FEDERAL COURT OF AUSTRALIA Signature Gold Ltd, in the matter of Signature Gold Ltd (No 2) [2018] FCA 799 File number: NSD 509 of 2018 Judge: MARKOVIC J Date of judgment: 25 May 2018 Date of publication of reasons: 1 June 2018 Catchwords: CORPORATIONS – scheme of arrangement – second Court hearing – approval of scheme under s 411(4)(b) of the Corporations Act 2001 (Cth). Legislation: Corporations Act 2001 (Cth) ss 411(4)(a)(ii), 411(4)(b) Cases cited: Avoca Resources Limited, in the matter of Avoca Resources Limited [2011] FCA 208 EcoBiotics Limited, in the matter of EcoBiotics Limited (No 2) [2017] FCA 1031 Re Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited (No 3) (2010) 267 ALR 583; [2010] FCA 400 Signature Gold Ltd, in the matter of Signature Gold Ltd [2018] FCA 688 Date of hearing: 25 May 2018 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 26 Counsel for the Plaintiff: Dr R Austin Solicitor for the Plaintiff: Maddocks Lawyers ORDERS NSD 509 of 2018 IN THE MATTER OF SIGNATURE GOLD LTD ACN 142 902 985 SIGNATURE GOLD LTD ACN 142 902 895 Plaintiff JUDGE: MARKOVIC J DATE OF ORDER: 25 May 2018 THE COURT ORDERS THAT: 1. The Scheme of Arrangement between the plaintiff and the holders of fully paid ordinary shares in the plaintiff (Scheme) being Attachment 5 to the Scheme Booklet (comprising the Explanatory Statement), which was dispatched in accordance with the Orders of this Court of 19 April 2018 be approved pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act). 2. Pursuant to s 411(12) of the Act, the plaintiff is exempted from compliance with the requirements of s 411(11) of the Act in relation to the Scheme. 3. An office copy of these Orders be lodged with the Australian Securities and Investments Commission as soon as practicable after these orders are made. 4. No order as to costs. 5. These orders be entered forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MARKOVIC J: 1 On 19 April 2018 the Court made orders (Orders), among others, pursuant to s 411(1) and s 1319 of the Corporations Act 2001 (Cth) (Act) that the plaintiff, Signature Gold Ltd (Signature Gold), convene a meeting (Scheme Meeting) of the holders of ordinary shares in Signature Gold (Scheme Shareholders) for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement between Signature Gold and the Scheme Shareholders (Scheme). 2 On 25 May 2018 I made orders, including orders pursuant to s 411(4)(b) of the Act, approving the Scheme. These are my reasons for making those Orders. background 3 The details of the Scheme are set out in Signature Gold Ltd, in the matter of Signature Gold Ltd [2018] FCA 688 (Signature Gold). 4 On 4 April 2018 Signature Gold and StratMin Global Resources PLC (StratMin) entered into a scheme implementation agreement (SIA) and StratMin executed a deed poll for the benefit of Scheme participants. Pursuant to the terms of the deed poll StratMin bound itself to procure and undertake the actions attributed to it as bidder under the Scheme, including providing the Consideration Shares described at [5] below. 5 Pursuant to the Scheme, the shares in Signature Gold held by the Scheme Shareholders will be transferred to StratMin in exchange for shares issued to them by StratMin (Consideration Shares). That is, Signature Gold will become a wholly owned subsidiary of StratMin. The shares in StratMin are to be admitted to trading on the NEX Exchange Growth Market in the United Kingdom, which is a recognised investment exchange under s 285 of the Financial Services and Markets Act 2000 (UK). 6 The Scheme Meeting was held on 14 May 2018. 7 As at 23 May 2018 Signature Gold had not received any notice of appearance in relation to the second Court hearing. No representative of the Australian Securities and Investments Commission (ASIC) and no creditor or shareholder of Signature Gold appeared at the second Court hearing. formal and structural matters 8 In EcoBiotics Limited, in the matter of EcoBiotics Limited (No 2) [2017] FCA 1031 (EcoBiotics) Gleeson J set out the matters to be proved at the second Court hearing. At [11] her Honour noted that she was required to be satisfied that: (1) at a scheme meeting convened in accordance with the Court's orders under s 411(1) of the Act, resolutions in favour of the scheme were passed in accordance with the statutory majority required for a members' scheme by s 411(4)(a)(ii) of the Act; (2) there has been compliance with the orders made at the first [Court] hearing; and (3) ASIC had indicated that it has no objections to the scheme under s 411(17). 9 Also relevant are the issues of voter turnout and the question of satisfaction or waiver of conditions precedent: see EcoBiotics at [17]-[23] and [25]. Statutory requirements 10 Section 411(4)(a)(ii) provides that, to be eligible for approval by the Court, the Scheme must have been approved at the Scheme Meeting by a majority in number of the members present and voting in person or by proxy and passed by 75% of the votes cast by members present and voting in person or by proxy. 11 Bruce Fulton, who chaired the Scheme Meeting, gave evidence which establishes that the meeting was convened and proceeded regularly in accordance with the Orders. 12 The evidence establishes that 22 members of Signature Gold were present at the Scheme Meeting in person or by proxy and that the resolution to approve the Scheme was passed with 21 of the members present at the meeting in person or by proxy voting in favour of the resolution and one member voting by proxy against the resolution. There were no abstentions. 13 In total 53,204,241 votes were cast in person or by proxy representing 56.83% of the total share capital. Of those votes, 53,037,574 votes were cast for the resolution representing 99.69% of votes cast by Scheme Shareholders present and voting at the meeting in person or by proxy. 14 Accordingly, the statutory majorities in favour of the Scheme required by s 411(4)(a)(ii) of the Act were obtained. 15 In EcoBiotics at [18] Gleeson J noted that, since earlier authorities referred to by her Honour at [17] including Avoca Resources Limited, in the matter of Avoca Resources Limited [2011] FCA 208 at 21 (Avoca Resources), this Court has expressed an interest in knowing the turnout percentage of eligible shares (both for and against) and more recently of shareholders. As has been recognised, these percentages have no statutory significance but a low turnout percentage might suggest a flaw in the convening procedure: see EcoBiotics at [18]; Avoca Resources at [21]. 16 According to the evidence before me: (1) the issued capital of Signature Gold is 93,621,673 shares held by 212 shareholders; (2) the number of shareholders voting in person or by proxy on the resolution to approve the Scheme, expressed as a percentage of the total number of shareholders, was 10.38% and the number of shares voted in person or by proxy on the resolution to approve the Scheme, expressed as a percentage of the total number of issued shares, was 56.83%; (3) the number of shareholders voting in person or by proxy in favour of the resolution to approve the Scheme, expressed as a percentage of the total number of shareholders, was 9.91%; and the number of shares voted in person or by proxy in favour of the resolution to approve the Scheme, expressed as a percentage of the total number of issued shares, was 56.65%; and (4) the number of shareholders voting in person or by proxy against the resolution to approve the Scheme, expressed as a percentage of the total number of shareholders, was 0.47% and the number of shares voted in person or by proxy against the resolution to approve the Scheme, expressed as a percentage of the total number of issued shares, was 0.18%. 17 I accepted Signature's Gold submission that, while the number of members in attendance by person or by proxy is low, the total number of shares voted is sufficiently high that there is no basis for concern that there may have been a flaw in the convening procedure. In any event, as the evidence disclosed, a proper convening procedure for the Scheme was followed. Compliance with the Orders 18 I am satisfied that there was compliance with the Orders: (1) the Scheme Booklet, including the notice of the Scheme Meeting and the proxy form, was despatched to members of Signature Gold by email in accordance with the Orders in circumstances where all members opted to receive correspondence by email and there were no "bounce backs"; (2) the date of the second Court hearing was advertised in The Australian newspaper on 23 April 2018 in accordance with the Orders; and (3) as already observed, the Scheme Meeting took place on 14 May 2018 and was chaired by Mr Fulton. The evidence establishes that the resolution to approve the Scheme was decided by way of a poll. ASIC's position 19 By letter dated 24 May 2018 ASIC informed Signature Gold that, under s 411(17)(b) of the Act, it had no objection to the Scheme. Conditions precedent 20 The evidence included certificates which established that the conditions precedent in cl 3 of the SIA (other than Court approval of the Scheme) had been satisfied. There was also evidence before me that StratMin had discharged its obligation under cl 6.3.11 of the SIA to obtain the approval of its shareholders to issue the Consideration Shares. Discretionary matters 21 The Court has the discretion whether to approve a scheme. It is not bound to approve it merely because it has previously made orders for the convening of meetings or because the statutory majorities have been achieved: Re Seven Network Ltd (ACN 052 816 789) (No 3) (2010) 267 ALR 583; [2010] FCA 400 (Re Seven Network) at [31]. That said, the Court would usually approach the task on the basis that members of the company are better judges of what is in their commercial interests than the Court: Re Seven Network at [32]. 22 In Re Seven Network at [35]-[40] Jacobson J set out the following considerations which have informed the Court's discretion whether or not to approve a scheme: (1) whether the shareholders have voted in good faith and not for an improper purpose; (2) whether the proposal is fair and reasonable so that an intelligent and honest person who is a member of the relevant class of shareholders, properly informed and acting alone, might approve it; (3) 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; (4) whether there has been full and fair disclosure of all information material to the decision; (5) whether minority shareholders would be oppressed by the scheme; and (6) whether the scheme offends public policy. 23 I was satisfied that I should exercise my discretion in favour of approving the Scheme. The Scheme was not contested in any active sense. Only one shareholder voted against the proposal but without informing Signature Gold of his reasons for doing so. There is nothing to suggest that members voted other than in good faith or that they cast their vote for an improper purpose. 24 The proposal is fair and reasonable such that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it. The evidence provided to the Court in connection with the application to convene the Scheme Meeting established that to be so: see Signature Gold at [22]-[27], [29]-[30] and [31]-[34]. Further, no one came forward to oppose the Scheme and ASIC has not raised any objection to it. 25 I was satisfied that Signature Gold brought to the Court's attention all matters that could be considered relevant to the exercise of its discretion, having regard to the evidence adduced at the first and second Court hearings and the submissions made both orally and in writing on both occasions. I was also satisfied that there has been full and fair disclosure to shareholders of all information material to their decision to approve or reject the Scheme. There has been no criticism of the substance of the disclosure made in the Scheme Booklet by any member or by ASIC. Finally, there is nothing to suggest that any minority shareholder would be oppressed under the Scheme or that the Scheme may offend public policy in any way. conclusion 26 For those reasons I was satisfied that I should approve the Scheme and made the orders on 25 May 2018. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic. Associate: Dated: 1 June 2018