021 [13].
[91] Second affidavit of Eric Merven filed 4 October 2021 [68].
100% of the Other Exiting Shareholders attended at the Other Exiting Shareholders Meeting and voted in favour of the Scheme resolution.[92]
[92] Second affidavit of Stephen Zurhaar filed 4 October 2021 [14].

Approval of Scheme

This matter came back before me for the second court hearing on 6 October 2021.
In addition to the affidavits that were relied upon at the first court hearing, Valmec filed several additional affidavits prior to the second court hearing. The following affidavits were relied upon by Valmec:
(a)a fourth affidavit of Steve Dropulich filed 4 October 2021, Valmec's managing director, regarding the plaintiff's satisfaction of the Conditions Precedent;
(b)a second affidavit of Eric Merven filed 4 October 2021, in relation to the physical and electronic dispatch of Scheme materials to shareholders, including new shareholders and those shareholders where electronic dispatch resulted in a bounce‑back. Mr Merven's second affidavit gave an overview of the conduct of the Scheme Meetings and outlined the production and receipt of proxy forms, the result of the Scheme Meetings poll reports and the Investor Assistance telephone line operated by Automic;
(c)a second affidavit of Stephen Zurhaar filed 4 October 2021, the chairperson of the Scheme Meetings, providing an overview of the Scheme Meetings;
(d)a second affidavit of Harveer Singh filed 4 October 2021, providing the reports on the Scheme Meetings;
(e)a second affidavit of Neil Fenton Pace filed 4 October 2021, outlining that no facts or circumstances have arisen since the date of the IER to change the opinions stated within it;
(f)a fourth affidavit of Ryan Eamonn Lennon filed 4 October 2021, confirming the registration of the Scheme booklet and service of court documents with ASIC and attaching the advertisements of the second court hearing published in The Australian and The West Australian newspapers;
(g)a fifth affidavit of Mr Lennon filed 5 October 2021, attaching correspondence between ASIC and Dentons Australia, a letter from ASIC confirming it had no objection to the proposed Scheme under s 411(7)(b) of the Act and the certificates executed by Valmec and Altrad respectively confirming each of the conditions precedent had be satisfied or waived in respect of the Scheme (save for the orders sought at the second court hearing); and
(h)a sixth affidavit of Mr Lennon filed 6 October 2021, attaching correspondence between Dentons Australia and Mr Merven of Automic in relation to details of the Trust Account to be provided to Automic required under cl 4.2 of the Scheme.
These additional affidavits address the matters Valmec was required to establish at the second court hearing.

Legal Principles in respect of the Scheme Approval

The approval of the proposed Scheme pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), or the second court hearing, is the third stage of approval for a scheme of arrangement. The second stage is the approval of the scheme by the requisite statutory majorities, which occurred at the Scheme Meetings.
At the second court hearing, the court has two tasks:[93]
(a)to ensure that all statutory and procedural requirements have been satisfied. This includes confirming that:[94]
(i)the meeting was convened and held in accordance with the court's earlier orders;
(ii)the resolutions were passed with the requisite statutory majorities; and
(iii)the plaintiff otherwise complied with the court's earlier orders;
(b)to determine, in the exercise of the court's discretion, whether to approve the proposed arrangement.
[93] Re Wesfarmers Ltd [No 2] [2018] WASC 357 [12].
[94] Re International Goldfields Ltd [2004] WASC 112 [7].
The court has a discretion to approve a scheme under s 411(4)(b) of the Act and is not bound to approve a scheme just because the court previously made orders for the convening of a meeting or because the statutory majorities have been achieved.[95] That said, the court will usually approach the task on the basis that shareholders are better judges of what is in their commercial interests than the court.[96]
[95] Re Wesfarmers Ltd (No 2) [13]; Re Seven Network Ltd [No 3] [2010] FCA 400; (2010) 267 ALR 583 [31].
[96] Re Wesfarmers Ltd (No 2) [13]; Re Seven Network Ltd [No 3] [32] - [33].
The factors that inform the court's discretion whether or not to approve a scheme are:[97]
(a)whether the members have voted in good faith and not for an improper purpose;
(b)whether the proposal is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it;
(c)whether the plaintiff has brought to the attention of the court all matters that could be considered relevant to the exercise of the court's discretion;
(d)whether there has been full and frank disclosure of all information material to the members' decision;
(e)whether minority shareholders would be oppressed by the scheme;
(f)whether the court is satisfied that the scheme has not been proposed to avoid ch 6 of the Act;
(g)whether ASIC has an objection to the scheme; and
(h)whether the scheme offends public policy.
[97] Re Seven Network Ltd [No 3] [35] - [40], [50], [52].

Disposition

Compliance with statutory and procedural requirements

I was and am satisfied, on the basis of the additional affidavits that were filed by Valmec, that:
(a)a copy of the court's orders made on 31 August 2021 (Orders) were lodged with ASIC that day;[98]
(b)a copy of the Scheme booklet that was approved for distribution by the court at the first court hearing was lodged with ASIC and registered on 31 August 2021 and an amended version was lodged with ASIC and registered on 1 September 2021; [99]
(c)the Scheme booklet was dispatched to shareholders in accordance with the Orders;[100]
(d)the Scheme Meetings were convened and held on 1 October 2021 in accordance with the Orders;[101]
(e)the Scheme was approved by the requisite statutory majorities;[102]
(f)notice of the second court hearing was given by way of advertisement in The Australian newspaper and The West Australian newspaper on 23 September 2021;[103] and
(g)ASIC informed Valmec on 5 October 2021, pursuant to s 411(17)(b) of the Act, that it has no objection to the proposed Scheme.[104]
[98] Fourth affidavit of Ryan Eamonn Lennon filed 4 October 2021 [5], 'REL1'.
[99] Fourth affidavit of Ryan Eamonn Lennon filed 4 October 2021 [5] - [8], 'REL1' - 'REL2', 'REL4'.
[100] Second affidavit of Eric Merven filed 4 October 2021 [15] - [51], 'EM1' - 'EM7'.
[101] Second affidavit of Eric Merven filed 4 October 2021 [52]; Second affidavit of Stephen Zurhaar filed 4 October 2021 [5].
[102] Second affidavit of Eric Merven filed 4 October 2021 [67] - [68]; Second affidavit of Stephen Zurhaar filed 4 October 2021 [13] - [14].
[103] Fourth affidavit of Ryan Eamonn Lennon filed 4 October 2021 [12] - [13], 'REL6' - 'REL7'.
[104] Fifth affidavit of Ryan Eamonn Lennon filed 5 October 2021 [12], 'REL2'.
Counsel for the plaintiff drew my attention to the following matters in respect of the Scheme Meetings.
First, counsel drew my attention to the fact that 12 new shareholders were included in the member's register of Valmec between 2 September 2021 and 28 September 2021. A hardcopy Scheme booklet and personalised proxy form were physically dispatched to each of these shareholders.[105] I was and am satisfied that these new shareholders were given adequate disclosure as to the Scheme.
[105] Second affidavit of Eric Merven filed 4 October 2021 [34] - [35], 'EM5'.
Second, counsel drew my attention to the voter turnout at the General Scheme Meeting. Of the total 121,644,185 Valmec shares on issue, 90,279,916 shares were voted at the General Scheme Meeting, being approximately 74.22% of the Valmec shares on issue.[106] Further, only 102 of Valmec's 579 eligible shareholders voted at the General Scheme Meeting, which represented only 17.62% of eligible shareholders by number.
[106] Second affidavit of Eric Merven filed 4 October 2021 [68].
As was stated by Farrell J in Re TriAusMin Limited [No 2]:[107]
It is inappropriate to assume (in the absence of complaint) that shareholders who did not vote either did not have notice of the meeting or were silent in protest of the scheme; apathy should not be presumed to be antagonism.
Nonetheless it does call for consideration to ensure that the vote [was] not unrepresentative, since the court retains the discretion to withhold its approval in that case. It is relevant to consider whether members have been deterred from attending or voting at the meeting. (footnotes omitted)
[107] ReTriAusMin Limited [No 2] [2014] FCA 833 [10] - [11].
Relatively low shareholder turnout does not prevent the court from making orders approving a scheme of arrangement.[108]
[108] See for example Re Foundation Healthcare Ltd [No 2] [2002] FCA 973; (2002) 43 ACSR 680 [22] (44.23% of shareholders voting); Re Rebel Sport Ltd [No 2] [2007] FCA 458 [6] (24.99% of shareholders holding 83.59% of shares) Re Avoca Resources Ltd [2011] FCA 208 [25] (11.49% of shareholders holding 72.38% of shares); Re Great Artesian Oil and Gas Ltd [No 2] [2008] FCA 1169 [3] (24.6% of shareholders voting); Re Straits Resources Ltd [No 2] [2011] FCA 47 [12] (10.8% of shareholders holding 74% of shares); Re Cortona Resources Ltd [No 2] [2013] FCA 302 [12] (17.5% of shareholders holding 45.2% of shares); Re Auzex Resources Ltd [No 2] [2012] QSC 101 [18] (9.75% of shareholders representing 42.3% of votes); Re TriAusMin Limited [No 2] [9] (10.94% of shareholders holding 52.9% of shares); Re Decimal Software Limited [No 2] [2018] FCA 2040 [15] - [16] (5.21% of shareholders holding 52.85% of shares); Re Pensana Metals Ltd [2020] WASC 17 [12] (6.41% of shareholders holding 37.08% of shares); Re Zenith Energy Ltd [No 3] [2020] WASC 289 [18] (39% of shareholders holding 89.25% of shares); Re Saracen Mineral Holdings Ltd [No 2] [2021] WASC 32 [47] (9.50% of shareholders holding 75.46% of shares); Re CannPal Animal Therapeutics Ltd [No 2] [2021] WASC 83 [32] (6.63% of shareholders holding 55.46% of shares); Re Piedmont Lithium Ltd [No 3] [2021] WASC 173 (8.44% of shareholders holding 26.74% of shares).
I was and am satisfied that there was sufficient turnout at the General Scheme Meeting. I do not consider that the low voter turnout by number of shareholders, in itself, suggested there had been an error in the dispatch of the Scheme booklet, nor that this should prevent the court from making orders under s 411(4)(b) of the Act. In this respect, I have had regard to the following matters:
(a)the number of shareholders who voted at the General Scheme Meeting, being approximately 17.62% of all eligible shareholders,[109] significantly exceeded the number of shareholders who voted at the three previous general meetings of Valmec; [110]
(b)the shareholders who voted at the General Scheme Meeting overwhelmingly voted in favour of the Scheme;
(c)there was no evidence which suggested any irregularity in the dispatch of the Scheme booklet; and
(d)there was no evidence of any issue which would have deterred shareholders from voting at or attending the General Scheme Meeting.
[109] Second affidavit of Eric Merven filed 4 October 2021 [68].
[110] Second affidavit of Harveer Singh filed 4 October 2021 [11], 'HS3'.
The third matter was the platform used by Valmec for conducting the virtual component of the Scheme Meetings. The General Scheme Meeting was broadcast using Zoom.[111] No issues arose in relation to the General Scheme Meeting on the Zoom platform.
[111] Second affidavit of Eric Merven filed 4 October 2021 [55].
Finally, counsel drew to my attention the result of the polls conducted at the Scheme Meetings, specifically that the results were announced after the Scheme Meetings were closed. Mr Zurhaar was the chairperson of the Scheme Meetings. Mr Zurhaar deposed that at the Scheme Meetings, he announced that the results would be announced to the ASX and made available on Valmec's website shortly after the Scheme Meetings had closed.[112] Counsel submitted that because all votes were cast by proxy, Mr Zurhaar's announcement during the Scheme Meetings of the poll results were, in effect, an announcement of the results.[113]
[112] Second affidavit of Stephen Zurhaar filed 4 October 2021 'SZ1'.
[113] Submissions for second court hearing [55]; Second affidavit of Stephen Zurhaar filed 4 October 2021 'SZ1'.
The approach of the Chairperson advising the meeting that results will be the subject of an announcement pursuant to s 251AA of the Act, following completion of counting of the poll and after the meeting has formally been closed, has been approved by the courts on numerous occasions.[114]
[114] Re Asaleo Care Limited (No 2) [2021] FCA 636 [26] - [28]; Re CSG Limited (No 2) [2020] NSWSC 39 [6] - [8]; Re National Australia Bank Ltd [2016] VSC 62 [56]; Re MAC Services Group Ltd [2010] NSWSC 1474.
The question of whether a scheme resolution is passed at a meeting of shareholders when the result of the poll is not announced at the meeting but the meeting is told the result will be the subject of an ASX announcement, which subsequently occurs, was considered by Barrett J in Re MAC Services Group Ltd. Barrett J concluded at [22]:[115]
… Rather, it should be accepted that the process of a poll, of its nature, may extend beyond the time at which the persons making up the meeting at which it is demanded and directed cease to be together and, if the poll has been directed in such a way that the result can only crystallise after that time, the meeting is to be regarded as continuing until the result does crystallise. In using the word 'crystallise', I deliberately avoid the choice between ascertainment of the result and formal declaration of the result (see, as to this distinction in the case of election of officers, R v Coaks (1854) 3 El & Bl 249; 118 ER 1133; Lynch v McGrane (1965) 7 FLR 188). Ascertainment will always precede declaration but the important factor is, to my mind, completion of the process, as directed, so that the result is manifested in a way appropriate to the circumstances. Romer LJ, in his concurring judgment in Holmes v Keyes, said (at 217) that the tenure of the directors elected did not begin 'until the result of the poll has been made known', this being the form of words also preferred by Holland J in Ryan v South Sydney Junior Rugby League Club Ltd (1974) 3 ACLR 486 at 490.
[115] Re MAC Services Group Ltd [22].

I agree with his Honour's reasoning. No issue arises in the present case concerning the manner in which the poll was conducted or announced.
Accordingly, I was and am satisfied that all statutory pre‑conditions have been met. I now turn to consider the discretionary considerations.

Good faith and proper purpose

There is no evidence that the shareholders voted for an improper purpose. I am satisfied on the evidence that has been filed by Valmec that the members voted in good faith and for a proper purpose as:
(a)the purpose of the proposed Scheme is to effect the acquisition by Altrad of all Valmec shares on issue (save for the Excluded Shares). A merger of corporate entities is a transaction of a kind ordinarily approved by the court. It does not involve any novel treatment of rights;
(b)the independent expert opined that in the absence of an alternate proposal (and none has since emerged), the Scheme is in the best interests of shareholders; and
(c)neither ASIC nor any shareholder appeared at the second court hearing to object to approval of the proposed Scheme.

Fairness and reasonableness

At the first court hearing, based on the evidence before the court, I was satisfied that the proposed Scheme was of such a nature that there was no apparent reason that it should not receive approval if the requisite voting majorities were achieved at the Scheme Meetings.
Nothing has occurred since the date of the first hearing to change this view. The shareholders who voted at the Scheme Meetings overwhelmingly supported the proposed Scheme. No shareholder appeared to oppose the orders sought at the second court hearing. I was and am satisfied that the proposed Scheme is fair and reasonable and is a Scheme that sensible business people might consider to be of benefit to shareholders.

All relevant matters brought to the court's attention

At the first court hearing, counsel for Valmec drew my attention to a number of matters. These are summarised above at [34] - [85] of these reasons.
There were two further matters that counsel drew my attention to at the second court hearing. First, Valmec sought an exemption from s 411(11) of the Act. In my view, there is no utility in requiring the court's orders approving the Scheme to be annexed to Valmec's constitution. As counsel for the plaintiff noted, this exemption has become ordinary practice for transactions of this kind.[116] I considered it was and is appropriate in the circumstances of this case to make the orders sought under s 411(12) of the Act. Second, the conditions precedent to the Scheme were satisfied or waived, as evidenced by the certificates from Valmec and Altrad put before me.[117]

Full and fair disclosure

[116] Submissions for second court hearing [64]; Re Nusantara Resources Limited [2021] WASC 334 [103].

[117] Fifth affidavit of Ryan Eamonn Lennon filed 5 October 2021 [13], 'REL3' - 'REL4'.

At the first court hearing, based on the evidence before the court, I was satisfied the draft Scheme booklet would provide full and fair disclosure to shareholders.
The additional affidavit evidence filed by Valmec establishes that the Scheme booklet dispatched to shareholders was in the form approved for distribution by the court. Nothing has arisen to suggest there has not been full and fair disclosure of all information which was material to the decision of shareholders prior to them voting on the Scheme.

Oppression of minorities

There was no evidence that any minority has been oppressed.

Satisfaction of s 411(17) of the Act and ASIC's view

ASIC has provided a written statement to the effect that it does not object to the Scheme pursuant to s 411(17)(b) of the Act.[118] As a result, the requirements of s 411(17) have been satisfied. In any event, having regard to the nature of the proposed transaction, it cannot be said the Scheme was proposed to avoid the operation of ch 6 of the Act.

Public Policy

[118] Fifth affidavit of Ryan Eamonn Lennon filed 5 October 2021 [12], 'REL2'.

There is no evidence before the court that the proposed Scheme offends any aspect of public policy. Given the nature of the proposed Scheme, it is my view that it could not be sensibly suggested that the Scheme offends public policy.

Conclusion and orders

At the second court hearing before me, I was satisfied that the substantive and procedural requirements under s 411(1) of the Act had been satisfied and that I should approve the proposed Scheme.
For these reasons, at the conclusion of the hearing on 6 October 2021, I made orders in terms of 'Annexure B' to this judgment in respect of the Scheme.

'Annexure A'

'Annexure B'

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
HW
Research Associate to the Honourable Justice Hill
26 NOVEMBER 2021