FEDERAL COURT OF AUSTRALIA

Lithium Power International Ltd, in the matter of Lithium Power International Ltd [2023] FCA 1637

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to subsection 411(1) and section 1319 of the Corporations Act 2001 (Cth) (Act), the plaintiff convene and hold a meeting (Scheme Meeting) of its members holding fully paid ordinary shares (LPI Shareholders):

(a)    To consider, and, if thought fit, to approve (with or without modification) a scheme of arrangement proposed to be made between the plaintiff and the Scheme Shareholders as defined in the Scheme Implementation Deed (a copy of which is at Tab 2 of Exhibit MW-1 to the affidavit of Murray Wheater affirmed on 6 November 2023) (Scheme), the terms of which are contained in Annexure B to the Scheme Booklet (a copy of which is Exhibit 1);

(b)    To be held:

(i)    In person at Ashurst Australia, Level 11, 5 Martin Place, Sydney, NSW 2000; and

(ii)    Online by way of live webcast,

(c)    On 23 January 2024 commencing at 11:00am (Sydney time).

2.    The Scheme Booklet, substantially in the form of Exhibit 1, which comprises the explanatory statement as required by s 412(1)(a) of the Act (Scheme Booklet), be and is hereby approved for distribution to LPI Shareholders.

3.    On or around 21 December 2023 there be dispatched to each LPI Shareholder whose name is recorded in the plaintiff’s register of members at 5:00 pm (Sydney time) on 17 December 2023:

(a)    In the case of LPI Shareholders who have elected to receive shareholder communications electronically (Email Shareholders):

(i)    An initial email which contains URL links to:

1.    An electronic copy of the Scheme Booklet (including the explanatory statement approved for distribution by the Court, a notice of Scheme Meeting and an “online virtual meeting guide” containing instructions on how LPI Shareholders can participate in the Scheme Meeting via Boardroom Pty Ltd (Boardroom)’s online platform);

2.    Boardroom’s online proxy voting submission platform;

3.    A personalised proxy form for the Scheme Meeting substantially in the form contained at pages 17 to 18 of exhibit MW-2 to the affidavit of Murray Wheater affirmed on 13 December 2023 (Wheater Affidavit) (Proxy Form); and

4.    The online virtual meeting guide containing instructions on how to participate in the Scheme Meeting substantially in the form contained at pages 19 to 23 of exhibit MW-2 to the Wheater Affidavit (Virtual Meeting Guide);

(ii)    A further email to be sent only to Email Shareholders who do not have a bank account recorded with Boardroom for their LPI shareholding, attaching or linking a direct credit facility form;

(b)    In the case of LPI Shareholders who have elected to receive hard copy communications (Postal Shareholders), a package sent by pre-paid post to the relevant address recorded in the plaintiff’s register, or in the case of LPI Shareholders whose registered address is outside Australia, a package sent by airmail or international courier service, which contains hard copies of:

(i)    The Scheme Booklet (including the explanatory statement approved for distribution by the Court, a notice of Scheme Meeting and an “online virtual meeting guide” containing instructions on how LPI Shareholders can participate in the Scheme Meeting via Boardroom’s online platform);

(ii)    A personalised Proxy Form and a reply paid envelope or air mail reply paid envelope (as applicable) for the return of the Proxy Form;

(iii)    The Virtual Meeting Guide; and

(iv)    For those Postal Shareholders who do not have a bank account recorded with Boardroom for their LPI shareholding, a direct credit facility form;

(c)    In the case of LPI Shareholders who have not elected to receive electronic or hard copy communications (Other Shareholders), a letter sent by pre-paid post to the relevant address recorded in the plaintiff’s register, or in the case of LPI Shareholders whose registered address is outside Australia, sent by airmail or international courier service, which:

(i)    Contains a URL link to an electronic copy of the Scheme Booklet (including the explanatory statement approved for distribution by the Court, a notice of Scheme Meeting and an “online virtual meeting guide” containing instructions on how LPI Shareholders can participate in the Scheme Meeting via Boardroom’s online platform);

(ii)    Encloses a personalised Proxy Form, a reply-paid envelope or air mail reply paid envelope (as applicable) for the return of the Proxy Form;

(iii)    Encloses for those Other Shareholders who do not have a bank account recorded with Boardroom for their LPI shareholding, a direct credit facility form; and

(iv)    Contains a URL link to the online Virtual Meeting Guide.

4.    Subject to these orders, the Scheme Meeting be convened, held and conducted in accordance with:

(a)    The provisions of Part 2G.2 of the Act (save for any applicable replaceable rule) that apply to a meeting of the plaintiff’s members; and

(b)    The provisions of the plaintiff’s constitution that apply in relation to meetings of the plaintiff’s members and that are not inconsistent with Part 2G.2 of the Act.

5.    The LPI Shareholders entitled to vote at the Scheme Meeting are those whose names are recorded in the plaintiff’s register of members at 11:00 am (Sydney time) on 21 January 2024.

6.    Voting on the resolution to approve the Scheme at the Scheme Meeting is to be conducted by way of a poll.

7.    The time by which a Proxy Form must be returned or lodged in accordance with the instructions given on the Proxy Form is 11:00 am (Sydney time) on 21 January 2024.

8.    David Hannon, or failing him, Andrew Phillips be Chair of the Scheme Meeting.

9.    The Chair of the Scheme Meeting has the power to adjourn the Scheme Meeting to such time, date and place as he considers appropriate in his absolute discretion.

10.    Pursuant to rule 1.3 of the Federal Court (Corporations) Rules 2000 (NSW) (Rules), compliance with the following requirements of the Rues is dispensed with:

(a)    Rule 2.15; and

(b)    Rule 3.4.

11.    The plaintiff is to publish an announcement via the Australian Securities Exchange’s Market Announcements platform once, on or before 29 January 2024, substantially in the form of pages 623 – 626 of exhibit AP-1 to the affidavit of Andrew Guy Phillips affirmed on 13 December 2023.

12.    The proceedings be adjourned to 6 February 2024 at 10:15 am (Sydney time) before Justice Stewart for the hearing of any application to approve the Scheme.

13.    The plaintiff be granted liberty to apply.

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

REASONS FOR JUDGMENT

STEWART J:

1    The plaintiff, Lithium Power International Ltd (LPI), is proposing a scheme of arrangement for the Court’s approval under Pt 5.1 of the Corporations Act 2001 (Cth). On 18 December 2023, I made orders pursuant to ss 411(1) and 1319 of the Corporations Act convening a meeting of LPI shareholders for the purpose of considering and, if thought fit, approving the scheme; and also approving an explanatory statement in the form of a Scheme Booklet for distribution to LPI shareholders to accompany a notice convening the scheme meeting. These are my reasons for making those orders.

2    LPI is an Australian public company listed in the Australian Securities Exchange (ASX).

3    On 18 October 2023, LPI announced to the ASX that it had entered into a binding scheme implementation deed (SID) with Corporación Nacional del Cobre de Chile (Codelco). Codelco is a Chilean State-owned company. It has nominated its wholly owned subsidiary, Salar de Maricunga SpA, as the entity which it is proposed will acquire LPI’s shares pursuant to the scheme.

4    The scheme, if implemented, will result in Salar de Maricunga SpA acquiring all of the LPI shares, Codelco paying to scheme shareholders cash consideration of $0.57 per share, and the subsequent delisting of LPI from the ASX.

5    The independent expert appointed by LPI to assess the scheme has prepared an Independent Expert’s Report. It concludes that in the absence of a superior proposal, the scheme is fair and reasonable to, and therefore in the best interests of, LPI shareholders. There is nothing in the approach of the expert that causes me to doubt the conclusions expressed in the report.

6    After the scheme becomes effective under s 411(10) of the Act, but before the transfer by scheme shareholders of their LPI shares to Salar de Maricunga SpA, Codelco must deposit, or procure the deposit of, an amount in cleared funds equal to the aggregate amount of the scheme consideration payable to all scheme shareholders into an Australian dollar denominated trust account operated by LPI as trustee for the scheme shareholders. LPI must pay or procure the payment of the scheme consideration to each scheme shareholder from the trust account. The transfer of the scheme shares to Salar de Maricunga SpA is subject to the payment of the scheme consideration in accordance with those steps.

7    This structure addresses a concern that shareholders should not, once the scheme has become effective, be in a position where their shares have been transferred but there is a delay in provision of the scheme consideration and where their only remedy would be to sue on the deed poll: Re APN News & Media Ltd [2007] FCA 770; 62 ACSR 400 at [43]. See Schemes of Arrangement Practice Note (GPN-SOA), [5(b)].

8    The deed poll executed by Codelco and Salar De Maricunga SpA in favour of all scheme shareholders also contains an undertaking by those entities to provide the scheme consideration to each scheme shareholder in accordance with the scheme. There is no evidence with regard to the enforceability of the deed poll in Chile, but I do not regard that to be necessary: Schemes of Arrangement Practice Note (GPN-SOA), [5(a)].

9    LPI’s board of directors, each member of which is an LPI shareholder, has unanimously recommended that LPI shareholders vote in favour of the scheme. Each director will receive one-off bonus payments, the managing director and CEO will receive a change of control bonus, and each director will be entitled, pursuant to their employment or service contracts with LPI, to payments in lieu of their termination notice period.

10    LPI’s board considers that it is appropriate for each director to have made a recommendation in respect of the scheme given their integral roles in the oversight of LPI and the expectation of LPI shareholders that the directors would make an informed recommendation, notwithstanding the benefits that they will each receive if the scheme is implemented. I have considered other cases dealing with this issue, and I am satisfied that it is not inappropriate for the directors to have made the recommendation that they have. See, for example, Re Kidman Resources Ltd [2019] FCA 1226; 375 ALR 760 at [113] and Re Villa World Ltd [2019] NSWSC 1207; 139 ACSR 550 at [34]-[40].

11    The Court’s concern at this stage with regard to benefits accruing to directors is to ensure that those benefits are properly disclosed: Kidman at [115]. I am satisfied that in this case they are.

12    The Schemes of Arrangement Practice Note (GPN-SOA) at [6] requires that the explanatory statement “prominently display” a notice to the effect that although the Court has ordered that a meeting be convened and has approved the explanatory statement, the Court has not formed any view as to the merits of the proposed scheme or how the members should vote, nor is it responsible for the content of the explanatory statement. Such a notice is included amongst other notices in a three and a half page “IMPORTANT NOTICES” document with which the Scheme Booklet commences. Although there may be some debate as to whether the notice in this case is “prominently display[ed]”, in my view it is, even of only marginally so.

13    Under the SID, LPI undertakes to pay a break fee to Codelco in certain prescribed circumstances. The break fee is $3,850,000 (excluding GST) which is approximately 1% of the implied fully diluted equity value of LPI as at the time of entry into the SID. This proportion, as well as the circumstances in which the break fee is payable, accord with the guideline in the Australian Takeovers Panel Guidance Note 7: Lock-up devices at [48]-[52]. Break fees should reflect genuine commercial costs and risks; they should not operate coercively so as to distort the commercial incentives in a way that will increase the preference of shareholders for the scheme because the company has already committed to the payment of a large break fee which will dilute the equity interest of shareholders if they do not support the scheme: Gindalbie Metals Ltd, in the matter of Gindalbie Metals Ltd [2019] FCA 953; 137 ACSR 338 at [27]. I am satisfied of those matters in this case, and I am comforted by the arrangements in this case being within the “acceptable” range as discussed in Guidance Note 7.

14    The scheme is subject to customary exclusivity provisions, described as “no-existing discussions”, “no-shop”, “no-talk” and “no-due diligence”. I am satisfied that these provisions exist for no more than a reasonable period capable of precise ascertainment (six months in this case), are subject to the directors’ fiduciary duties and are not otherwise unlawful, and are disclosed with adequate prominence in the Scheme Booklet. See Re TPG Telecom Ltd [2020] NSWSC 772 at [22] and Guidance Note 7 at [17]-[38].

15    Senior counsel for the plaintiff has carefully taken me through the various requirements justifying the orders sought. The principles to be applied are well established. The recent Schemes of Arrangement Practice Note (GPN-SOA) has assisted in bringing welcome clarity as to the Court’s expectations where perhaps some uncertainty has recently existed. I am satisfied of the various matters, including the arrangements for the convening of the scheme meeting and the justification for dispensing with the requirements of rr 2.15 and 3.4 of the Federal Court (Corporations) Rules 2000 (Cth).

16    I acknowledge the careful and detailed submissions by senior counsel for the plaintiff, as well as the additional assistance of counsel for Codelco.

Associate:

Dated:    19 December 2023