Federal Court Orders Shareholders' Meeting for Scheme of Arrangement

FEDERAL COURT OF AUSTRALIA

Platinum Australia Limited, in the matter of Platinum Australia Limited [2013] FCA 747 Citation: Platinum Australia Limited, in the matter of Platinum Australia Limited [2013] FCA 747

Parties: PLATINUM AUSTRALIA LIMITED (ACN [PHONE])

File number(s): WAD 138 of 2013

Judge(s): SIOPIS J

Date of judgment: 20 June 2013

Date of hearing: 20 June 2013

Place: Perth

Division: GENERAL DIVISION

Category: No Catchwords

Number of paragraphs: 19

Counsel for the Plaintiff: [redacted]

Solicitor for the Plaintiff: [redacted]

IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 138 of 2013

IN THE MATTER OF PLATINUM AUSTRALIA LIMITED (ACN [PHONE]) PLATINUM AUSTRALIA LIMITED (ACN [PHONE])

Plaintiff

JUDGE: SIOPIS J DATE OF ORDER: 21 JUNE 2013 WHERE MADE: PERTH

THE COURT ORDERS THAT:

1. Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (Act): (a) the plaintiff convene a meeting of the holders of its [NAME] shares (Shareholders) (Scheme Meeting) for the purpose of considering, and if thought fit, approving a scheme of arrangement (with or without modification) proposed to be made between the plaintiff and the Shareholders (Scheme), being the scheme substantially in the form set out in Annexure C of the scheme booklet, containing the explanatory statement, in relation to the Scheme which is annexure BAC10 of the affidavit of [NAME] sworn 21 June 2013 (Scheme Booklet); (b) the Scheme Meeting be held at 3.00 pm (AWST) on 30 July 2013 at the [NAME], [ADDRESS], Perth, Western Australia; (c) [NAME], or failing him, [NAME], be chairperson of the Scheme Meeting and report the result of the Scheme Meeting to this Court; and (d) the chairperson appointed to the Scheme Meeting have the power to adjourn the Scheme Meeting in their absolute discretion for such time that the chairperson considers appropriate.

2. Pursuant to section 1319 of the Act, Rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules) shall not apply to the Scheme Meeting, except in so far as that rule applies regulation 5.6.13 of the Corporations Regulations 2001 (Cth) to the Scheme Meeting. Subject to these Orders (which shall prevail in the event of any inconsistency) and pursuant to section 1319 of the Act, each Scheme Meeting is to be: (a) convened, held and conducted in accordance with the provisions of Part 2G.2 of the Act that apply to members of a company and the provisions of the plaintiff's constitution that are not inconsistent therewith and that apply to meetings of members; and (b) convened using the notice of meeting in the form or to the effect of the notice contained in Annexure 6 of the Scheme Booklet.

3. Pursuant to section 411(1) of the Act, the explanatory statement contained in the Scheme Booklet is approved for distribution to the Shareholders.

4. Subject to registration of the Scheme Booklet with the Australian Securities and Investments Commission (ASIC) pursuant to section 412(6) of the Act, the plaintiff is to despatch, on or before 25 June 2013, a document substantially in the form of the Scheme Booklet, a proxy form, a share election form and a reply-paid envelope addressed to [COMPANY] to each Shareholder on the plaintiff's register of members (Register) to the relevant address set out in the Register by: (a) in the case of each Shareholder who has a registered address in Australia, prepaid post; (b) in the case of each Shareholder who has a registered address outside Australia, prepaid airmail or air courier; and (c) in the case of each Shareholder who has nominated an electronic address for the purposes of receiving notification of notices of any meeting from [COMPANY], by email.

5. Despatch of the documents referred to in paragraph 4 of these Orders in accordance with its terms is to be taken to be sufficient notice of the Scheme Meeting.

6. The time by which the Shareholders must return their proxy forms for the Scheme Meeting is 3.00 pm (Perth time) on 28 July 2013.

7. All voting at the Scheme Meeting be by poll to be declared by the chairperson.

8. If the matter is relisted, the plaintiff is to give notice of the hearing of the application pursuant to section 411(4) of the Act and that notice of the hearing of an application pursuant to subsection 411(4)(b) of the Act for orders approving the Scheme be published once in "The Australian" newspaper by an advertisement substantially in the form of Annexure A to these Orders, such advertisement to be published on or before 24 July 2013 and the plaintiff be otherwise exempted from compliance with the requirement to publish such notice following the Scheme Meeting and prior to the second court hearing for approval of the Scheme pursuant to Rule 3.4 of the Corporations Rules.

9. The proceeding be adjourned to 2.15 pm on 31 July 2013 for the hearing of any application to approve the Scheme. Annexure A Platinum Australia Limited (Subject to deed of company arrangement) Notice of Hearing to Approve Scheme of Arrangement pursuant to section 411 of the Corporations Act 2001 (Cth) To all members of Platinum Australia Limited ACN [PHONE] (Subject to deed of company arrangement) (PLA) TAKE NOTICE that at 2.15 pm on 31 July 2013, the Federal Court of Australia at [NAME] [ADDRESS] [POSTCODE] will hear an application by PLA seeking the approval of the arrangement between PLA and its [NAME], if agreed to by a meeting of [NAME] to be held at the [NAME], [ADDRESS], Perth, Western Australia at 3.00 pm (AWST) on 30 July 2013. If you wish to oppose the approval of the above arrangements, you must file and serve on PLA a notice of appearance, in the prescribed form, together with any affidavit which you wish to rely on at the hearing. The notice of appearance and affidavit must be served on PLA at its address for service by no later than one day before the [ADDRESS]. The address for service of PLA is c/- [NAME], Level 27, QV.1 [ADDRESS] [POSTCODE] (Reference: [NAME]) Facsimile: 08 9481 3095 Email: [EMAIL] A copy of the Scheme Booklet is available at www.platinumaus.com.au Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Plaintiff

JUDGE: SIOPIS J DATE: 20 JUNE 2013 PLACE: PERTH

REASONS FOR

JUDGMENT 1 This is an application under s 411 of the Corporations Act 2001 (Cth) for the making of orders for the convening of a meeting of the members of a company, Platinum Australia Limited (PLA), to consider, and if found fit, to approve a scheme of arrangement between the company and its [NAME]. 2 This is a somewhat unusual application because PLA is the subject of a deed of company arrangement. The deed administrator is [NAME]. There is evidence that a variation will be sought to the deed of company arrangement to give effect to a proposed compromise between PLA and its creditors. It is a condition precedent of the scheme of arrangement that the proposed creditor compromise and the variation to the deed of company arrangement are effected. Likewise, the proposed creditor compromise is also dependent upon the scheme of arrangement being effected. 3 The scheme of arrangement contemplates that the members of PLA will transfer their shares to [COMPANY] ([NAME]) a public company whose shares are listed on the Johannesburg Stock Exchange and also on the Alternative Investment Market, and that PLA will become a wholly owned subsidiary of [NAME]. By way of the scheme consideration, each PLA shareholder will receive for one PLA share, either, at their option, 0.396 [NAME] shares, which will be listed on the Johannesburg Stock Exchange; or 0.198 [NAME] depository interest, being a unit of beneficial ownership of two [NAME] shares registered in the name of [COMPANY]. The [NAME] depository interests will be listed on the Australian Stock Exchange. 4 [NAME], senior counsel for PLA, has today drawn my attention to a late development, namely, that [NAME] is proposing a placement of shares to be listed on the Johannesburg Stock Exchange which has not yet been approved. If that placement and listing proceeds that may have a very marginal effect upon the value of the scheme consideration. This late development has been brought to the attention of the Australian Securities and Investments Commission (ASIC) and also to the expert who has, in the scheme booklet, provided an opinion on the valuation of the scheme consideration. Both ASIC and the expert have stated that this development does not change their previously expressed views. ASIC has previously expressed the view that it did not intend to oppose the orders sought by PLA at this particular hearing. The expert previously stated that whilst, technically speaking, the scheme consideration was not fair, bearing in mind the solvency issues facing PLA, the scheme consideration proposed was reasonable. 5 At a first hearing of the application to convene a meeting under s 411 of the Corporations Act, the Court has to be satisfied of a certain number of elements. The first of those elements is that the scheme proposed is a "scheme" within the meaning of the Corporations Act. I have no difficulty in coming to the view that it is. 6 I am also satisfied that the PLA shareholders are all members of the same class. As to the question of optionholders, the evidence is that there are only two persons who hold options, and that they will cancel the options. Therefore, no question arises as to holding a meeting of optionholders to approve any optionholder scheme. 7 Further, as I have already mentioned, ASIC has been advised of this application and has had an opportunity to look at the scheme booklet; and has approved the scheme booklet subject to the insertion of a footnote which covers this late development in respect of the potential placement of the shares in [NAME]. [ADDRESS] also needs to be satisfied that the requirements of the Corporations Act have been fulfilled. There is attached to PLA's submissions a chart which demonstrates that this has occurred. 9 There is also a requirement for the Court to be satisfied that, so far as is foreseeable, there is no impediment to the approval of the scheme of arrangement at the second hearing, if the requisite majorities are obtained at the meeting to be held for the approval of the scheme. 10 In this regard, senior counsel for PLA has brought to my attention to a number of matters. 11 Senior counsel referred to cl 12 of the scheme implementation deed which deals with exclusivity arrangements, which restrict, in a number of ways, the pursuit or entertainment, by either party, of competing offers during a limited period, referred to as the exclusivity period. 12 Provisions of this kind are scrutinised by the Court to see that they do not prejudice shareholders from obtaining the best value in respect of their investments. [ADDRESS] is also concerned to see that such provisions do not impinge upon the fiduciary obligations of the company directors and, in this case, the deed administrator. Clause 12 contains what is referred to as a "fiduciary carve-out" in relation to the exclusivity arrangements which satisfies the Court's concern in this regard. I am satisfied that the exclusivity provisions would not preclude the making of final orders approving the scheme of arrangement, should the requisite majorities be obtained at the proposed meeting. 13 The scheme implantation deed contains provisions which require the payment of what is referred to as a "break fee" in the sum of AUD400,000. The break fee is not payable simply on the basis that the shareholders do not approve the scheme, and is payable by either party. Given the solvency issues facing PLA, it is not really appropriate, in assessing reasonableness of the break fee, to have regard to whether the amount of break fee can be justified by reference to the 1% of the equity value of PLA, which is the guideline referred to in the Takeovers Panel Guidance Note 7. However, I am satisfied, on the evidence, that the sum of AUD400,000 is a genuine pre-estimate of the amount of costs involved in preparing this application and all that has gone before it. I am satisfied that the break fee provisions do not constitute an impediment to the approval of the scheme of arrangement at the second hearing, if it is approved by the requisite majorities at the proposed meeting. 14 This case also raises a question of whether it is appropriate to use s 411 of the Corporations Act to permit meetings to be held for the approval of a scheme of arrangement under Pt 5.1 of the Corporations Act where the solvency of the company is questionable and a winding up may be avoided by the implementation of the scheme. However, I am satisfied on the materials before the Court that the observations of Barrett J in the case of Re Centro Properties (2011) 87 ACSR 131 at [56] are germane to the circumstances of PLA. I am content to regard that particular feature as not being an impediment to the approval of the scheme at a final hearing, if the requisite majorities are obtained. 15 There is also the matter of the application for the winding up of PLA's main operating subsidiary which was made in a South African court on 29 May 2013. This event could have given rise to the termination of the scheme implementation deed, and did in fact lead to an adjournment of this application on 10 June 2013. However, there is now before the [NAME]' evidence that the winding up application has been withdrawn, and that the threat to the continuing effect of the scheme implementation deed has dissipated.

Accordingly, on the basis of that evidence, I do not regard those matters as constituting an impediment to the making of final orders in the event that the requisite majorities are obtained. 16 I am also satisfied in relation to the performance risk, which is dealt with in a deed poll. 17 I note that the effectiveness of the scheme of arrangement is subject to a condition precedent that financing be obtained by [NAME]. The question of the financing has apparently not been concluded. However, the date for the fulfilment of that condition precedent has been extended to the second Court date. 18 There is also a question of whether orders should be made which would permit the advertising of the second Court hearing prior to the meeting at which the scheme will be considered by the PLA shareholders. I am content to make an order which will, unusually, permit the advertising of the second Court hearing before the meeting of shareholders takes place. 19 Because there is a need to accommodate, in the documentation, the late development in relation to the potential placement of [NAME] shares, I will not make orders for the convening of the meeting and ancillary orders now. I will make orders in chambers tomorrow. I will expect to receive from PLA's solicitors a minute of proposed orders by tomorrow morning. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.

Associate: Dated: 30 July 2013