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[2010] FCA 1424
Federal Court of Australia
2010-12-17
McKerracher J
Original judgment source is linked above.
IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 323 OF 2010
IN THE MATTER OF ALDRIDGE URANIUM LIMITED (ACN 144 941 097) ALDRIDGE URANIUM LIMITED (ACN 144 941 097)
JUDGE: MCKERRACHER J DATE: 17 December 2010 PLACE: PERTH
INTRODUCTION 1 On 3 November 2010 I made orders pursuant to s 411 of the Corporations Act 2001 (Cth) (the Act) summoning a scheme meeting and approving the explanatory statement required by s 412(1)(a). At that time I granted the plaintiff (Aldridge) leave to make a further application for orders under s 411(4)(b), (6) if appropriate and s 413(1)(f) of the Act following the meeting for approval of the Scheme of Arrangement (See Aldridge Uranium Limited, in the matter of Aldridge Uranium Limited [2010] FCA 1263 (Aldridge No 1)). 2 By its interlocutory application dated 7 December 2010 (the Application) the plaintiff applies for orders that the Scheme of Arrangement between Aldridge and its shareholders (the Scheme) be approved and for consequential orders pursuant to s 411(12) and s 413(1)(f) of the Act. 3 The purpose of the Scheme is to implement the acquisition of Aldridge by AWH Corporation Limited (AWH) and Vetter Uranium Limited (Vetter) so that Aldridge becomes an incorporated joint venture vehicle for a uranium exploration project in Central Anatolia, Turkey (the Project). The background of the three companies involved in the Scheme and details of the Scheme itself can be found in Aldridge No 1 (at [4]-[14]).
Final Stage 4 This application is the third and final stage of the three part process outlined in Pt 5.1 of the Act. The relevant subsections of s 411 are set out in the following terms: 411 Administration of compromises etc. … (4) A compromise or arrangement is binding on the creditors, or on a class of creditors, or on the members, or on a class of members, as the case may be, of the body and on the body or, if the body is in the course of being wound up, on the liquidator and contributories of the body, if, and only if: (a) at a meeting convened in accordance with an order of the Court under subsection (1) or (1A): (i) in the case of a compromise or arrangement between a body and its creditors or a class of creditors - the compromise or arrangement is agreed to by a majority in number of the creditors, or of the creditors included in that class of creditors, present and voting, either in person or by proxy, being a majority whose debts or claims against the company amount in the aggregate to at least 75% of the total amount of the debts and claims of the creditors present and voting in person or by proxy, or of the creditors included in that class present and voting in person or by proxy, as the case may be; and (ii) in the case of a compromise or arrangement between a body and its members or a class of members - a resolution in favour of the compromise or arrangement is: (A) unless the Court orders otherwise - passed by a majority in number of the members, or members in that class, present and voting (either in person or by proxy); and (B) if the body has a share capital - passed by 75% of the votes cast on the resolution; and (b) it is approved by order of the Court. … (6) The Court may grant its approval to a compromise or arrangement subject to such alterations or conditions as it thinks just. … (10) An order of the Court made for the purposes of paragraph (4)(b) does not have any effect until an office copy of the order is lodged with ASIC, and upon being so lodged, the order takes effect, or is taken to have taken effect, on and from the date of lodgment or such earlier date as the Court determines and specifies in the order. (11) Subject to subsection (12), a copy of every order of the Court made for the purposes of paragraph (4)(b) must be annexed to every copy of the constitution of the body issued after the order has been made. (12) The Court may, by order, exempt a body from compliance with subsection (11) or determine the period during which the body must comply with that subsection. … (17) 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). 5 In determining whether to approve the Scheme it is necessary that the Court be satisfied that: (a) The requirements of s 411 have been met. (b) The majority of shareholders voting in favour of the Scheme were acting in good faith and not in pursuit of some illegitimate purpose. (c) The proposal was sufficiently fair and reasonable that an intelligent and honest shareholder, acting alone, might approve of it: See Re NRMA Ltd (No 2) (2000) 34 ACSR 261 per Santow J.
STATUTORY COMPLIANCE 6 The Explanatory Statement in the form of the Scheme Booklet was duly registered under Ch 5 (s 412(6) of the Act) and was then dispatched to shareholders with the other documents referred to in my orders of 3 November 2010 (the Orders). 7 The required Scheme Meeting was convened and held on Friday 3 December 2010 in compliance with the Orders and the Act. The provisions of Div 3 of the Federal Court (Corporations) Rules 2000 (the Rules) and the Orders have been complied with, including the provisions relating to the advertisement of notice of the final court hearing and service of documents on the Australian Securities and Investments Commission (ASIC) (Order 12 and Rules 2.6, 2.11, 2.12 and 3.4). 8 The report of the Chairman of the Scheme Meeting shows the results of the meeting which are set out in the following table: Numerical "Headcount" Majority In Favour Total Against Shareholders in Person or by Representative/Attorney and by Proxy (including discretion votes) 26 26 0 TOTAL% 100% 100% 0%
Voting Majority Total cast on poll 75% Votes in Favour Votes Against Shareholders votes cast in Person or by Representative/Attorney and by Proxy 14,629,341 10,972,005 14,629,341 0 TOTAL (VOTES) 14,629,341 10,972,005 14,629,341 0 TOTAL (%) 100% 75% 100% 0%
9 The shareholders' votes cast in person or by representative/attorney and by proxy represented 48.75% of the total voting shares of the Plaintiff. 10 The special statutory majorities, including the numerical or 'headcount' majority as well as the voting majority, required pursuant to s 411(4)(a)(ii) of the Act were therefore convincingly met at the Scheme Meeting. 11 For reasons which follow, I am satisfied that the Scheme complies with Pt 5.1 of the Act and all applicable Regulations; was duly approved on the basis of full and fair disclosure and adequate information for members; is fair and reasonable; and is unconditional and binding on all members, subject to the approval of the Court and subject also to the making of an order under s 411(6) which will be discussed further below. 12 It has been noted, and I accept that ASIC has a significant role in schemes in the interests of investor and creditor protection. ASIC, having been requested to do so, has provided a s 411(17)(b) statement of 'no objection' in respect of the Scheme. 13 The Court is required, pursuant to s 411(17) of the Act, not to approve a scheme unless paras (a) or (b) of that subsection are satisfied. 14 Paragraphs (a) and (b) of s 411(17) are alternatives. The written statement of 'no objection' by ASIC, while not binding on the Court, removes the requirement that the Court be satisfied that the Scheme was not proposed for a proscribed purpose, although there will always be a residual judicial discretion in that regard under s 411(4)(b) of the Act (Re Foundation Healthcare Ltd (No 2) (2002) 43 ACSR 680 (at [29]) per French J; Re Coles Group Ltd (No 2) (2007) 65 ACSR 494 (at [66]-[78]) per Robson J (and the cases cited therein); Re Hostworks Group Limited (No 2) [2008] FCA 248 (at [19]) per Mansfield J). 15 To the extent that it may be necessary, I am satisfied that the Scheme is not proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Ch 6 of the Act. Even though a form of compulsory acquisition is involved, if the Court approves the Scheme, it is not assumed that compulsory acquisition in relation to Ch 6 of the Act is to be preferred to a scheme under s 411. The principal prohibitions on acquisitions in s 606 in Ch 6 of the Act do not apply to an approved scheme. Item 17 of s 611 of the Act provides an exception to the prohibition for acquisitions that result from an arrangement approved by the Court. Further, it appears on the evidence that all material information regarding the Scheme has been provided to Aldridge's shareholders and they have had a reasonable and equal opportunity to share the benefits provided under the Scheme. In these circumstances, Aldridge's shareholders are not adversely affected by the acquisition proceeding by a scheme of arrangement rather than takeover procedures under Ch 6 of the Act (See Re Hostworks (at [22]) per Mansfield J). 16 I am satisfied that there has been statutory compliance in all necessary respects, that the Scheme is not pursued in respect of any illegitimate purpose and that the proposal advanced is fair and reasonable.
UN-CONDITIONALITY AND S 11(6) CONDITION 17 It was anticipated that the Scheme would be unconditional and binding on all members, subject to the approval of the Court. However, Aldridge seeks an order pursuant to s 411(6) of the Act that the Court approve the scheme subject to a condition. 18 The condition proposed is that Aldridge will only lodge with ASIC a copy of the Court's orders when the Australian Stock Exchange (ASX) has announced that the presently suspended AWH securities are to be re-instated to official quotation (such that the Effective Date will be deferred until AWH securities are so reinstated). 19 The Scheme, as it was communicated to Scheme Participants via the Scheme Booklet, contemplated that part of the Scheme consideration would involve 35% of Aldridge Shareholders' unlisted shareholding in Aldridge being converted (amongst other things) into AWH shares which at the conclusion of the 12 month escrow period would be freely tradeable on a recognised securities exchange. 20 On 6 December 2010 (after the Scheme Meeting) an ASX market release indicated that the securities of AWH would be suspended from quotation immediately pending the outcome of resolutions at AWH's general meeting regarding a change in the nature and scale of activities. If AWH's shareholders approve a change in the nature and scale of activities, the securities will remain suspended pending compliance with Ch 1 and Ch 2 of the ASX Listing Rules. 21 By s 411(6) of the Act the Court may grant its approval to a compromise or arrangement subject to such alterations or conditions as it thinks just. In Investorinfo Limited (2006) 24 ACLC 44 (at [6] and [7]), Gyles J made reference to five propositions emerging from the authorities relevant to the exercise of power under s 411(6) of the Act and its predecessors. The following three are presently relevant: (1) If the alteration is of a minor kind which does not really affect the details of the scheme, then the Court has power to approve the scheme as amended: Re Adelaide Air Conditioning and Domestic Engineers Ltd (In Liq) [1972] 6 SASR 603 AT 605 (Zelling J); Re H Craig Pty Ltd (1971-73) CLC 40-026 (Mitchell J); Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [21] (Barrett J). (2) The discretion under the section has to be exercised at the time the scheme is approved and cannot be exercised once the approval order has been made: Re BTS Bearings and Transmission Supplies Pty Ltd (1983) 8 ACLR 287 (Needham J). (3) … (4) … (5) The discretion may be exercised where the amendment improves the smooth working of the scheme without affecting its substance: Re Evandale Estates Ltd 962 VSC unreported (Adam J), noted in WE Paterson & HH Ednie, Australian Company Law, 2nd edn, Butterworths, Sydney, 1971 at [181/43]; Re H Craig Pty Ltd (1971-73) CLC 40-026 (Mitchell J); Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [21] (Barrett J). 22 In In the matter of Professional Investment Holdings Limited (No 2) [2010] FCA 1336, Jacobson J observed that two further propositions could be distilled from the authorities (at [38]), namely: a. The discretion under the section may be exercised where, although the alteration changes creditors' rights or the rights of members, it would have the effect of putting the scheme into a form that is consistent not only with the procedures with respect of the meetings and voting that was in fact adopted, and the resultant expressions of will, but also the regime which was described in the Explanatory Statement; and b. Although the discretion of the court as to whether it should exercise its power under s 411(6) is at large, the court has regard to whether the proposed variation is so novel or substantial as to take the varied scheme beyond the reasonable contemplation of the shareholders at the time they agreed to it. 23 In the present circumstances, the condition proposed brings the Scheme as agreed to by the members into line with the Explanatory Statement and in any event clarifies what must have been the actual contemplation of a Scheme Participant as to what would comprise the Scheme consideration. The fulfilment of the condition does not lie in the hands of Aldridge. If the order is not made, and the Effective Date is earlier than the re-instatement of AWH securities there will be an impediment to the proper operation of the Scheme not foreseen by the members that voted in favour of it. 24 The substance of the Scheme remains unchanged. There is no disadvantage to the Scheme Participants; it cannot be said the variation puts the Scheme beyond the reasonable contemplation of the members at the time they agreed to it. Rather, it brings the Scheme within what would fairly and reasonably have been expected by the members at that time. 25 I have no doubt that the circumstances in the present case meet the propositions outlined above.
CONSEQUENTIAL ORDERS 26 Aldridge also seeks orders pursuant to s 413(1)(f) of the Act to ensure that the 'AWH Scheme Consideration', as defined in the Scheme Booklet and set out in Aldridge No 1 (at [12]), be issued to Vetter, held by Vetter for an ASX imposed 12 month escrow period, and then transferred to the Scheme Participants at the end of the escrow period. 27 The orders are sought to effectively eliminate 'performance risk'. 28 The Court's power to make the orders sought under s 413(1) has been enlivened by virtue of cl 6.4 of the Scheme which provides: As soon as practicable after the Completion Date, AWH will transfer the Scheme Property to Aldridge, so that Aldridge may assist Vetter with the expenses of holding the AWH Scheme Consideration until the expiry of the ASX-imposed 12 month escrow period. 29 Vetter has submitted to the jurisdiction of the Court in respect of all matters arising under the Scheme and its implementation. 30 In the circumstances, I consider it is appropriate to make the orders sought as follows: