FEDERAL COURT OF AUSTRALIA Aphrodite Gold Limited, in the matter of Aphrodite Gold Limited [2017] FCA 1346 File number(s): WAD 526 of 2017 Judge(s): SIOPIS J Date of judgment: 10 November 2017 Catchwords: CORPORATIONS – scheme of arrangement – application for orders under s 411(1) of the Corporations Act 2001 (Cth) for the convening of a meeting of members to approve a scheme of arrangement. Legislation: Corporations Act 2001 (Cth) Pt 5.1, ss 411(1), 411(2) Date of hearing: 10 November 2017 Registry: Western Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 18 Counsel for the Plaintiff: Mr J Garas Solicitor for the Plaintiff: GTP Legal ORDERS WAD 526 of 2017 IN THE MATTER OF APHRODITE GOLD LIMITED (ACN 138 879 928) APHRODITE GOLD LIMITED (ACN 138 879 928) Plaintiff JUDGE: SIOPIS J DATE OF ORDER: 10 NOVEMBER 2017 THE COURT ORDERS THAT: 1. The plaintiff, Aphrodite Gold Limited, (Aphrodite) convene a meeting of holders of fully paid ordinary shares in the capital of the plaintiff, other than Spitfire Materials Limited, (Shareholders) to be held in held at the office of RMS Australia Pty Ltd, 116 Harrick Road, Keilor Park, Victoria, Victoria on or about 18 December 2017 at 10.00am or on such other date and such other time as the Court may approve (Scheme Meeting) for the purpose of considering and if thought fit, agreeing (with or without amendment) the scheme of arrangement which is Annexure C to the draft scheme booklet and explanatory statement respectively, being Annexure "RM-01" to the second affidavit of Mr Roger Stuart Mitchell sworn 20 October 2017 (Scheme Booklet). 2. Subject to these orders, the Scheme Meeting is to be: (a) convened, held and conducted in accordance with the provisions of Part 2G.2 of the Corporations Act 2001 (Cth) (Act) that apply to members of a company and the provisions of Aphrodite's constitution that are not inconsistent which those provisions of the Act that apply to meetings of members; (b) convened, held and conducted pursuant to section 1319 of the Act, on the basis that Corporations Regulations 5.6.11 to 5.6.12 and 5.6.13A to 5.6.36A do not apply to the meeting; and (c) convened using the notice of meeting in the form or to the effect of the notice contained in Annexure E of the Scheme Booklet. 3. Mr Roger Stuart Mitchell or, failing him, Mr Peter Anthony Buttigieg is to be appointed to act as chairperson of the Scheme Meeting (Chairman) and report the result of the Scheme Meeting to this Court. 4. The Chairman can adjourn the Scheme Meeting in his absolute discretion for such time that the Chairman thinks appropriate. 5. Two Shareholders present in person or by proxy, corporate representative or attorney under power and entitled to vote shall constitute a quorum for the Scheme Meeting. 6. Voting on the resolution to approve the Scheme for the Scheme Meeting is to be conducted by way of poll. 7. The Scheme Booklet, which contains an explanatory statement required by section 412(1)(a) of the Act, be and is approved for distribution to members, subject to: (a) correction of any typographical errors and formatting; (b) the minor amendments approved by the Australian Securities and Investments Commission (ASIC) for registration under section 412(6) of the Act, being the amendments set out in paragraph 24 and annexure "JP-08" of the affidavit of Mr James Lewis Pearse sworn 9 November 2017; and (c) adopting any amendments approved by the Court. 8. Subject to registration of the Scheme Booklet with the ASIC, pursuant to section 412(6) of the Act, Aphrodite is to dispatch the Scheme Booklet, substantially in the form of the document approved in paragraph 7 above, and any applicable proxy form to the Shareholders who appear on the register of members at close of business on 10 November 2017 (being the last business day prior to the intended date for registration of the Scheme Booklet with ASIC): (a) by ordinary pre-paid post, ordinary post, parcel post or courier to Shareholders with a registered address in Australia; or (b) by pre-paid airmail, airmail or air courier to Shareholders with a registered address outside Australia, and dispatch on or before 15 November 2017 is to be taken to be sufficient notice of the meeting. 9. The matter is relisted on 20 December 2017 at 11.15am for such application as appropriate following the Scheme Meeting. 10. Aphrodite is to give notice of the hearing of the application pursuant to section 411(4)(b) of the Act for orders approving the Scheme by publishing an advertisement in the public notices column of "The Australian" and "The West Australian" newspapers substantially in accordance with Form 6 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules), such advertisement to be published at least five days before any date allocated for the hearing and Aphrodite is otherwise exempted from compliance with rule 3.4 of the Rules. 11. Aphrodite, ASIC and any interested party has liberty to apply to relist the matter on 24 hours' written notice. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT SIOPIS J: 1 This is an application for the convening of a meeting of the members of the plaintiff company, Aphrodite Gold Limited (Aphrodite), under s 411(1) of the Corporations Act 2001 (Cth) to consider, and, if thought fit, to approve a proposed scheme of arrangement between the plaintiff and its members. Aphrodite is a gold exploration company whose shares are listed on the Australian Securities Exchange (ASX). 2 Under the proposed scheme of arrangement, the shares which are held by Aphrodite shareholders would be acquired by Spitfire Materials Limited (Spitfire), which is also a public company whose shares are listed on the ASX. Spitfire is a company which is engaged in mineral exploration, including gold exploration. The scheme would bring about, in effect, a merger between Aphrodite and Spitfire. 3 The scheme consideration is that Aphrodite shareholders would obtain one new fully paid ordinary share in Spitfire for every 2.8959 shares held in Aphrodite. The scheme consideration represents a premium on the Aphrodite share price at the date of the announcement of the proposed scheme. 4 There are also a number of options to acquire shares in Aphrodite, but those are being dealt with by a means outside of the scheme. 5 When a court considers whether to grant the relief sought under s 411(1), it has to be satisfied of a number of matters. 6 First, I am satisfied that the proposed scheme of arrangement qualifies as an arrangement within the meaning of that term under Pt 5.1 of the Corporations Act. 7 Secondly, I am satisfied that in compliance with s 411(2) of the Corporations Act, the Australian Securities and Investments Commission (ASIC) has had at least 14 days' notice of the hearing today and has also had reasonable opportunity to examine the proposed scheme and the proposed scheme booklet. 8 The evidence shows that the solicitors for Aphrodite have been in correspondence with ASIC for some time in relation to the content of the proposed scheme booklet and that as a consequence thereof, a number of amendments have been incorporated into the proposed scheme booklet. 9 In addition, Mr James Pearse of the firm of solicitors representing Aphrodite, has filed an affidavit today to which is attached a letter from ASIC dated 10 November 2017. In that letter, ASIC has advised that it had received at least 14 days' notice of this hearing and that it has had a reasonable opportunity to consider the proposed scheme booklet. ASIC also stated that it did not propose to appear today to make submissions in opposition to the making of the orders proposed, but reserves its position in relation to the second hearing. 10 Thirdly, I am satisfied that there has been compliance with the relevant provisions of the Corporations Act and the Corporations Regulations 1994 (Cth). There is annexed to Aphrodite's outline of submissions a detailed checklist which has described each of the relevant provisions of the Corporations Act and the Corporations Regulations and which has identified the parts of the affidavit evidence which demonstrate that there has been compliance with that provision. Further, I am satisfied that the content of the proposed scheme booklet contains sufficient information about the scheme as to provide Aphrodite's shareholders with an informed basis upon which to determine whether to vote for or against the scheme. There is affidavit evidence from Mr Roger Mitchell, non-executive director of Aphrodite, and Mr Russell Hardwick, company secretary of Spitfire, to the effect that exercises have been undertaken to ensure that the statements which are contained in the scheme booklet are correct. 11 Counsel for Aphrodite has also taken me to a number of provisions in the merger implementation agreement. 12 There are provisions in the merger implementation agreement which provide for the payment of a break fee. I am satisfied that that amount of break fee falls within the ambit of the Takeovers Panel Guidance Note 7: Lock-up devices, and is otherwise not objectionable. 13 There are also exclusivity provisions in the merger implementation agreement. I note that in relation to the exclusivity provisions that there is an appropriate fiduciary carve-out. I also observe that there is evidence that the break fee and exclusivity provisions were negotiated at arm's length with each of the two parties having been represented by firms of solicitors in the negotiation of those provisions. 14 I am also satisfied that the terms of the break fee and exclusivity provisions have been sufficiently described in the proposed scheme booklet, such that the shareholders will be sufficiently apprised of the terms of those provisions. 15 As to the performance risk, there is attached to the affidavit of Mr Pearse, dated 10 November 2017, a deed poll which has been executed by Spitfire. So I am satisfied that performance risk has been dealt with. 16 I might say that there is also an expert report in the proposed scheme booklet which opines that the scheme is fair and reasonable, and in the absence of any other offer, in the best interests of the Aphrodite shareholders. I would also observe that counsel for Aphrodite took me to some parts of the expert report which deal with the way in which the experts have approached the question of the valuation of the shares in Aphrodite. I am satisfied that this issue has been properly explained in the expert report. Otherwise, the question of whether the scheme is fair and reasonable is a matter which is to be considered at the second hearing. 17 On the basis of the matters to which my attention has been drawn, there is no matter which causes the Court to believe that if the requisite majorities were obtained at the meeting that the Court would not approve the scheme. 18 Accordingly, I am content to make orders in terms of the minute of proposed orders subject to the amendment which I raised with counsel in relation to para 7 of the minute. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. Associate: Dated: 17 November 2017