Re Zenith Energy Ltd; [No 2]
[2020] WASC 275
•22 JULY 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: RE ZENITH ENERGY LTD; EX PARTE ZENITH ENERGY LTD [No 2] [2020] WASC 275
CORAM: HILL J
HEARD: 22 JULY 2020
DELIVERED : 22 JULY 2020
FILE NO/S: COR 51 of 2020
EX PARTE
ZENITH ENERGY LTD
Plaintiff
Catchwords:
Corporations - Scheme of arrangement - Application for orders pursuant to s 1319 of the Corporations Act 2001 (Cth) - Supplementary disclosure regarding increase in consideration - Whether court should give leave to dispatch a supplementary disclosure statement
Legislation:
Corporations Act 2001 (Cth), s 411(1), s 1319
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | S K Dharmananda SC & J Sippe |
Solicitors:
| Plaintiff | : | Allens |
Case(s) referred to in decision(s):
Re Amcom Telecommunications (No 2) [2015] FCA 410
Re Amcom Telecommunications Limited (No 3) [2015] FCA 596
Re Aurora Oil & Gas Ltd [2014] FCA 612
Re Cellestis Ltd (No 2) [2011] VSC 329
Re Konekt Limited (No 2) [2019] FCA 1997
Re Prime Media Group Ltd [2019] NSWSC 1888
Re Prime Media Group Ltd; Re Seven Network Ltd (No 2) [2010] FCA 355
Re Zenith Energy Ltd; Ex Parte Zenith Energy Ltd [2020] WASC 266
HILL J:
By interlocutory process dated 21 July 2020, Zenith Energy Ltd (Zenith Energy) sought directions under s 1319 of the Corporations Act 2001 (Cth) (Act) for the dispatch of supplementary materials to its shareholders for meetings scheduled to be held on 31 July 2020.
In support of its application, the plaintiff relies on the affidavit of Andrew James Pascoe affirmed 21 July 2020.
The interlocutory application came on for hearing before me on an urgent basis on 22 July 2020. At the conclusion of the hearing, I made orders in terms of the interlocutory process and indicated that I would subsequently publish brief reasons for my decision. These are those reasons.
Factual background
On 25 June 2020, the court made orders for two meetings of members of Zenith Energy to be convened at 10.00 am (AWST) on 31 July 2020 to consider a proposed scheme of arrangement (Scheme) and for the dispatch of a Scheme booklet to shareholders.[1] Proxies for the Scheme meetings are required to be lodged by 10.00 am (AWST) on 29 July 2020.
[1] Re Zenith Energy Ltd; Ex Parte Zenith Energy Ltd [2020] WASC 266.
On 21 July 2020, Zenith Energy entered into a second Deed of Amendment and Restatement in relation to the Scheme Implementation Deed (Second SID).[2] Under the Second SID, the bidder, Elemental Infrastructure BidCo Pty Ltd (Elemental), agreed to increase the cash consideration under the Scheme from $1.01 to $1.05 (Increased Cash Consideration).
[2] Affidavit of Andrew James Pascoe filed 21 July 2020 [6], 'AJP45'.
Zenith Energy made an announcement to the Australian Stock Exchange (ASX) on 21 July 2020 in relation to its entry into the Second SID and stated that the Increased Cash Consideration was Elemental's 'best and final' offer.[3] In the same announcement, Zenith Energy announced that the board of Zenith Energy had determined that it had increased capacity to pay a fully franked special dividend up to $0.14 per share, an increase of one cent from its previous announcement. It also announced that Westoz Funds Management, one of its shareholders who holds 12.94% of the issued capital of Zenith Energy, had confirmed it intended to vote in favour of the Scheme as amended, in the absence of a superior proposal.
[3] Affidavit of Andrew James Pascoe filed 21 July 2020 [6], 'AJP45'.
The Increased Cash Consideration is an increase of 4% to the Cash Consideration previously offered. The proposed increased dividend, if paid, will mean that eligible shareholders of Zenith Energy may receive an additional benefit of up to $0.053 per share in the form of franking credit. This is an increase from the previous potential benefit of $0.05 per share.[4]
[4] Supplementary Scheme booklet, p 5.
Zenith Energy proposes to dispatch a supplementary Scheme booklet to its shareholders informing them of these matters. A copy of the supplementary Scheme booklet was in evidence before me.[5] It includes an updated letter from the independent expert confirming that they had considered the new information set out in the supplementary Scheme booklet and that their opinion remains unchanged.[6]
[5] Affidavit of Andrew James Pascoe filed 21 July 2020, 'AJP56'.
[6] Supplementary Scheme booklet, Annexure A.
The contents of the supplementary Scheme booklet have been verified by Zenith Energy and Elemental.[7]
[7] Affidavit of Andrew James Pascoe filed 21 July 2020 [8] - [10], 'AJP47', 'AJP48'.
Both the independent committee of the board and the executive directors of Zenith Energy continue to recommend that shareholders vote in favour of the scheme.[8]
[8] Supplementary Scheme booklet, p 6 - 7.
A copy of the draft supplementary Scheme booklet was provided to the Australian Securities and Investments Commission (ASIC) on 20 July 2020[9] with an amended version provided on 21 July 2020.[10] ASIC provided a letter to Zenith Energy shortly prior to the hearing confirming that it did not intend to appear at the hearing nor make any submissions.[11] In their letter, ASIC noted the limited time frame within which shareholders will have to consider the supplementary Scheme booklet particularly in circumstances where mail delivery has been impacted by the COVID‑19 pandemic.
[9] Affidavit of Andrew James Pascoe filed 21 July 2020 [17], 'AJP51'.
[10] Affidavit of Andrew James Pascoe filed 21 July 2020 [19] - [21], 'AJP53' - 'AJP56'.
[11] Exhibit 1 (Letter from ASIC to Zenith Energy dated 22 July 2020).
Zenith Energy proposes to dispatch the supplementary Scheme booklet in the manner as approved by the court on 25 June 2020 - namely by email to shareholders who have elected to receive correspondence electronically and in hard copy to all other shareholders.[12] The primary difference is that for shareholders who have not provided an email address for communication, the supplementary Scheme booklet will be sent by priority prepaid mail within Australia and by prepaid airmail or air courier to overseas shareholders.[13]
[12] Orders of 25 June 2020, O 4.
[13] Affidavit of Andrew James Pascoe filed 21 July 2020 [11] - [14].
Zenith proposes that at the Scheme meetings, two resolutions will be put: first, a resolution to approve the amendments to the Scheme to increase the Scheme Consideration; and second, a resolution to agree to the Scheme. Zenith also proposes that proxies which have already been lodged for the Scheme meetings will remain valid unless they are revoked by the shareholder.
Legal principles
Under s 1319 of the Act, the court has power to authorise the dispatch of further explanatory materials in relation to a scheme of arrangement.[14] Where a meeting has been convened by order of the Court under s 411 of the Act, only material which has been approved by the court for dispatch should be provided to shareholders.[15]
[14] Re Amcom Telecommunications Limited (No 3) [2015] FCA 596 [14] and the authorities cited therein.
[15] Re Amcom Telecommunications Limited (No 3) [15] and the authorities cited therein.
ASIC Regulatory Guide 60, which deals with schemes of arrangement, states that in general, shareholders should be given at least 10 days' notice of any material new information in relation to a scheme.[16] While the court should take this into account, it is a matter for the court to assess whether there is sufficient time for shareholders to consider the information and to understand its effect.[17]
[16] ASIC Regulatory Guide 60 [RG60.92].
[17] Re Prime Media Group Ltd [2019] NSWSC 1888 [8].
Disposition
For the following reasons, I consider that the supplementary Scheme booklet substantially in the form set out in attachment 'AJP56' to the affidavit of Andrew James Pascoe filed 21 July 2020 should be approved for dispatch. First, the events that have occurred since the dispatch of the Scheme booklet are material to the shareholders' decision as to how to vote at the Scheme meetings. Second, the Increased Cash Consideration offered by the bidder is important to that decision. Third, the information in the supplementary Scheme booklet has been the subject of a verification process to ensure its contents are accurate and not misleading and its content does not appear to be misleading. Fourth, ASIC has not raised any objection to the disclosure in the draft supplementary Scheme booklet and has not appeared to oppose the orders being made. Fifth, the procedure that has been proposed by the plaintiff is consistent with the approach taken in previous similar transactions.[18]
[18] Re Amcom Telecommunications (No 2) [2015] FCA 410; Re Aurora Oil & Gas Ltd [2014] FCA 612; Re Cellestis Ltd (No 2) [2011] VSC 329.
In this case, shareholders will have three to five working days' notice of this new information. In essence, the new information to be provided in the supplementary Scheme Booklet is that the shareholders will receive the Increased Cash Consideration under the Scheme, if approved by shareholders. The Increased Cash Consideration has been the subject of an announcement to the ASX as well as media coverage. In these circumstances, I am satisfied that the proposed timeframe is sufficient for shareholders to consider whether or not to vote in favour of the Scheme before voting or lodging a proxy for the Scheme meetings. In reaching this decision, I note that previous courts have accepted similar periods as providing adequate notice of new information without requiring the Scheme meeting to be adjourned.[19]
[19] Re Konekt Limited (No 2) [2019] FCA 1997; Re Prime Media Group Ltd; Re Seven Network Ltd (No 2) [2010] FCA 355.
In any event, at the second court hearing, it will be necessary to consider the numbers of shareholders who voted at each of the Scheme meetings in considering whether or not to approve the Scheme.
Conclusion
At the hearing before me, I was satisfied that it was appropriate for the supplementary Scheme booklet to be dispatched to shareholders and that it was not necessary to adjourn the Scheme meetings.
For these reasons, at the conclusion of the hearing before me on 22 July 2020, I made orders in terms of Annexure 'A' to this judgment.
ANNEXURE A
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MG
Research Orderly to the Honourable Justice Hill
24 JULY 2020
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