Federal Court of Australia

De Grey Mining Ltd, in the matter of De Grey Mining Ltd (No 2) [2025] FCA 396

ORDERS

THE COURT NOTES THAT:

A.    The plaintiff and Northern Star Resources Limited (ACN 092 832 892) will seek to rely on the Court’s approval of the scheme of arrangement for the purpose of qualifying for exemption from the registration requirements of the Securities Act 1933 (US), provided for by section 3(a)(10) of that Act, in connection with the implementation of, and provision of consideration under, the scheme of arrangement.

THE COURT ORDERS THAT:

1.    Pursuant to subsection 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between the plaintiff and the holders of the fully paid ordinary shares in the capital of the plaintiff (Scheme), in the form contained at pages 392 - 414 of the affidavit of Janelle Louise Sputore sworn 10 March 2025 that is four paragraphs in length, be approved.

2.    Pursuant to subsection 411(12) of the Act, the plaintiff be exempted from compliance with subsection 411(11) of the Act in respect of the Scheme.

3.    The plaintiff lodge an office copy of these orders with the Australian Securities and Investments Commission on 23 April 2025.

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

REASONS FOR JUDGMENT

FEUTRILL J:

Introduction

1    On 22 April 2025 I made orders at the second court hearing approving the scheme of arrangement between the plaintiff (De Grey) and its members (shareholders) under s 411(4)(b) and s 411(6) of the Corporations Act 2001 (Cth). These are my reasons for those orders.

2    The shareholders agreed to the scheme at a meeting held on 16 April 2025 by voting in favour of a resolution to approve the scheme in majorities that exceeded those prescribed in s 411(4)(a)(ii) of the Act. The meeting of shareholders was convened in accordance with orders made at the first court hearing on 10 March 2025: De Grey Mining Ltd, in the matter of De Grey Mining Ltd [2025] FCA 246 (terms defined or described in those reasons are used in these reasons as so defined or described).

3    The scheme will result in Northern Star Resources Limited (bidder) acquiring all the issued share capital of the plaintiff from its shareholders. The shareholders will receive 0.119 new ordinary shares in the bidder for each ordinary share in the plaintiff as scheme consideration unless they are non-electing small shareholders or ineligible foreign shareholders in which case the scheme consideration will be issued to a sale agent and sold and the net proceeds distributed to those shareholders.

4    The principles applicable to the approval of an arrangement at a second court hearing are well-established. I have summarised these principles in previous decisions in the following terms.

(1)    The Court should be satisfied that: (a) the meeting of members was convened and held in accordance with the Court’s orders at the first court hearing; (b) the statutory majorities (headcount and voting power) were achieved at the meeting: s 411(4)(a)(ii); (c) all conditions to which the arrangement is subject (other than Court approval and lodgement of the Court’s orders with ASIC) have been met or waived; and (d) the arrangement has not been proposed to avoid Ch 6 of the Act or a statement in writing by ASIC is produced to the Court stating that ASIC has no objection to the arrangement: s 411(17).

(2)    The Court has a discretion whether to approve a scheme. It is not bound to approve it merely because orders have been made to convene a meeting at the first court hearing and the statutory majorities have been achieved.

(3)    The Court’s jurisdiction is supervisory. It is to be satisfied that there has been an absence of oppression and that the arrangement is one capable of being accepted.

(4)    The Court will usually approach the task upon the basis that members are better judges of what is in their commercial interests than the Court. It is not the role of the Court to usurp the decision of the members by imposing its own commercial judgment on the arrangement, nor to satisfy itself that no better arrangement could have been devised.

(5)    Nonetheless, attainment of the statutory majorities is only a threshold that must be met. If the Court is satisfied that the meeting is unrepresentative, or that those voting in favour of the arrangement have done so with a special interest to promote which differs from the interests of the ordinary independent and objective members, then the vote in favour of the resolution may not be given effect by sanction of the Court.

(6)    In general, the Court will take into account six factors as informing the discretion of whether or not to approve the arrangement. First, whether the members have voted in good faith and not for an improper purpose. Second, whether the proposal is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone might approve it. Third, 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. Fourth, and related to the third, whether there has been full and fair disclosure of all information material to the decision. Fifth, whether a minority of members would be oppressed by the arrangement. Sixth, whether the arrangement offends public policy. That includes a discretion not to approve even if the requirements of s 411(17) have been met.

See, e.g., Chesser Resources Limited, in the matter of Chesser Resources Limited (No 2) [2023] FCA 1067 at [3]; Eumundi Group Limited, in the matter of Eumundi Group Limited (No 2) [2025] FCA 58 at [4].

5    The plaintiff has filed written submissions in support of the orders it has sought for approval of the scheme. The plaintiff has also made oral submissions. It relies on the affidavit material filed, read and relied upon in support of its application for orders to convene the meeting of the shareholders.

6    It has also filed, read and relied upon the further affidavit of Simon Richard Lill sworn 16 April 2025 at the second court hearing. Mr Lill is the independent non-executive chair of the plaintiff and was the chair of the scheme meeting. His affidavit:

(a)    outlines the manner in which the scheme meeting materials, including the scheme booklet, were dispatched to shareholders following the first court hearing;

(b)    exhibits various ASX announcements of the plaintiff, other communications to the shareholders after the first court hearing and a notice of the second court hearing published through an ASX announcement;

(c)    sets out the procedure followed and proceedings at the scheme meeting, including the voting process and results of the poll conducted at the meeting, the script of the meeting he followed and an address given at the meeting by the chair of the company;

(d)    describes the circumstances in which the conditional waiver of a condition precedent to the effectuation of the scheme relating to the official quotation approval of the issuance of new shares in the bidder by the ASX in cl 3.1(h) of the scheme implementation deed has been agreed; and

(e)    deposes to facts relating to the registration of the scheme booklet by ASIC, the enquiries received on the shareholder information line, outbound shareholder communications, the bidder’s communications with shareholders, the provision of the ‘standard’ inbound and outbound call scripts and emails to ASIC and other related matters.

7    At the oral hearing the plaintiff tendered a letter from ASIC containing a statement in writing that it has no objection to the scheme for the purposes of s 411(17)(b) of the Act and certificates of each of the plaintiff and the bidder confirming that all conditions precedent in the scheme implementation deed has been satisfied or waived except for court approval of the scheme. Regarding the condition in cl 3.1(h) of the scheme implementation deed, the plaintiff’s certificate was conditional upon the bidder’s certificate confirming that, as at 7.00am (AWST) on the date of the certificate, ASX has not indicated to the bidder or its representatives that it will not grant approval for the official quotation by ASX of the new bidder shares to be issued pursuant to the scheme from the trading day following implementation of the scheme. The bidder’s certificate contained that confirmation and, therefore, the plaintiff’s certificate is unconditional.

8    All affidavits relied upon and the documents tendered at the second court hearing were received as exhibits and evidence in support of the final orders sought on the originating process.

9    I was satisfied, based on the plaintiff’s submissions, the affidavit material, and other exhibits, that the scheme should be approved in accordance with the established principles.

Scheme meeting held and convened in accordance with the Court orders

10    I was satisfied, based on the plaintiff’s submissions and the affidavit material, that the meeting of shareholders was convened and held in accordance with the orders of 10 March 2025 and there has been compliance with the other aspects of those orders.

Statutory majorities achieved at the scheme meeting

11    The scheme meeting was held on 16 April 2025. In accordance with the orders of 10 March 2025, Mr Lill was chair of the meeting and called for voting upon the resolution to approve the scheme was conducted by way of a poll. A representative of Automic Group acted as the returning officer, supervised the voting procedures and reported the outcome of the poll to Mr Lill. The report of the poll records that 99.38% of votes cast (voting power) were in favour of the resolution and 83.10% of shareholders voting (headcount) were in favour of the resolution. Therefore, the statutory majorities were met and exceeded.

Conditions of scheme satisfied

12    Clause 3.1 of the scheme implementation deed contains a number of conditions precedent to the scheme coming into effect in accordance with s 411(10) of the Act. Clause 3.3 provides a mechanism for waiver of certain of the conditions precedent by one or both of the plaintiff and the bidder. Clause 4.2(x) requires the plaintiff and cl 4.3(j) requires the bidder to provide certificates before the second court hearing confirming that all conditions precedent have been satisfied or waived except for cl 3.1(b) which concerns Court approval of the scheme under s 411(4)(b) of the Act. The scheme is also conditional upon satisfaction or waiver of all conditions precedent: cl 3.1(a) of the scheme. And, it is a term of the scheme that the plaintiff and bidder provide the certificates under the scheme implementation deed: cl 3.2(a) of the scheme.

13    Clause 3.1(h) of the scheme implementation deed requires the new shares in the bidder that are the scheme consideration to be approved for official quotation on the ASX before the second court hearing. The plaintiff agreed to a conditional waiver of that condition precedent on the basis that the bidder confirms that ASX has not indicated to the bidder that it will not grant its approval for official quotation of such shares from the trading day following implementation of the scheme. The conditional waiver and confirmation brings the nature of the condition into line with the more common approach to a condition precedent of that nature and certain aspects of the ASX listing rules. As already mentioned, the certificate of the plaintiff was conditional on the bidder’s confirmation and the bidder’s certificate gave confirmation to that effect. Therefore, cl 3.1(h) has been waived.

14    I am satisfied that there is no condition precedent to performance of the scheme, other than court approval and lodgement of an office copy of the Court’s orders with ASIC, that remains an impediment to the scheme taking effect under s 411(10) of the Act.

Section 411(17) requirements satisfied

15    Section 411(17) of the Act provides:

The Court must not approve a compromise or arrangement under this section unless:

(a)    it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6; or

(b)    there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement;

but the Court need not approve a compromise or arrangement merely because a statement by ASIC stating that ASIC has no objection to the compromise or arrangement has been produced to the Court as mentioned in paragraph (b).

16    ASIC has provided a statement in writing conforming with s 411(17)(b) of the Act. Therefore, that limb of s 411(17) has been satisfied.

Other factors informing the exercise of the Court’s discretion

Good faith, proper purpose, oppression and public policy

17    There is nothing in the materials before the Court to suggest that the scheme members have voted other than in good faith and for a proper purpose. Nor is there anything to suggest oppression of minority shareholders. Likewise, I am satisfied that there is no matter of public policy, including that the scheme was not prepared for the purpose of avoiding any provision of Ch 6 of the Act, that operates as a factor against exercising the Court’s discretion to approve the scheme.

Fair and reasonable scheme

18    The number of votes cast at the scheme meeting was 1,586,777,233. That represents 66.17% of the 2,398,075,852 scheme shares the plaintiff has issued. There were 682 shareholders present in person or by proxy. That represents 5.54% of shareholders (by headcount). Of the shareholders present, 678 voted (608 in favour, 70 against) and four abstained.

19    As a percentage of all shareholders 5.54% is a relatively low turnout. However, it was about double the turnout of the last three annual general meetings of the company. Further, the total number of votes cast was in line with the votes cast at the last three AGMs. While low voter turnout can be indicative of a flaw in the process of convening the meetings or that the statutory majorities are not truly representative of the views of the scheme class members, I do not consider the turnout in this case to be a discretionary factor that weighs against approval of the scheme. I am satisfied that the votes cast and shareholders present at the meeting held on 16 April 2025 is representative of the views of the shareholders, as a whole, as to the commercial merit of the scheme.

20    There is also evidence, in terms of the independent expert report, that the scheme is in the best interests of the shareholders in the absence of a superior proposal. There is otherwise no information before the Court to suggest that the scheme is other than one that is fair and reasonable such that an intelligent and honest shareholder, properly informed and acting alone, would approve. There is no evidence of any superior proposal.

Matters brought to the Court’s attention

Communications with scheme members

21    As mentioned in De Grey Mining (No 1) at [44], in accordance with the scheme proponent’s duty of candour, the Court expects oral or informal communications with shareholders made after the first court hearing to be disclosed at the second court hearing if these may be inconsistent with the information contained in the explanatory statement approved by the Court or contain inaccurate or misleading information that could or would undermine the integrity of the scheme meeting process. The Lill Affidavit (Ex 7) deposes to a number of communications with shareholders after 10 March 2025.

22    The plaintiff undertook certain ‘inbound’ and ‘outbound’ shareholder communications. The ‘inbound’ communications took place through an information line the plaintiff established for shareholders with questions about the scheme. That line was maintained by external proxy solicitation advisors, PGS Advisers Pty Ltd, whose staff were provided with a pre-approved script based on the information contained in the frequently asked questions section of the scheme booklet. PGS staff were instructed not to deviate from the script. The script was reviewed by the plaintiff and its external legal advisers to ensure consistency with the information contained in the scheme booklet. The name and contact details of shareholders who asked questions that were not on the pre-approved script were recorded. Certain shareholders asked questions that were not on the script relating to how other shareholders had been voting. They were informed that the question could not be answered.

23    The ‘outbound’ communications involved shareholders with holdings of 100,000 shares or more or the top-100 institutional shareholders. These shareholders were contacted using a pre-prepared script and a pro-forma email. Again, PGS staff were asked not to deviate from the script or email and these were reviewed by the plaintiff and its external legal advisers to ensure consistency with the information contained in the scheme booklet. To the extent that shareholders asked questions that were not on the pre-approved inbound call script, again, the name and contact details of those shareholders were recorded. There was one record of a question regarding communications between the plaintiff and a third party. That shareholder was told that the question could not be answered.

24    Representatives of the plaintiff conducted meetings with four proxy advisory firms using the presentation annexed to the Pledger Affidavit (Ex 2) which contained information consistent with the scheme booklet. Representatives of the plaintiff also met with one of its top-30 shareholders to address questions that shareholder had about the scheme. In these meetings certain questions were asked about the bidder’s initial approach to the plaintiff. These were answered indicating that the bidder had approached the plaintiff two months before the announcement of the proposed scheme and that the board’s processes were appropriate and included guidance from the plaintiff’s legal, financial and investor relations advisors. The top-30 shareholder also asked if there had been conversations with any other third parties. That shareholder was informed there had been informal conversations with various third parties over the years.

25    A representative of the bidder also had contact with two of the plaintiff’s shareholders after the 10 March 2025 orders were made. The shareholders were directed to the scheme booklet and the plaintiff for answers to their questions. The only information provided that was not in the scheme booklet was that the bidder considered it important to approach the plaintiff on a ‘friendly’ basis and that the plaintiff did not run a sale process and, hence, the bidder made a direct approach to the plaintiff.

26    The nature of all the post-10 March 2025 shareholder communications was disclosed to ASIC. ASIC has not raised any concerns about them or sought to make submissions to the Court.

27    I do not consider any of the communications with shareholders disclosed in the Lill Affidavit raises any matter inconsistent with the information contained in the scheme booklet or, otherwise, to interfere with the integrity of the scheme meeting process ordered by the Court.

Pre-scheme meeting statement of voting intention

28    On 14 April 2025 a shareholder, Gold Road Resources Ltd, announced to the ASX that it was supportive of the scheme and would vote all its shares in favour of the scheme. The announcement also explained that if the scheme were implemented it would become a shareholder of the bidder and any decision it made about those shares would be made with a view to maximising the value for the shareholders of Gold Road Resources. That is, the announcement was, in substance, to inform the shareholders of Gold Road Resources about how it intended dealing with that company’s substantial shareholding in the plaintiff.

29    Mr Lill deposes that he was not aware of Gold Road Resources’ voting intention before the announcement. He also deposes that he is not aware of any inducement made to secure that voting intention.

30    While in accordance with its duty of candour the plaintiff quite properly informed the Court of the Gold Road Resources’ announcement, in the circumstances deposed in the Lill Affidavit, I am satisfied that the statement of voting intention was not induced by any collateral benefit offered to Gold Road Resources. There is nothing to suggest that Gold Road Resources may fall into a different class of shareholder. Nor is there any reason to think that a pre-scheme meeting statement of the voting intention of this substantial shareholder interfered with the integrity of the scheme meeting process.

Full and fair disclosure of all information material to the decision

31    I am satisfied that there has been full and fair disclosure to shareholders of all information material to the decision whether or not to vote in favour of the scheme, as set out in the scheme booklet (including the explanatory statement).

Other matters

US Securities Act notation

32    At the first court hearing the plaintiff notified the Court that the bidder intends relying on the exemption from the registration requirements of the Securities Act 1933 (US) provided under s 3(a)(10) of that Act and on the Court’s approval of the scheme to qualify for that exemption. While the Court does not express any view about the extent to which its procedures or processes are sufficient to satisfy the requirements of the exemption, it is common practice in this and other courts to note, in the reasons for orders approving a scheme, certain matters that are relevant to qualifying for an exemption under the US Securities Act. I see no reason not to follow that well-established practice. Accordingly, I note that:

(1)    the Court was informed before the commencement of the second court hearing that reliance would be placed on the s 3(a)(10) exemption of the US Securities Act on the basis of its approval of the scheme;

(2)    the Court was informed that the shares in the bidder are to be offered as scheme consideration, and an independent expert report concluded that the scheme is in the best interests of the plaintiff’s shareholders;

(3)    the Court held a hearing in open court to consider the fairness and reasonableness of the scheme, and it was open to any member of the public including any of the plaintiff’s shareholders to attend;

(4)    notice of the date of the approval hearing was included in the scheme booklet provided to all the plaintiff’s shareholders prior to the scheme being considered by the scheme meeting and was advertised on the ASX, so that those to whom the shares in the bidder are to be issued had the opportunity to oppose or otherwise raise any objection to the scheme; and

(5)    no shareholder of the plaintiff gave notice of any intention to appear at the second court hearing to oppose the approval of the scheme, and none in fact opposed it.

Exemption from compliance with s 411(11)

33    I am also satisfied that the plaintiff should be exempted from compliance with s 411(11) (annexing a copy of the orders under s 411(4)(b) to the company’s constitution) in accordance with s 411(12) of the Act. The scheme will not alter the rights of the members, creditors or other persons dealing with the plaintiff.

Associate:

Dated:    23 April 2025