FEDERAL COURT OF AUSTRALIA

Barrick (Lawlers) Pty Ltd v Barrick Mining Company (Australia) Pty Ltd, in the matter of Barrick (Lawlers) Pty Ltd [2015] FCA 1510

IN THE MATTERS OF BARRICK (LAWLERS) PTY LTD (ACN 009 125 259), BARRICK (PLUTONIC) PTY LTD (ACN 004 680 997), BARRICK MINING SERVICES PTY LTD (ACN 050 037 673) AND BARRICK (DARLOT) PTY LTD (ACN 000 761 188)

THE COURT ORDERS THAT:

1.    Pursuant to s 411 of the Corporations Act 2001 (Cth), there be convened:

(a)    by the first plaintiff (Barrick (Lawlers) Pty Ltd), a meeting of the holder of the fully paid ordinary shares in the capital of the first plaintiff to be held in Perth, Western Australia on 6 January 2016 at 10.00am (WST) (or on such other date and such other time as the Court may approve) for the purpose of considering and if thought fit, approving with or without modifications, the scheme of arrangement proposed between the first plaintiff and its shareholder, being contained in the affidavit of Eliza Jane Egan sworn 21 December 2015 at Annexure EJE-11, pages 541-561;

(b)    by the second plaintiff (Barrick (Plutonic) Pty Ltd), a meeting of the holder of the fully paid ordinary shares in the capital of the second plaintiff to be held in Perth, Western Australia on 6 January 2016 at 10.05am (WST) (or as soon as practicable after the meeting in order 1(a) above, or on such other date and such other time as the Court may approve) for the purpose of considering and if thought fit, approving with or without modifications, the scheme of arrangement proposed between the second plaintiff and its shareholder, being contained in the affidavit of Eliza Jane Egan sworn 21 December 2015 at Annexure EJE-11, pages 541-561;

(c)    by the third plaintiff (Barrick Mining Services Pty Ltd), a meeting of the holder of the fully paid ordinary shares in the capital of the third plaintiff to be held in Perth, Western Australia on 6 January 2016 at 10.10am (WST) (or as soon as practicable after the meeting in order 1(b) above, or on such other date and such other time as the Court may approve) for the purpose of considering and if thought fit, approving with or without modifications, the scheme of arrangement proposed between the third plaintiff and its shareholder, being contained in the affidavit of Eliza Jane Egan sworn 21 December 2015 at Annexure EJE-11, pages 541-561; and

(d)    by the fourth plaintiff (Barrick (Darlot) Pty Ltd), a meeting of the holder of the fully paid ordinary shares in the capital of the fourth plaintiff to be held in Perth, Western Australia on 6 January 2016 at 10.15am (WST) (or as soon as practicable after the meeting in order 1(c) above, or on such other date and such other time as the Court may approve) for the purpose of considering and if thought fit, approving with or without modifications, the scheme of arrangement proposed between the fourth plaintiff and its shareholder, being contained in the affidavit of Eliza Jane Egan sworn 21 December 2015 at Annexure EJE-11, pages 541-561,

(together, the Scheme Meetings).

2.    Pursuant to s 411(1) of the Corporations Act, the explanatory statement required by s 412(1)(a) of the Corporations Act and being contained in pages 523-579 of Annexure EJE-11 of the affidavit of Eliza Jane Egan sworn 21 December 2015, be and is approved, subject to:

(a)    correction of any minor typographical or grammatical errors and the date of the Scheme Meetings (above); and

(b)    any minor amendments required or approved by the Australian Securities and Investments Commission (ASIC) for registration under s 412(6) of the Corporations Act.

3.    Each of the Scheme Meetings shall be convened by a notice of meeting, a copy of which forms part of the approved explanatory statement in order 2 above, accompanied by a copy of the explanatory statement.

4.    Subject to registration of the explanatory statement pursuant to s 412(6) of the Corporations Act, service of the notice of meeting and accompanying explanatory statement may be effected by electronic means or by hand delivery to a person who is a director of the member or a person who is a proxy, corporate representative appointed under s 250D of the Corporations Act or attorney under power, of each member of the applicable plaintiff at any time before a relevant meeting commences.

5.    Dispatch of the documents referred to in order 4 above in general accordance with its terms is to be taken to be sufficient notice of the Scheme Meetings.

6.    Subject to these orders, the Scheme Meetings are to be (so far as practicable):

(a)    convened, held and conducted in accordance with the provisions of Part 2G.2 of the Corporations Act that apply to members of a company and the provisions of the plaintiffs’ constitutions that are not inconsistent therewith and that apply to meetings of members;

(b)    convened, held and conducted pursuant to s 1319 of the Corporations Act, on short notice at the times set out in para 1 and on the basis that Corporations Regulations 2001 (Cth) reg 5.6.11 to 5.6.11A and 5.6.13A to 5.6.36A do not apply to the Scheme Meetings; and

(c)    convened using the notices of meetings substantially in the form or to the effect of the notices to be contained in or accompanying the explanatory statement.

7.    Mr Daniel David Kirk or, failing him, Mr Derek Noel La Ferla is to be appointed to act as chairperson of the Scheme Meetings (Chairperson) and report the result of the Scheme Meetings to this Court.

8.    The Chairperson of each of the Scheme Meetings has the power to adjourn each such meeting, in his absolute discretion.

9.    A single shareholder present in person or by proxy, corporate representative or attorney under power and entitled to vote shall constitute a quorum for each of the Scheme Meetings.

10.    A proxy, appointment of corporate representative or power of attorney to act on behalf of a member of a plaintiff may be delivered to the Chairperson of the relevant scheme meeting at any time up until the vote is cast on a resolution at that meeting.

11.    A resolution put to the vote at any stage of the scheme meetings to approve the proposed schemes of arrangement, or any modification to the proposed schemes of arrangement, must be decided by the member or its representative signing a record of the resolution.

12.    The matter is to be relisted on 5 February 2016 at 2:25 pm for such applications as appropriate following the Scheme Meetings.

13.    If the matter is relisted, the plaintiffs are to give notice of the hearing of the applications pursuant to ss 411(4)(b) and 413 of the Corporations Act for orders approving the Schemes and other orders by publishing an advertisement in the public notices column of “The Australian” and “The West Australian” newspapers substantially in accordance with “Annexure A” to these orders, such advertisement to be published at least five days before any date allocated for the hearing and the plaintiffs are otherwise exempted from compliance with rule 3.4 of the Federal Court (Corporations) Rules 2000 (Cth).

14.    There be liberty to apply.

15.    These orders be entered forthwith.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANNEXURE A

BARRICK (LAWLERS) PTY LTD (ACN 009 125 259)

BARRICK (PLUTONIC) PTY LTD (ACN 004 680 997)

BARRICK MINING SERVICES PTY LTD (ACN 050 037 673)

BARRICK (DARLOT) PTY LTD (ACN 000 761 188)

(collectively, the Companies)

NOTICE OF HEARING TO APPROVE COMPROMISE OR ARRANGEMENT

TO all the creditors and members of the Companies.

TAKE NOTICE that at 2:15pm on 5 February 2016, the Federal Court of Australia at the Peter Durack Commonwealth Courts Building at 1 Victoria Avenue, Perth, Western Australia, will hear an application by the Companies seeking the approval of compromises or arrangements between each of the Companies and their member as proposed by resolutions passed at the meetings of the members of the Companies held on Wednesday 6 January 2016 (Arrangements).

The effect of the Arrangements is the solvent reorganisation of various subsidiaries of Barrick Mining Company (Australia) Pty Ltd (ACN 006 245 629) (BMCA), such that:

1.    all of the assets of the Companies will be transferred to BMCA (except the Excluded Assets, as defined, of Barrick (Plutonic) Pty Ltd and Barrick (Darlot) Pty Ltd);

2.    all of the liabilities of the Companies will be transferred to BMCA (except the Excluded Liabilities, as defined, of Barrick (Plutonic) Pty Ltd and Barrick (Darlot) Pty Ltd);

3.    any legal proceedings pending by or against any of the Companies will be continued by BMCA; and

4.    Barrick (Lawlers) Pty Ltd and Barrick Mining Services Pty Ltd will be deregistered without winding up under s 413(1)(d) of the Corporations Act.

If you wish to oppose the approval of the Arrangements, you must file and serve on the plaintiffs (the Companies) a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on the plaintiffs at their address for service at least 1 day before the date fixed for the hearing of the application.

The address for service of the plaintiffs is Lavan Legal, Level 19, 1 William Street, Perth, Western Australia, 6000.Name of the person giving notice [or] person’s legal practitioner: Alison Robertson (Partner) / Daniel Kirk (Partner), Lavan Legal. Contact – email: Alison.Robertson@lavanlegal.com.au and Daniel.Kirk@lavanlegal.com.au; phone: (08) 9288 6000.

IN THE MATTERS OF BARRICK (LAWLERS) PTY LTD (ACN 009 125 259), BARRICK (PLUTONIC) PTY LTD (ACN 004 680 997), BARRICK MINING SERVICES PTY LTD (ACN 050 037 673) AND BARRICK (DARLOT) PTY LTD (ACN 000 761 188).

REASONS FOR JUDGMENT

1    This is an application for orders under s 411(1) of the Corporations Act 2001 (Cth) convening:

(1)    a meeting to consider a proposed scheme of arrangement (Lawlers scheme) between the first plaintiff, Barrick (Lawlers) Pty Ltd (ACN 009 125 259), and its sole shareholder (Lawlers shareholder) (Lawlers scheme meeting);

(2)    a meeting to consider a proposed scheme of arrangement (Plutonic scheme) between the second plaintiff, Barrick (Plutonic) Pty Ltd (ACN 004 680 997), and its sole shareholder (Plutonic shareholder) (Plutonic scheme meeting);

(3)    a meeting to consider a proposed scheme of arrangement (MS scheme) between the third plaintiff, Barrick Mining Services Pty Ltd (ACN 050 037 673) (MS), and its sole shareholder (MS shareholder) (MS scheme meeting); and

(4)    a meeting to consider a proposed scheme of arrangement (Darlot scheme) between the fourth plaintiff, Barrick Darlot Pty Ltd (ACN 000 761 188) (Darlot), and its sole shareholder (Darlot shareholder) (Darlot scheme meeting)

(together, the schemes).

2    The Australian Securities and Investments Commission (ASIC), by a letter dated 23 December 2015, annexed to the affidavit of Mr Daniel David Kirk sworn 23 December 2015 (fourth Kirk affidavit), advised the plaintiffs that it did not propose to make submissions or intervene to oppose the schemes at the first hearing.

OVERVIEW

3    Four separate but interdependent schemes are proposed.

4    The defendant, Barrick Mining Company (Australia) Pty Ltd (ACN 006 245 629) (BMCA) owns all of the shares in each of the plaintiffs.

5    The schemes would effect arrangements for:

(1)    the amalgamation of Lawlers and MS with BMCA by the transfer of the whole of their assets and liabilities to BMCA, their sole shareholder, such that Lawlers and MS may be deregistered by ASIC without winding up pursuant to s 413(1)(d) of the Corporations Act; and

(2)    the amalgamation of Plutonic and Darlot with BMCA, or their reconstruction, by the transfer of the whole of each of Plutonic’s and Darlot’s assets and liabilities (except the excluded assets and excluded liabilities) to BMCA, their sole shareholder, such that Plutonic and Darlot might be voluntarily deregistered pursuant to s 601AA of the Corporations Act (after the disposal of the excluded assets has been perfected).

6    BMCA is a wholly owned subsidiary of Barrick (Australia Pacific Holdings) Pty Ltd (ACN 085 702 558) (BAPH).

7    The ultimate holding company of BAPH is Barrick Gold Corporation.

8    Barrick Gold Corporation is a Canadian company listed on the Toronto Stock Exchange and New York Stock Exchange and one of the world’s largest gold producers, with mines in Argentina, Australia, Canada, Chile, the Dominican Republic, Papua New Guinea, Peru, Saudi Arabia, the United States and Zambia.

9    The purpose of the schemes is to consolidate corporate structures within an Australian group. In recent years, Lawlers, Plutonic and Darlot disposed of their main undertakings to third parties. Each had owned and operated a gold mine in Western Australia. MS was a service company for those three companies.

10    The four plaintiffs are now otherwise dormant entities.

11    By the terms of the schemes and additional orders made under s 413, it is proposed that there be a reconstruction or amalgamation to reduce the expense and complexity of corporate administration.

12    The plaintiffs rely on:

(1)    the affidavit of Mr Daniel David Kirk sworn 30 November 2015;

(2)    the affidavit of Mr Daniel David Kirk sworn 11 December 2015;

(3)    the affidavit of Mr Todd Johannes Giltay sworn 16 December 2015 (Giltay affidavit);

(4)    the affidavit of Mr Hayden James Bartrop sworn 17 December 2015 (first Bartrop affidavit);

(5)    the affidavit of Mr Hayden James Bartrop sworn 21 December 2015 (second Bartrop affidavit);

(6)    the affidavit of Ms Eliza Jane Egan sworn 21 December 2015 (first Egan affidavit);

(7)    the affidavit of Mr Derek Noel La Ferla sworn 21 December 2015 (La Ferla affidavit);

(8)    an affidavit of Mr Daniel David Kirk sworn 21 December 2015 (third Kirk affidavit); and

(9)    the fourth Kirk affidavit referred to above.

Should orders convening meetings be made and the explanatory statement approved under section 411 of the Corporations Act?

13    There are three stages to an application under s 411:

(1)    Court approval to convene the meetings at which the Lawlers shareholder, Plutonic shareholder, MS shareholder and Darlot shareholder (schemes shareholder) will vote according to its respective holdings in the plaintiffs on the Lawlers scheme, the Plutonic scheme, the MS scheme and the Darlot scheme (scheme meetings) and approval of a draft explanatory statement to be sent to the schemes shareholder;

(2)    the schemes shareholder voting on the schemes at the scheme meetings; and

(3)    Court approval of the schemes:

Re CSR Ltd (2010) 183 FCR 358 at [7]; [2010] FCAFC 34 (Keane CJ, as he then was, and Jacobson J).

14    The principal questions relevant to the first stage are as follows:

(1)    Are there compromises or arrangements?

(2)    Is there a Part 5.1 body?

(3)    Are there members or creditors of a company?

(4)    Are there classes of members or creditors?

(5)    Should the Court make orders to convene meetings?

Standard of review

15    The standard of review at this stage is whether the schemes are not inappropriate and are ones that sensible business people might consider to be of benefit to the members concerned: Re Sonodyne International Ltd (1994) 15 ACSR 494 at 499 (Hayne J).

16    If the proposed arrangement is one that seems fit for consideration by a meeting of members (or creditors) and is a commercial proposition likely to gain the Court’s approval if passed by the necessary majorities, then leave should be given to convene the meetings: Re ACM Gold Limited (1992) 34 FCR 530 at 535 (O’Loughlin J).

17    The Court is not required to be satisfied either at the convening or approval stage that no better scheme or schemes could have been devised: Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at 265; [2002] FCA 742 (French J, as he then was).

18    While s 411(2) contains a statement of the circumstances in which a scheme meeting must not be ordered, s 411 contains no statement of the criteria that must be satisfied before a meeting is ordered: Re CSR at [8].

19    Nonetheless, as mentioned above at [13] as to the principal issues, it is relatively settled that the Court should order the convening of the scheme meetings and approve the dispatch of the information booklet to the schemes shareholder in respect of the schemes (explanatory statement) if satisfied of the following matters:

(1)    Each of the schemes is an arrangement in respect of which the Court may order a meeting of the members or creditors: s 411(1). That is: (i) each of the schemes is an arrangement; (ii) each of the plaintiffs is a Part 5.1 body; (iii) each of the schemes’ participants are members and/or creditors of the plaintiffs; and (iv) each of the scheme meetings will be convened between members of the same class.

(2)    ASIC has had a reasonable opportunity to: (i) examine the terms of each of the schemes and explanatory statement; and (ii) make submissions to the Court in relation thereto: s 411(2)(b).

(3)    The explanatory statement:

(a)    provides adequate disclosure: s 412(1)(a)(i); and

(b)    contains the prescribed information: s 412(1)(a)(ii), reg 5.1.01 and Sch 8 cll 8301- 8310 of the Corporations Regulations 2001 (Cth).

(4)    The procedural requirements of the Federal Court (Corporations) Rules 2000 (Cth) have been met.

(5)    There is no apparent reason why each of the schemes should not, in due course, receive the Court’s approval if the necessary majority of shareholders votes are achieved with respect to each of the schemes:

Re NRMA Ltd (No 1) (2000) 156 FLR 349 at [3], [14]-[41]; [2000] NSWSC 82 (Santow J); Re Ranger Minerals Ltd (2002) 42 ACSR 582 at [21]-[23], [31]-[36], [40] and [47]; [2002] WASC 207 (Parker J); Re Hills Motorway Ltd (2002) 43 ACSR 101 at [5]; [2002] NSWSC 897 (Barrett J); Re Orica Limited [2010] VSC 231 at [7] (Davies J); Re MAC Services Group Ltd (2010) 80 ACSR 390 at [5]; [2010] NSWSC 1316 (Barrett J).

20    The following five sections deal with each of the above matters in turn.

Section 411(1) members’ scheme

Arrangement within s 411(1)

21    The word “arrangement” is of wide import. As was said in Re NRMA at [20]:

Generally speaking, unless the arrangement is ultra vires the company or seeks to deal with a matter for which a special procedure is laid down by the Corporations Law or to evade a restriction imposed by the Corporations Law, almost any arrangement otherwise legal which touches or concerns the rights and obligations of the company or its members or creditors, and which is properly proposed, may come under s 411 …

22    The proposed schemes contain cl 5.2, by which BMCA (as transferee) approves the relevant schemes.

23    Also by cl 5.2, BMCA consents to the schemes notwithstanding any diminution in the value of its shareholding in the relevant plaintiff and any rights that it may have in connection with the proposed schemes at law (including under the plaintiffs’ constitutions). Further, by cl 5.2, BMCA waives any rights it may otherwise have as against any plaintiff in connection with the scheme.

24    So expressed, the arrangement touches and concerns rights and obligations of BMCA as a shareholder.

25    A concern has been expressed that an internal restructure of a corporate group may not constitute an “arrangement”. That is because, it has been said, the sole shareholder of an entity to be the subject of a scheme of arrangement gets nothing or has no rights or obligations affected as a shareholder. That issue had been identified by Emmett J in AGL Energy Services (Queensland) Pty Limited v AGL Energy Services Pty Limited [2010] FCA 452, where his Honour initially refused to make orders to convene a scheme meeting on that basis. However, after the addition of a clause like cl 5.2 of the proposed schemes, his Honour was so satisfied: AGL Energy Services (Queensland) Pty Limited v AGL Energy Services Pty Limited (No 2) [2010] FCA 453 at [3].

26    That clause and the approach taken by Emmett J in AGL Energy have been relied upon in subsequent schemes, including All Star Funds Management Limited v Ventura Investment Management Ltd [2012] FCA 527 at [4]-[6] (Jagot J) and Macquarie Equipment Finance Pty Limited v Macquarie Bank Limited [2012] FCA 1212 at [3] (Jagot J).

27    As such, it is clear that the proposal before the Court is an arrangement.

28    Further, it has been held that schemes that involve the transfer of the whole or part of the property and liabilities of one wholly owned subsidiary to another are to be undertaken by a members’ scheme of arrangement: Re AGL Sydney Ltd (1994) 13 ACSR 597 at 598 (Young J); SGIC Insurance Ltd v Insurance Australia Ltd (2004) 51 ACSR 470 at [7]-[11]; [2004] FCA 1492 (Jacobson J); Stork ICM Australia Pty Ltd v Stork Food Systems Australasia Pty Ltd (2007) 25 ACLC 208 at [69]; [2006] FCA 1849 (Lindgren J).

29    The potential effects on creditors, by transfer of the liabilities, do not require a creditors scheme and are an issue of fairness to be dealt with at the second court hearing: SGIC Insurance at [10]-[11].

30    Consistent with the approach identified by Finkelstein J in Royal Victorian Institute for the Blind Ltd v RBS.RVIB.VAF Ltd (2004) 206 ALR 581; [2004] FCA 735, the proposed transferee of the assets and liabilities of the plaintiffs (BMCA) has been joined as a defendant to these proceedings. See too SGIC Insurance at [6], All Star Funds Management at [1] and Equatorial Mining Pty Limited v Antofagasta Investment Company Limited [2013] FCA 1452 at [14] (Yates J).

Part 5.1 body

31    Section 411 of the Corporations Act confers jurisdiction on the Court in respect of a Part 5.1 body. The term “Part 5.1 body” is defined in s 9 of the Corporations Act to mean, relevantly, a company.

32    Each of the plaintiffs is a company.

Members

33    The term “member” is defined in s 9 to mean, in relation to a company, a person who is a member under s 231 of the Corporations Act. Broadly, a person is a member of a company if they are a member of the company on its registration, or agree to become a member of the company after its registration and their name is entered on the register of members.

34    The Lawlers shareholder, Plutonic shareholder, MS shareholder and Darlot shareholder, being BMCA, is a member of each plaintiff company.

35    It has been held that a court ordered meeting can be constituted by one person: Re Hastings Deering Pty Ltd (1985) 9 ACLR 755 at 755 (Kearney J); SGIC Insurance at [12] and [14].

36    There are no other classes of shares in each of the plaintiffs on issue.

Classes

37    An arrangement to which s 411(1) applies is one between a company and its members or creditors or any class of them. It is the only such arrangement to which the Court may grant its approval pursuant to s 411(6).

38    Section 411 does not define the term “class”. However, in the leading case of Sovereign Life Assurance Company v Dodd [1892] 2 QB 573 at 583, Bowen LJ said that the term ought to be given such a meaning:

… as will prevent the section being so worked as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest.

39    In this case, there is only one shareholder in each of the plaintiffs. As such, there can only be one class of shareholders for each of the plaintiffs.

40    No issue as to class composition arises.

ASIC consideration

41    The jurisdiction of the Court to make an order convening meetings under s 411(1) is conditional upon the matters set out in s 411(2). Section 411(2) requires that the Court be satisfied of two matters before making an order. First, that ASIC has been given 14 days’ notice of the hearings, or such lesser period of notice as the Court or ASIC permits: s 411(2)(a). Second, that ASIC has had a reasonable opportunity to examine the terms of each of the schemes and the draft explanatory statement and to make submissions to the Court: s 411(2)(b).

42    The originating application was formally served on ASIC on 3 December 2015. Formal notice of the date and time of the hearing was given to ASIC on 3 December 2015. The first requirement was satisfied. The first court hearing date was moved to 24 December 2015 on 15 December 2015, and ASIC was accordingly updated on 15 December 2015.

43    The explanatory statement was lodged with ASIC on 10 December 2015. The second requirement is satisfied.

44    ASIC did not wish to be heard at the first hearing, and the plaintiffs confirmed that ASIC was given notice of and examined the draft explanatory statement in the fourth Kirk affidavit.

Draft explanatory statement

45    The most recent draft of the explanatory statement is at EJE-11 of the first Egan affidavit.

46    The various annexures to the explanatory statement comprise of the following:

(1)    Annexure A, the scheme of arrangement for the reconstruction of the Barrick Mining Australia (Company) Group;

(2)    Annexure B, the unaudited management balance sheets of each of the plaintiffs and BMCA as at 9 December 2015; and

(3)    Annexure C, the notices of scheme meetings of shareholders for each of the plaintiffs and a proxy form.

47    The emphasis is on proper disclosure: Re Seven Network Limited [2010] FCA 220 at [8] (Jacobson J).

48    The explanatory statement must provide proper disclosure as required in s 411(3) of the Corporations Act. It must essentially set out “all the main facts as will enable [shareholders] to exercise their judgment on the proposed scheme”: Re Dorman, Long & Co Ltd [1934] Ch 635 at 665-6 (Maugham J); applied in Re NRMA at [16] and Foundation Healthcare at 263.

49    Additionally, the Court should be satisfied that there is nothing apparently misleading or deceptive in the explanatory statement:

(1)    The plaintiffs have undertaken a process of verifying the accuracy of the statements relating to it in the explanatory statement.

(2)    The plaintiffs’ directors consider the contents of the explanatory statement to be accurate insofar as statements of fact relate to the plaintiffs and there is no reason to believe that statements of fact relating to the plaintiffs are inaccurate.

(3)    Further, to the extent that any information about BMCA, the defendant, is included in the explanatory statement, then it as the sole shareholder and sole recipient of the explanatory statement will know the accuracy of that information.

ASIC’s position

50    ASIC considers that its role is to assist the Court by, inter alia, reviewing the content of each of the schemes’ documents, reviewing the nature and function of each of the schemes, representing the interests of investors and creditors and bringing all relevant matters to the Court’s attention before it orders scheme meetings or confirms a scheme: see ASIC Regulatory Guide 60 at RG 60.4.

Disclosure requirements – explanatory statement

51    The explanatory statement prepared by the plaintiffs in relation to the schemes appears to satisfy the disclosure requirements prescribed in:

(1)    ASIC Regulatory Guide 60; and

(2)    ss 411(3) and 412 of the Corporations Act and Sch 8 of the Regulations.

52    The plaintiffs sought a waiver from ASIC as to the need for an independent expert’s report (stating whether or not, in the expert’s opinion, the schemes are in the best interests of the members), to be attached to the explanatory statement, as permitted by ASIC Regulatory Guide 60.79-60.80 when an internal reconstruction is proposed. This has been found acceptable in other internal reconstruction schemes: Equatorial Mining at [26].

53    By a letter dated 23 December 2015, annexed to the fourth Kirk affidavit, ASIC advised the plaintiffs it waived the requirement for an expert report .

54    The explanatory statement will be registered by ASIC before it is dispatched in accordance with s 412(6).

Prescribed information – Part 3 of Schedule 8 of the Corporations Rules

55    Regulation 5.1.01 of the Regulations prescribes the information for the explanatory statement as required by ss 411(3)(b) and 412(1)(a)(ii). In respect of a scheme between a Part 5.1 body and its members, or a class of its members, reg 5.1.01(1)(b) requires the explanatory statement to state the matters set out, and have annexed to it the reports and copies of documents mentioned in Pt 3 of Sch 8 to the Regulations.

56    Part 3 of Sch 8 to the Regulations is entitled “Prescribed information relating to proposed compromise or arrangement with members or a class of members” and contains ten clauses, cll 8301 to item 8310 inclusive. The plaintiffs have identified the relevant paragraphs of the explanatory statement setting out the prescribed information as required by cll 8301-8310, when applicable.

Procedural matters

57    Rule 3.2 of the Rules requires the plaintiffs to file an affidavit stating the names of the persons who have been nominated to be the chairperson and alternate chairperson of the scheme meetings, that each person nominated is willing to act as chairperson, has had no previous relationship or dealing with the plaintiffs, or any other person interested in the schemes except as disclosed in the affidavit, and has no interest or obligation that may give rise to a conflict of interest or duty if the person were to act as chairperson of the scheme meetings, except as disclosed in the affidavit.

58    This requirement is satisfied by the third Kirk affidavit and La Ferla affidavit.

Order convening meetings – the Court’s discretion

59    The Court will not ordinarily summon a meeting unless the scheme is of such a nature and cast in such terms that, if it achieves the statutory majority at the members’ meeting, the Court would be likely to approve it on the hearing of the petition which is unopposed: FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72 (Street CJ).

60    However, the role of the Court at this stage of the process of a company propounding and implementing a scheme of arrangement is not to scrutinise finally whether the scheme should be approved. That decision must await the expression of the will of the members or creditors at the meeting and any argument that may be advanced on behalf of dissenting members or other interested parties at the time of the application for approval: Re Sonodyne International at 497.

61    The schemes proposed by the plaintiffs are not so obviously unfair or otherwise inappropriate that they should be stopped in their tracks before going any further: see Re Foundation Healthcare at 265 [44].

62    Further, the directors of the plaintiffs have individually considered the merits of each of the proposed schemes.

63    A director of each plaintiff has given evidence that the boards of each plaintiff consider each proposed scheme is in the best interests of each plaintiff for the reasons of efficiency and corporate rationalisation.

64    The following subsections address a number of matters relating to the fairness and appropriateness of the schemes. Although none of these matters provides a basis for refusing to convene the scheme meetings, the Court’s attention has been drawn to them because the application is made ex-parte.

Proper purpose

65    The Court should be satisfied that each scheme is properly proposed (bona fides and intra vires). However, where there is no suggestion of an improper purpose on the material before the Court, bona fides is a matter for consideration on any application to approve each scheme: Re NRMA at [22]-[25].

66    The plaintiffs’ constitutions do not prevent the proposed schemes.

67    There is nothing in the material before the Court that suggests the scheme has not been properly proposed:

(1)    A director of the plaintiffs has given evidence that the purpose of the proposed schemes is to consolidate the affairs of the plaintiffs with the defendant, so as to reduce corporate administration expense. That is, there is an intelligible and realistic justification for the proposed schemes.

(2)    There is no evidence that the plaintiffs propose the schemes to avoid liabilities or defeat the claims of creditors or potential creditors:

(a)    The internal accountants for the plaintiffs have prepared financial statements for the plaintiffs and given evidence that they represent a true picture of the plaintiffs’ affairs.

(b)    A director of each of the plaintiffs has given evidence that he does not believe the position of creditors will be adversely affected. Further, he has confirmed that this is the view of the other directors of the plaintiffs.

(c)    The pre-schemes net asset position of the defendant is a substantial amount of intercompany receivables (US$466,546,058) (none of which is payable by a plaintiff to the defendant). The post-schemes unaudited net asset position of the defendant, upon receiving the assets (and liabilities) of the plaintiffs, will be US$781,773,403. This amount is also comprised of intercompany receivables.

(d)    A director has confirmed that a deed of cross-guarantee is also in place for creditors of any group entity, and the terms of that instrument are disclosed.

Proper disclosure

68    The Court is satisfied, prima facie, that there has been proper disclosure with nothing misleading or deceptive in any material sense: Re NRMA at [3].

69    As noted above, the explanatory statement meets the disclosure requirements of ss 411(3) and 412 of the Corporations Act, ASIC Regulatory Guide 60 and Sch 8 of the Regulations. Accordingly, the Court is satisfied that there has been proper disclosure.

70    Additionally, the Court is satisfied that there is nothing apparently misleading or deceptive in the explanatory statement, as a verification procedure has been completed by the management of the plaintiffs, with the assistance of their solicitors, as explained above.

Usual mergers and acquisitions issues do not arise

71    The schemes proposed do not involve the more typical scheme of arrangement for members of a publicly listed target company to effect a merger or takeover.

72    As such, issues concerning lock up devices, break fees, performance risks, conditions precedent, encumbrance and deemed warranty clauses and treatment of foreign shareholders do not arise for these proposed schemes.

73    As there are no other types of securities on issue for any of the plaintiffs and only one shareholder for each of the plaintiffs, issues of whether potential collateral benefits to particular shareholders, enticing them to vote a particular way, do not arise.

74    Further, no issue can arise under s 411(17). This is not a transaction that is suitable for, or capable of being achieved by, a takeover bid under Ch 6 of the Corporations Act.

Preparation of unaudited balance sheets

75    It must be noted that the balance sheets prepared for the plaintiffs and defendant have been prepared internally by an accountant within the corporate group and have not been audited by any external firm of accountants.

76    This approach to the unaudited balance sheets is acceptable in this case for the following reasons:

(1)    Mr Todd Giltay, the accountant who prepared the statements, has been employed within the Barrick group since May 2010.

(2)    Mr Giltay has given sworn evidence as to the manner of preparation of the unaudited balance sheets.

(3)    Mr Giltay’s evidence confirms that he has had assistance from Ms Sherly Handoko (Senior Accountant) and Mr Luke Fleming (a director of the plaintiffs with the group role of Senior Manager of Taxation). As to the BMCA unaudited statement post-schemes, Ms Handoko assisted.

(4)    Mr Giltay’s evidence confirms that the directors of each of the plaintiffs and defendant have reviewed the draft unaudited statements and made any changes to address material errors or omissions.

(5)    The assets of the plaintiffs and defendant in the unaudited balance sheets consist largely of intercompany receivables, or the equity is retained earnings.

(6)    There are no liabilities of the plaintiffs and defendant in the unaudited balance sheets, so as to require a more comprehensive breakdown as to what those liabilities are.

77    Further, in All Star Funds Management at [11], Jagot J accepted evidence of the “unaudited net position”. Further, at the second court hearing, Jagot J approved the schemes based on an update from the chief financial officer and company secretary that there had been no material change to the financial position disclosed in the unaudited balance sheets for the scheme companies: All Star Funds Management Limited v Ventura Investment Management Ltd (No 2) [2012] FCA 564 at [3] (Jagot J) (All Star Funds Management (No 2)).

Scheme meetings on short notice

78    By reason of the plaintiffs and defendant all forming part of the same corporate group, short notice of the scheme meetings has been proposed. The defendant, as sole shareholder, has provided consent to this.

79    This has been found acceptable in other cases by reason of the “essentially in-house nature of the proposed reconstruction”: Equatorial Mining at [33], following SGIC Insurance at [16].

80    The short notice of the scheme meetings proposed is acceptable.

Terms of the proposed schemes

81    The terms of the proposed schemes were addressed by oral submissions at the first court hearing, including by reference to similar individual terms for the reconstructions and amalgamations in:

(1)    Legrand Australia Pty Ltd v HPM Industries Pty Ltd [2009] FCA 1184 and Legrand Australia Pty Ltd v HPM Industries Pty Ltd (No 2) [2009] FCA 1239 (Lindgren J);

(2)    Millennium CHPP Pty Ltd v Millennium Coal Pty Ltd [2009] FCA 1556 and Millennium CHPP Pty Ltd v Millennium Coal Pty Ltd (No 2) [2011] FCA 4 (Stone J); and

(3)    All Star Funds Management; All Star Funds Management (No 2).

Section 413 orders

82    The proposed schemes are reliant upon orders sought under s 413 of the Corporations Act, which provision relates to schemes of arrangement that propose an amalgamation or reconstruction of Part 5.1 bodies.

83    The interrelationship between ss 411 and 413 is explained in AGL Energy at [14]-[15] by Emmett J as follows:

[14]     A scheme for reconstruction or amalgamation within s 413 is not, of itself, a compromise or arrangement between a Part 5.1 body and its creditors within s 411. However, before the jurisdiction under s 413 can be exercised, there must be such a compromise or arrangement. As a practical matter, it may be that the compromise or arrangement is one that does not need to rely on s 411(4), because it is something that could be effected privately between a company and its members, as in this case, between the Company and the Company Member. However, there is nothing untoward, in invoking the powers conferred on the Court by s 411 as a prerequisite to enlivening the further provisions of s 413 (see, for example, Re Clydesdale Bank Limited (1950) SC 30 at 36 ff, where a clear distinction was drawn between a compromise or arrangement and a scheme of reconstruction or amalgamation under s 206 and s 208 of the Companies Act 1948 (United Kingdom), which correspond with ss 411 and 413 of the Act).

[15]     The element of compromise or arrangement that is necessary to satisfy s 411 need not be of any great magnitude or significance, so long as what is proposed can fairly be characterised as a compromise or arrangement between a company, on the one hand, and its members, on the other. That will suffice to enliven the Court’s powers under s 413, so long as the compromise or arrangement is proposed for the purposes of, or in connection with, a scheme for the reconstruction or amalgamation. Clearly enough, what is being proposed is for the purposes of, and in connection with, such a scheme.

84    Section 413 confers jurisdiction on the Court to make orders if three conditions precedent are met:

(1)    there must be a compromise or arrangement (that is addressed above);

(2)    the compromise or arrangement must have been proposed “for the purposes of, or in connection with, a scheme for” the reconstruction of a Part 5.1 body or bodies or the amalgamation of any two or more Part 5.1 bodies (addressed below); and

(3)    under the scheme, “the whole or any part of the undertaking or of the property of a body concerned in the scheme … is to be transferred to a company” (addressed below).

85    If these are satisfied, the Court can make orders either at the approval of the compromise or arrangement (at the second court hearing on the scheme) or by any subsequent order.

86    It has been said that a provisional view at this stage need only be made that there is no jurisdictional impediment to the Court making the foreshadowed orders under s 413: Equatorial Mining at [29].

87    At this stage, it can be demonstrated that s 413 will likely support the orders required to give effect to the proposed schemes.

88    The relevant matters are dealt with, in turn, below.

There is a reconstruction and/or amalgamation

89    While the plaintiffs say this matter will be further addressed at the second court hearing, it may be seen that all of the four proposed schemes meet the requirements of a “reconstruction” or amalgamation within the authorities to a sufficient threshold of arguability.

90    The definitions and authorities are comprehensively detailed in Damian T and Rich A, Schemes, Takeovers and Himalayan Peaks (3rd ed, Ross Parsons Centre of Commercial, Corporate and Taxation Law, 2013) at [9.2.2] (pp 447-452) (set out below without footnote references).

91    The learned authors say as to the constituent elements of a reconstruction:

(1)    all or substantially all of an undertaking is transferred by a company (the transferor company) to another company (the transferee company) and that undertaking is then carried on by the transferee company;

(2)    substantially the same business must be carried on by the transferee company as was carried on by the transferor company;

(3)    the shareholders of the transferee company must be (or, after the reconstruction become) the same or substantially the same as the shareholders of the transferor company;

(4)    in relation to (3) above, in the case of an intragroup transfer from one company to another company in the group, it will be sufficient if the shareholders of the ultimate holding company of the transferee and the transferor are the same or substantially the same;

(5)    for there to be a reconstruction, there is no requirement for the transferee company to take over all or indeed any of the liabilities of the transferor company; and

(6)    a transfer may still involve a reconstruction even if the undertaking is transferred to more than one transferee company.

92    The learned authors say, as to the key features of an “amalgamation” identified in the authorities, that:

(1)    all or substantially all of the undertakings of one company (or of several companies) are transferred to another (existing) company (which is this case); or

(2)    all or substantially all of the undertakings of two or more companies are transferred to another (newly incorporated) company (which is not this case).

93    See too Citizens and Graziers’ Life Assurance Company Limited v Commonwealth Life (Amalgamated) Assurances Limited (1934) 51 CLR 422; [1934] HCA 22.

Whole or part of property of a body to be transferred to a company

94    By cll 4.2.1, 4.3.1, 4.4.1 and 4.5.1 of the proposed schemes, the whole or part of the property of the plaintiffs is to be transferred to BMCA.

95    This requirement is satisfied.

Assets to be transferred

96    The plaintiffs say they will provide more detailed submissions at the second court hearing in seeking orders pursuant to s 413(1)(a).

97    For present purposes, it may be said that the assets of the plaintiffs will be transferred to the defendant other than the excluded assets (explained below).

Liabilities to be transferred

98    The protection of creditors is to be considered at the second court hearing and by the orders to be made at the second court hearing under s 413: Re AGL Sydney at 598.

99    Pursuant to cll 4.2.2, 4.3.2, 4.4.2 and 4.5.2 of the proposed schemes, “all liabilities” of the plaintiffs will transfer to BMCA once orders under s 413 are made by the Court at the second court hearing.

100    The definition of “liabilities” contained in the proposed schemes at cl 1.1 is very broad:

(1)    means all liabilities howsoever arising and whether present, unascertained, immediate, future or contingent, including (without limitation):

(a)    any liabilities within the meaning of s 413(4) of the Corporations Act; and

(b)    any liability subject to a security interest (as that term is defined in the Personal Property Securities Act 2009 (Cth)).

101    As such, all liabilities of the plaintiffs will transfer (subject to the excluded liabilities mentioned below).

102    As BMCA (the defendant) is a party to these proceedings and it is a party to the proposed schemes, BMCA will be bound to the terms of the schemes once effective and the orders made by the Court pursuant to s 413 of the Corporations Act.

103    Further, s 413(1)(a) is cast in broad terms so as to cover future or contingent liabilities of the scheme company: Stork ICM Australia at [91]-[92]; Achieve Foundation Ltd v ACNewCo Ltd (2010) 77 ACSR 673 at [58]-[61]; [2010] FCA 382 (Foster J).

104    At this first court hearing stage, the evidence before the Court shows that no “long tail liabilities” or known or foreshadowed contingent liabilities have been identified by a director of the plaintiffs. See All Star Funds Management at [12].

105    However, by reason of the activities of the plaintiffs (conducting mining operations), it is not impossible that some future liability, currently unknown, may arise. The explanatory statement specifically notes at paras 4.4 to 4.8 some types of such liabilities:

(1)    potential liability under environmental legislation;

(2)    potential liability under s 114B of the Mining Act 1978 (WA) in respect of which one of the plaintiffs may have been liable as a tenement holder prior to the disposal of those tenements to third parties;

(3)    potential contractual or tortious liability.

106    The notification of six workers compensation claims made against MS, in connection with operations on mines previously owned and operated by Lawlers, Plutonic and Darlot is noted specifically in the explanatory statement at para 4.7.

107    By reason of the orders to be sought pursuant to s 413(1)(a) and cll 4.2.2, 4.3.2, 4.4.2 and 4.5.2 of the proposed schemes, contingent environmental, statutory, contractual or tortious liabilities of the plaintiffs that could arise in the future, including workers compensation claims, will be liabilities of BMCA.

108    Further, the proposed advertisement for the second court hearing has been drafted in a manner to reveal that assets and liabilities will be transferred to BMCA, such that creditors can be aware of the proposed schemes. This is consistent with the specific advertisements approved in AGL Energy at [18] (Emmett J) and All Star Funds Management at [9].

109    The Court finds the explanatory statement and proposed advertisement provide sufficient disclosure of the liabilities to be transferred to BMCA.

The excluded assets and excluded liabilities issue

110    Plutonic and Darlot hold the excluded assets which are to be transferred to third parties under contracts of sale with those third parties upon the assessment of transfer duty and registration of transfers. Those assets are a group of granted mining tenements and pastoral leases, rights under a mining tenement application and a freehold property interest: see the proposed schemes, cll 4.3.1 and 4.5.1 and Annexure B (Parts A and B).

111    The rights and obligations in relation to those assets, and ancillary rights to them, are reserved in Plutonic and Darlot.

112    This drafting has been provided so as to allow the completion of the transfer of these assets to third parties in due course, with appropriate separation of primary and secondary rights and obligations.

113    The plaintiffs satisfactorily dealt with these matters in more detail at the first court hearing.

Deregistration of Lawlers and MS – s 413(1)(d)

114    By s 413(1)(d), the Court may make orders for the deregistration by ASIC of Lawlers and MS, as the transferor bodies, without winding up. This course is proposed in the schemes and the Court has the power to make such orders.

115    The plaintiffs say they will make further submissions on this aspect at the second court hearing.

conclusion and orders

116    As considered above, the Court is satisfied as to the matters now relevant to an order convening meetings under s 411 of the Corporations Act.

117    In all of these circumstances, appropriate disclosure of any relevant matters having been made, the Court is satisfied the proposed orders should be made.

Associate:

Dated:    24 December 2015