Mogul Mining [1999] NSWSC 159

New South Wales Supreme Court CITATION : Mogul Mining [1999] NSWSC 159 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 1285/99 HEARING DATE(S) : 24 February 1999 JUDGMENT DATE : 24 February 1999

PARTIES : Mogul Mining NL (P) JUDGMENT OF : Austin J

COUNSEL : I Jackman (P) SOLICITORS : Minter Ellison (P) CATCHWORDS : Company - members' scheme of arrangement - members to receive shares in another entity - disclosure DECISION : Orders for convening scheme meeting

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

WEDNESDAY 24 FEBRUARY 1999

1285/99 - MOGUL MINING NL

JUDGMENT (EX TEMPORE)

1 HIS HONOUR: This is an application for orders to convene a meeting of members of the company (Mogul Mining NL) to consider a scheme or arrangement under s 411 of the Corporations Law. The scheme is in most respects straightforward: major creditors have consented; there is only one class of shareholders; there is no proposal to bind other parties such as optionholders to the changes and there is no requirement for an expert's report under Sch 8 of the Corporations Regulations. 2 The scheme is accompanied by a reduction of capital treated as an equal reduction, but the resolution to approve it is put as a special resolution. Presumably this complies with the requirements of the company's constitution. 3 The striking character of the scheme is that if it is approved the company will dispose of a mining asset for no consideration to it, and the company's shareholders will receive shareholdings in the acquiring entity which is a Canadian corporation ('Augusta'). 4 The offer of the shares in Augusta is exempt from Divisions 2 and 3A of Pt 7.12 of the Corporations Law by virtue of regulation 7.12.02(b) of the Corporations Regulations. However, in my opinion the Court should expect to find in the scheme explanatory statement, or in the notice of meeting for the capital reduction, disclosure about the entity whose shares are offered, that is Augusta, to a level which would satisfy the disclosure standard of s 1022. 5 In the present case the explanatory statement annexes an information memorandum supplied by Augusta. At this stage the Court is not in a position to say whether it meets the requisite standard of disclosure, though in saying that I do not mean to imply that I regard it as deficient in any way. 6 The explanatory statement says that the responsibility for the information memorandum rests with Augusta and that the company and its directors disclaim responsibility for its accuracy and completeness. Whether the disclaimer is effective or not, the company by dispatching the scheme proposal takes the risk that an opponent may object when the scheme returns to the Court for the second hearing, and that in such a case the objection may be made on the ground that the information memorandum by Augusta has failed to meet the requisite standard of disclosure. 7 As I foreshadowed to counsel, I have no difficulty in making the orders sought and I propose to make orders one to nine of the draft orders handed up by counsel and initialled by me for the purposes of identification.