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[2003] FCA 1465
Federal Court of Australia
2003-10-16
Emmett J
Original judgment source is linked above.
(a) the Notice of Meeting contained in section 16 of the Explanatory Memorandum, the Explanatory Memorandum, the Chairman's letter and location map (being part of Exhibit 'AJB2' to the affidavit of Ashley John Black sworn 16 October 2003 in this proceeding): (i) to the members of the Plaintiff recorded in the Plaintiff's share register who have elected to receive the Explanatory Memorandum by an email in the Smart Delivery Systemä format, by that means; (ii) to the members of the Plaintiff recorded in the Plaintiff's share register as being resident in Australia who have elected to receive the Explanatory Memorandum by CD Rom, by CD Rom sent by ordinary mail posted in Australia; (iii) to the members of the Plaintiff recorded in the Plaintiff's share register as being resident in New Zealand who have elected to receive the Explanatory Memorandum by CD Rom, by CD Rom sent by direct entry mail to New Zealand; (iv) to the members of the Plaintiff recorded in the Plaintiff's share register as being resident outside Australia and New Zealand who have elected to receive the Explanatory Memorandum by CD Rom, by CD Rom sent by airmail; (v) to the members of the Plaintiff recorded in the Plaintiff's share register as being resident in Australia (other than such members who have made either of the elections referred to in sub-paragraphs (a)(i)-(iv) above), by ordinary mail; (vi) to the members of the Plaintiff recorded in the Plaintiff's share register as being resident in New Zealand (other than such members who have made either of the elections referred to in sub-paragraphs (a)(i)-(iv) above), by direct entry mail to New Zealand; and (vii) to the members of the Plaintiff recorded in the Plaintiff's share register as being resident outside Australia and New Zealand (other than such members who have made either of the elections referred to in sub-paragraphs (a)(i)-(iv) above), by airmail; (b) a Proxy Form (being part of Exhibit 'AJB2' to the affidavit of Ashley John Black sworn 16 October 2003 in this proceeding) and reply paid envelope: (i) to the members of the Plaintiff recorded in the Plaintiff's share register as being resident in Australia, by ordinary mail; (ii) to the members of the Plaintiff recorded in the Plaintiff's share register as being resident in New Zealand, by direct entry mail to New Zealand; (iii) to the members of the Plaintiff recorded in the Plaintiff's share register as being resident in the United Kingdom, by airmail; and (c) a Proxy Form (being part of Exhibit 'AJB2' to the affidavit of Ashley John Black sworn 16 October 2003 in this proceeding) and pre-addressed (but not reply paid) envelope to the members of the Plaintiff recorded in the Plaintiff's share register as being resident outside Australia, New Zealand and the United Kingdom, by airmail.
(a) received by mail to the AMP Securities Registry at: (i) in the case of members of the Plaintiff resident in Australia, GPO Box 2980, Melbourne 8060 Vic; (ii) in the case of members of the Plaintiff resident in New Zealand, PO Box 91543, Auckland Mail Centre; (iii) in the case of members of the Plaintiff resident in the United Kingdom, PO Box 1075, Bristol BS99 3FA; (iv) in the case of members of the Plaintiff resident in the rest of the world, GPO Box 2980, Melbourne 3000 Vic, Australia; or
(b) transmitted by facsimile to: (i) in the case of members of the Plaintiff resident in Australia, facsimile number 1300 301 721; (ii) in the case of members of the Plaintiff resident in New Zealand, facsimile number 09 488 8787; (iii) in the case of members of the Plaintiff resident in the United Kingdom, facsimile number 0870 703 6109; or (iv) in the case of members of the Plaintiff resident in the rest of the world, facsimile number + 61 2 8234 5002; or
(c) delivered to: (i) AMP Limited's registered office, Level 24, 33 Alfred Street, Sydney NSW 2000, Australia; or (ii) the AMP Securities Registry, c/- Computershare Investor Services Pty Limited, Level 3, 60 Carrington Street, Sydney NSW 2000, Australia; or
(d) submitted electronically by accessing the AMP Securities Registry website via www.ampgroup.com/shareholdercentre,
in each case not later than 9.00am (Australian Eastern Standard Time) on Sunday 7 December 2003.
(a) the provisions of Part 2G.2 of the Corporations Act that apply to members of the Plaintiff; and
(b) the provisions of the Plaintiff's Constitution that apply in relation to meetings of members of the Plaintiff and are not inconsistent with Part 2G.2 of the Corporations Act,
to the exclusion of every other provision which, but for this Order , would relate to the convening, holding or conducting of the Meeting.
of the Federal Court (Corporations) Rules 2000 (Cth) is dispensed with.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
REASONS FOR JUDGMENT 1 There is before the Court an application under s 411 of the Corporations Act 2001 (Cth) ('the Corporations Act') for orders convening a meeting of the members of the plaintiff, AMP Limited ('AMP'). Section 411, in general terms, provides that, where certain prerequisites have been satisfied, an arrangement is binding on the members of the company and on the company. 2 AMP is a leading Australian-based financial services company with significant life insurance and wealth management businesses in Australia, New Zealand and the United Kingdom. AMPs three main businesses are: · AMP Financial Services, which includes Australia and New Zealand's largest life insurer and financial planning network; · UK Life Services, comprising the United Kingdom life insurance companies Pearl, London Life, National Provident Life and NPI; and · Henderson Global Investors, a fund manager with significant operations in the United Kingdom, Europe and Australia. AMP also owns the Towry Law financial planning group in the United Kingdom, as well as a number of businesses that are described as 'non-core'. The non-core businesses include Cobalt and the closed re-insurance and commercial insurance portfolios, principally Gordian and TGI, as well as Virgin Money, a joint venture with the Virgin Group. 3 On 1 May 2003, AMP announced a proposal to separate its existing business in Australia and New Zealand from its existing business in the United Kingdom. The proposal has been described as a 'demerger' ('the Demerger'). The Australian-based company will retain the 'AMP' name after the Demerger and will comprise AMP Financial Services, Henderson Global Investors' Australian and New Zealand operations, and Cobalt and Gordian. It is proposed that AMP will continue to be listed on Australian Stock Exchange Limited ('ASX') and the New Zealand stock exchange. 4 The United Kingdom-based company will be called 'HHG plc' ('HHG') following the Demerger. It will comprise UK Life Services, Henderson Global Investors' northern hemisphere businesses primarily in the United Kingdom and Europe, Towry Law and AMP's 50 per cent interest in Virgin Money. It is intended to seek the listing of HHG on both the London stock exchange and ASX. 5 The Demerger involves several inter-related steps. The first stage involves a capital adjustment of AMP to be effected by a resolution at an extraordinary general meeting of shareholders. The second stage involves a scheme of arrangement ('the Scheme') to be approved by the Court under s 411 of the Corporations Act. As part of the Demerger, there will also be a capital re-organisation of HHG. 6 The issued capital of AMP relevantly comprises ordinary shares and reset preferred securities, a category of preference share. At the same time as the proposed Demerger it is intended to take steps to redeem the reset preferred securities. The capital adjustment involves, first, the cancellation of a number of the ordinary shares held by each shareholder. Although not expressly stated, the cancellation will give rise to a 'cancellation entitlement' for each shareholder. Secondly, there will be a conversion of the remaining ordinary shares held following the cancellation, such that each AMP shareholder will have the same number of ordinary shares following the conversion as that shareholder held prior to the cancellation. 7 Section 256B(1) of the Corporations Act provides that a company may reduce its share capital in a way that is not otherwise authorised by law if the reduction: (a) is fair and reasonable to the company's shareholders as a whole; (b) does not materially prejudice the company's ability to pay its creditors; and (c) is approved by shareholders under s 256C. 8 The reduction is an 'equal reduction' if: (a) it relates only to ordinary shares; (b) it applies to each holder of ordinary shares in proportion to the number of ordinary shares they hold; and (c) the terms of the reduction are the same for each holder of ordinary shares.
The proposed capital adjustment is an equal reduction within the meaning of that term. 9 Under s 256C(1), if the reduction is an equal reduction, it must be approved by a resolution passed at a general meeting of the company. Section 256C(4) provides that the company must include with the notice of the meeting a statement setting out all information known to the company that is material to the decision on how to vote on the resolution. Under 256C(5), before the notice of meeting is sent to shareholders, the company must lodge with the Australian Securities and Investments Commission ('the Commission') a copy of the notice of the meeting and any document relating to the reduction that will accompany the notice of the meeting sent to shareholders. 10 Clause 32 of the Constitution of AMP deals with changes to share capital. Clause 32.1 provides that AMP may convert all or any shares into a larger or smaller number of shares by resolution at a general meeting. Clause 32.3 provides: 'In any reduction of share capital under the Corporations Act that is an equal reduction, the terms of the reduction may comprise or include the transfer or distribution of specific assets … , including fully paid shares in, or debentures of, any other corporation.'
Thus, it is clear that there is no impediment to the capital adjustment element of the proposed Demerger. 11 The Scheme will be conditional upon a number of prior events, relevantly: · the passing of the capital adjustment resolutions; · the approval of the Scheme by the requisite majority at a meeting of shareholders to be convened by the Court, pursuant to s 411; · the approval of the Scheme by the Court under s 411; and · the sanctioning by the High Court of Justice of England and Wales ('the English High Court') of a proposed capital reduction of HHG that is an element in the capital re-organisation of HHG. 12 Under the Scheme, AMP agrees to give effect to the capital adjustment. The Scheme then provides: '… [T]he Cancellation Entitlement of each Scheme Shareholder will, on the Demerger Date, be applied by AMP as consideration for the issue by HHG to that Scheme Shareholder of that number of HHG Ordinary Shares which is equal to the Original Number for that Scheme Shareholder on the Record Date.'
13 Each of the terms in upper case is defined in the Scheme. The 'Cancellation Entitlement', specifically, is defined as a sum of money determined by means of a formula. One of the integers in the formula is the volume weighted average price of AMP shares on ASX for the ten business days ending on the business day immediately prior to the date of the meeting to approve the Scheme. The Cancellation Entitlement is determined by multiplying the number of shares cancelled by that average price. 14 Under the Scheme, each shareholder of AMP appoints AMP as its agent for various purposes, including the execution of any form required to effect the issue of HHG shares to the shareholder and the enforcement against HHG of a deed poll entered into today by HHG. By the deed poll, HHG covenants to issue HHG shares to Scheme shareholders as contemplated by the Scheme. By the Scheme, each AMP shareholder who is to receive HHG ordinary shares agrees to become a member of HHG, to accept the shares and to be bound by the memorandum and articles of association of HHG. 15 As at 1 October 2003, the issued share capital of HHG consisted of 787,070,000 ordinary shares of Ł1 each and 16,770,000 'A' preference shares of Ł1 each. As part of the restructuring of HHG prior to the Demerger, it is proposed that AMP Financial Services Holdings Limited ('AMPFSH'), the current shareholder of HHG within the AMP Group, will subscribe approximately Ł1,348 million for the issue of new preferred ordinary shares in HHG. The precise final subscription amount is dependent upon fluctuations in the exchange rate between the Australian Dollar - Pound Sterling and interest rates. 16 HHG will then apply to the English High Court for an order confirming the reduction of HHG's share capital by way of cancellation of all of the Ł1 'A' preference shares and all of the preferred ordinary shares so allotted. Part of the share capital reduced by the cancellation of the preferred ordinary shares will be repaid to AMPFSH, subject to that capital being restored by the issue of new HHG shares to AMP shareholders pursuant to the Scheme, in consideration of the application of their Cancellation Entitlements. 17 Following the Demerger, AMPFSH will retain approximately 15 per cent of HHG's share capital. Pursuant to the Scheme, the number of HHG shares to be issued to AMP shareholders will be equal to the number of shares held by the AMP shareholders prior to the capital adjustment. The HHG ordinary shares will be issued credited as fully paid up to rank in full for all dividends and other distributions declared, paid or made by HHG after the Demerger date. No AMP shareholder will be required to pay any cash for the issue of shares in HHG. 18 AMP also proposes to make a rights offer to all AMP shareholders resident in Australia and New Zealand ('the Rights Offer'). Such shareholders will be invited to take up rights by paying a fixed amount of cash for AMP share held. The price for the shares to be issued under the Rights Offer will be set by reference to the pricing of an institutional bookbuild ('the Offer Price'). The number of new AMP shares to be offered under the Rights Offer will be calculated by dividing the total subscription amount paid by 90 per cent of the Offer Price. AMP shareholders who do not take up their rights will receive an amount equal to 10 per cent of the Offer Price multiplied by the number of new AMP shares that they would have received had they taken up the rights. The proceeds of the Rights Offer will be applied in the redemption of the 11.5 million outstanding reset preferred securities of AMP. 19 Section 411(1) of the Corporations Act relevantly provides that, where an arrangement is proposed between a company and its members, the Court may order a meeting of the members of the company to be convened in such manner and to be held in such place as the Court directs. Where the Court makes such an order, the Court may approve the explanatory memorandum required by s 412(1)(a) of the Corporations Act to accompany notices of the meeting. 20 Section 412(1) relevantly provides that, where a meeting is convened under s 411, the company must: (a) with every notice convening the meeting, send a statement explaining the effect of the arrangement and setting out such information as is prescribed and any other information that is material to the making of a decision by a member whether or not to agree to the arrangement; (b) in every notice convening the meeting that is given by advertisement, include either a copy of the explanatory statement or a notification of the place at which and the manner in which members entitled to attend the meeting may obtain copies of the explanatory statement. 21 Under s 411(2), the Court must not make an order pursuant to an application under s 411(1) unless: (a) 14 days' notice of the hearing of the application has been given to the Commission; and (b) the Court is satisfied that the Commission has had a reasonable opportunity to examine the terms of the proposed arrangement and a 'draft explanatory statement' and to make submissions to the Court in relation to the proposed arrangement and the draft explanatory statement.
The term 'draft explanatory statement' is defined in s 411(3) as a statement explaining the effect of the proposed arrangement and setting out such information as is prescribed and any other information that is material to the making of a decision by a member of the company whether or not to agree to the proposed arrangement.
22 I am satisfied as to the matters referred to in s 411(2). Under s 411, it is the company that initiates the procedure by preparing the draft scheme and draft explanatory statement. The company then applies to the Court for an order convening the meeting of members. Ordinarily, the Court will not order a meeting unless the scheme is such, as to its nature and terms, that, following approval by the shareholders, the Court would be likely to approve it on an unopposed application. 23 Since the initial application is made ex parte, subject to notification to the Commission, the company making the application has a responsibility to bring to the Court's attention all matters that could be considered relevant to the exercise of its discretion. The task of the Court, in deciding whether to make an order under s 411(1), is to be satisfied that: · the proposal fits within the statutory concept of arrangement; · there will be available to shareholders all the main facts relevant to the exercise of judgment on the proposal; and · the scheme is so conceived and presented as to its structure, purpose, and effect that there is no apparent reason, so far as can be foreseen, why it should not, in due course, receive the Court's approval, if the necessary majority of shareholders vote in favour of it. 24 AMP has tendered considerable evidence in support of its application. A schedule of the affidavits and other evidence relied upon by AMP is attached as Schedule 1. However, I propose to refer briefly to the evidence of several experts whose affidavits have been read on the hearing of the application. 25 Mr Antony John Stuart is the managing director of N M Rothschild & Sons (Australia) Limited ('Rothschild'). Rothschild was engaged by AMP to prepare an independent expert's report for inclusion in the explanatory memorandum. I have considered the report, in general terms. Mr Stuart has confirmed on oath that the opinions expressed in the report are held by him. AMP requested Rothschild to provide opinions as to the following matters: · whether the Demerger is in the best interests of AMP shareholders and the reasons for that opinion; · as the Demerger includes a capital cancellation, whether the Demerger is fair and reasonable to shareholders as a whole; · whether the capital cancellation materially prejudices the ability of AMP to pay its creditors; · whether the methodology of the adjustment to the exercise price of options issued under the AMP executive and employee option plans (details of which are referred to in the explanatory memorandum) is fair and reasonable to AMP ordinary shareholders; · to comment on the effect of the adjustment; and · whether the cancellation of the reset preferred securities is fair and reasonable to shareholders as a whole. 26 Rothschild has concluded that the Demerger is the strategic option most likely to deliver maximum value to AMP shareholders over time, based on Rothschild's assessment of the benefits, costs, disadvantages, and risks inherent in the Demerger. That conclusion is predicated on the basis that, as at the date of the Rothschild report, no offer has been made to acquire HHG, in whole or in part, in terms that could be considered preferable to the Demerger proposal. Rothschild reserved the right to reconsider its opinion in the event that such an offer were to be made. 27 Subject to that, Rothschild expresses the opinion that the proposed Demerger is in the best interests of AMP shareholders as a whole. Rothschild is of the opinion that the ordinary share capital cancellation is fair and reasonable to shareholders as a whole and that the share capital cancellation does not materially prejudice AMP's ability to pay its creditors. In relation to the proposed adjustments to the exercise price of the options issued under AMP's executive and employee option plans, Rothschild considered that the methodology of the adjustment is fair and reasonable to AMP ordinary shareholders. Rothschild is of the opinion that the proposed cancellation of the reset preference securities is fair and reasonable to AMP shareholders as a whole. 28 Mr Paul Bruce Siviour is a director of Ernst & Young Transaction Advisory Services Limited ('Ernst & Young TAS'). Ernst & Young TAS was engaged by AMP to prepare an independent accountant's report to be included in the explanatory memorandum. The report was requested on the pro-forma consolidated forecast financial performance of the continuing businesses that would comprise the AMP Group following the Demerger. Mr Siviour has confirmed on oath that the opinions expressed in the report are held by him. 29 Based on Ernst & Young TAS's review of the forecast set out in the explanatory memorandum, which they make clear is not an audit, and based on an investigation of the reasonableness of AMP's directors' best-estimate assumptions giving rise to the forecast financial information, nothing has come to the attention of Ernst & Young TAS that causes them to believe that: (a) AMP's directors' best-estimate assumptions set out in the explanatory memorandum do not provide a reasonable basis for the preparation of the forecast; and (b) the forecast is not properly compiled on the basis of AMP's directors' best estimate assumptions and are not presented fairly in accordance with the recognition and measurement principles prescribed in the accounting standards and other mandatory professional reporting requirements in Australia, and the accounting policies adopted by AMP disclosed in the notes in the relevant part of the explanatory memorandum, as applied in Australia representing pro-forma forecasts in prospectuses and explanatory memoranda. 30 Mr Brian James Long is a partner of Ernst & Young and is chairman of its Board of Partners. He is the Global Audit Engagement Partner for AMP. AMP requested Ernst & Young to prepare a report, for inclusion in the explanatory memorandum, on certain financial information described in their report as the 'Pro-forma Historical Financial Information'. The Pro-forma Historical Financial Information is set out in the explanatory memorandum. Mr Long has confirmed on oath that the opinions expressed in the report are held by him. 31 Based on their review, which was not an audit, nothing has come to the attention of Ernst & Young that causes them to believe that the financial information set out in the explanatory memorandum does not present fairly the following pro-forma financial statements: (a) consolidated statements of financial performance of the demerged businesses for the years ended 31 December 2000, 2001 and 2002 and for the six months ended 30 June 2003, (b) consolidated statements of the financial position of the demerged businesses as at 30 June 2003; and (c) consolidated statements of cash flows for the year ended 31 December 2002 and the six months ended 30 June 2003;
in accordance with pro-forma adjustments and the measurement and recognition requirements of applicable accounting standards and other mandatory professional reporting requirements in Australia. 32 Nor has anything come to Ernst & Young's attention that causes them to believe that the financial information does not present fairly the capital adequacy requirements of the statutory funds of AMP as at 30 June 2003. Further, nothing has come to their attention that causes them to believe that the financial information does not present fairly the free asset ratios of Pearl Assurance plc, London Life Limited, NPI Limited and National Provident Life Limited as at 30 June 2003, which are based on asset, liability and required minimum margin values prepared in accordance with the requirements of the Interim Prudential Sourcebook and with professional guidance. 33 Detailed reports describing the work carried out by those three experts are included in the explanatory memorandum. In addition, Tillinghast-Towers Perrin, consulting actuaries, were engaged by AMP Services Limited to provide actuarial advice and opinions on certain matters in connection with the proposed Demerger. The work involved determining values of the business of companies within the AMP Group. Mr Mark Edmund Turner, a principal of Towers Perrin Forster & Crosby, confirms on oath the opinions contained in that report. 34 The explanatory memorandum is substantial. It contains extraordinarily detailed information and material relating to the financial position and business of AMP and its subsidiaries, including projections as to the position following the Demerger of AMP, on the one hand, and HHG, on the other. I have been taken by senior counsel for AMP to the significant aspects of the explanatory memorandum. It has not been possible, nor is it appropriate, for the Court to examine the whole of such a complex document in detail. However, I am satisfied that the Scheme that has been propounded by AMP is appropriate to be put before the shareholders of AMP for their consideration. 35 I have been provided with evidence concerning the manner in which members will be notified of the proposed general meeting and of the meeting to be convened by the Court. The methods of notification include electronic notification, where members have agreed to be notified in that fashion. 36 I consider that it is appropriate for an order to be made convening a meeting of the members of AMP for the purposes of considering the Scheme.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.
Counsel for the Plaintiff: T F Bathurst QC with A S McGrath
Solicitor for the Plaintiff: Mallesons Stephen Jaques
SCHEDULE 1 AFFIDAVITS Name Date Position Ashley John Black 30 September 2003 Partner of Mallesons Stephen Jaques Paul Donald Leaming 13 October 2003 Chief Financial Officer of AMP Antony John Stuart 10 October 2003 Managing Director of N M Rothschild & Sons (Australia) Ltd Paul Bruce Siviour 10 October 2003 Director of Ernst & Young Transaction Advisory Services Ltd Brian James Long 10 October 2003 Partner of Ernst & Young Mark Edmund Turner 10 October 2003 Principal of Towers Perrin Forster & Crosby Peter John Willcox 9 October 2003 Chairman of AMP Roger Patrick Handley 9 October 2003 Director of AMP Mark Edmund Turner 14 October 2003 Principal of Towers Perrin Forster & Crosby Catherine Mary Mills 14 October 2003 Solicitor of Mallesons Stephen Jaques Peter Colin Blyth 14 October 2003 Investor Relations Manager of AMP Ashley John Black 15 October 2003 Partner of Mallesons Stephen Jaques Antony John Stuart 15 October 2003 Managing Director of N M Rothschild & Sons (Australia) Ltd Anthony Gregory Bancroft 16 October 2003 Partner of Mallesons Stephen Jaques Ashley John Black 16 October 2003 Partner of Mallesons Stephen Jaques Brian James Long 16 October 2003 Partner of Ernst & Young
EXHIBITS EXHIBIT DESCRIPTION PL1 Two folders of documents marked as 'Exhibit PL1' to the affidavit of Paul Donald Leaming sworn 13 October 2003 1A Schedule of Amendments to Exhibit PL1 2A Draft of an instrument described as 'HHG Deed Poll' AS2 Exhibit so described in the affidavit of Antony John Stuart sworn 15 October 2003 (Independent Expert's Report - Rothschild) CMM2 Constitution of AMP Ltd exhibited to affidavit of Catherine Mary Mills affirmed 14 October 2003 AS1 Exhibit so described in the affidavit of Antony John Stuart sworn 10 October 2003 (Independent Expert's Report - Rothschild) BL1 Exhibit so described in the affidavit of Brian James Long sworn 10 October 2003 (Independent Expert's Report on Reviewed Pro-forma Historical Financial Information - Ernst & Young) PS1 Exhibit so described in the affidavit of Paul Bruce Siviour (Independent Expert's Report on Forecast Financial Information - Ernst & Young Transaction Advisory Services) MT1 Exhibit so described in the affidavit of Mark Edmund Turner affirmed 10 October 2003 (Consulting Actuaries' Report - Tillinghast-Towers Perrin) CMM1 Exhibit so described in the affidavit of Catherine Mary Mills affirmed 14 October 2003 (Company extract for AMP Ltd) AGB2 Exhibit so described in the affidavit of Anthony Gregory Bancroft sworn 16 October 2003 (Schedule of Amendments to the Explanatory Memorandum - changes from version presented to Court on 15 October 2003) AJB2 Exhibits so described in par 3 of the affidavit of Ashley John Black sworn 16 October 2003 3A Copy of HHG Deed Poll as executed BJL1 Exhibit so described in par 2 of the affidavit of Brian James Long sworn 16 October 2003 (HHG Pro-forma Special Purpose Financial Report)