1 Australian Co-operative Foods Limited, which I shall call "ACF", is a body registered under the Co-operatives Act 1992 as a co-operative. It trades under the name "Dairy Farmers".
2 ACF has negotiated with National Foods Limited with a view to carrying into effect an acquisition transaction involving a compromise or arrangement under Part 13 of the Co-operatives Act under which all the shares in ACF will cease to be held by ACF's current members and come to be held by National Foods. The envisaged compromise or arrangement is one between ACF and its members.
3 Having regard to s 344(1) of the Co-operatives Act, the compromise or arrangement will be binding only if it is approved by order of the court and also approved by the members concerned by special resolution passed by means of a special postal ballot, for which provision is made in the Act. The necessary approval of members is thus to be achieved by a process that does not require any meeting of members.
4 In the particular statutory context, the court is not cast in a role analogous with that provided for in s 411(1) of the Corporations Act 2001 (Cth) which empowers the court to order that a meeting or meetings be convened to consider a compromise or arrangement under Part 5.1 of that Act between a company and its members or a class of them; and to approve the explanatory statement required by s 412(1)(a) in such a case.
5 ACF has nevertheless approached the court today at a time when no special postal ballot has yet been conducted and no step has been taken to place the proposed compromise or arrangement before the members for decision. The only application now formally before the court is that it fix a date for the hearing of an application for an order under s 344(1).
6 Mr Oakes SC and Mr Foreman of counsel have appeared for ACF. Mr Katekar of counsel has appeared for the Registrar referred to in s 5B of the Co-operatives Act and has informed the court of the attitude, in general terms, of the Registrar. Mr Hastings, solicitor, has, by leave, appeared for National Foods and has not sought to make submissions.
7 The real purpose of ACF's approach to the court, despite the form of the application, is to obtain some form of advance appraisal or evaluation of the proposal and of a number of potentially difficult matters that seem to arise. The approach is made against the background of observations of Santow J in Re Namoi Cotton Co-Operative Ltd (1998) 26 ACSR 694. His Honour said (at 695), at the start of a judgment dealing with an application for s 344(1) approval:
"Recognising that the court must still approve the scheme, if passed, the applicant brought the proposed scheme before the court at the convening stage and invited the court, in considering whether to appoint a hearing date for approval, to apply the approach which has long been the practice in this court were this a convening application under the Corporations Law. This is that the court should not allow the matter to advance unless (assuming the necessary approval of members is obtained) the court would be likely to approve the scheme of arrangement on an uncontested basis after its consideration by the members: see generally F T Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72, a judgment of the Full Court of this court; applied by Marks J in Victoria in Re Linter Textiles Corp Ltd [1991] 2 VR 561 at 562 ; (1990) 4 ACSR 99, and considered by Hayne J in Re Sonodyne International Ltd (1994) 15 ACSR 494 at 497, 499 and 500 and O'Loughlin J in Re ACM Gold (1992) 34 FCR 530 at 535; 107 ALR 359; 7 ACSR 231. This approach still leaves open the ability for objectors to appear at the approval hearing and does not pre-empt the court at that stage - or indeed the registrar - in its consideration of whether or not to approve the scheme: cf Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; 112 ALR 627; 10 ACSR 230."
8 For my own part, I see no foundation for embarking on any non-statutory course which is tantamount to the giving of an advisory opinion on matters concerning the proposed compromise or arrangement that may become controversial if and when the court is asked to exercise the statutory approval function.
9 In the context of Part 5.1 of the Corporations Act, the court is given by the legislation a specific role to play before members are invited to pronounce upon a proposed compromise or arrangement. Here, it is not; and it is difficult, to say the least, to see what jurisdiction the court would be exercising if it embarked upon the course indicated, where Part 5.1 applies, by F T Eastman & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72 and other cases to which Santow J referred in the passage I have quoted.
10 It is suggested that s 368 of the Co-operatives Act might provide a basis for the court to embark upon some form of advance scrutiny of the proposed compromise or arrangement. Section 368 is as follows:
"The jurisdiction of the Court under this Part is intended to complement the Court's jurisdiction under the Corporations Act (as applied under this Act) and should be exercised in harmony with that jurisdiction."
11 It is to be noted that s 368 does not direct some general assimilation of the court's approach to a compromise or arrangement under Part 13 of the Co-operatives Act to the approach taken to a compromise or arrangement under Part 5.1 of the Corporations Act. Rather, the section makes specifications with respect to the "jurisdiction of the court under this Part", that is, Part 13 of the Co-operatives Act. In the case of a members' scheme, as distinct from a creditors' scheme, the only relevant aspect of the jurisdiction given to the court by Part 13 is the power to make an order approving the compromise or arrangement. The exercise of that jurisdiction has nothing to do with the anterior process of placing materials before members for the purposes of the necessary ballot.
12 Indeed, the provisions in Division 2 of Part 13 requiring that an explanatory statement accompany a notice sent to members for the purposes of the conduct of a special postal ballot say that the explanatory statement must be as approved by the Registrar referred to in s 5B of the Co-operatives Act. The legislation thus creates a specific and particular pre-vetting and appraisal process in which the court plays no part.
13 Written submissions made on behalf of ACF raised a number of issues in relation to the proposed compromise or arrangement. Some of these have been expanded upon in the course of oral submissions made today by Mr Oakes.
14 The first such matter concerns a proposal that there be included in the special postal ballot not only a special resolution approving the proposed compromise or arrangement but also a special resolution concerning conversion of ACF into a Corporations Act company (following approval of the compromise or arrangement) and a special resolution concerning alteration of the terms of so-called "co-operative capital units" issued by ACF so that the holders of those units can participate under the compromise or arrangement.
15 There is then a detailed description of the steps involved in the implementation of the proposed compromise or arrangement, including payment by National Foods and an implementation agreement containing conditions precedent. The conditions include, in particular, a condition that another body, Dairy Farmers Milk Co-operative Ltd (or "DFMC"), a co-operative distinct from ACF, enter into certain contracts with milk suppliers.
16 Reference is then made in the submissions to several matters which have received attention in the context of members' schemes under Part 5.1 of the Corporations Act, including performance risk, exclusivity (including "no shop" and "no talk" restrictions) and "break fee".
17 The submissions also draw attention to the reports from outside experts that are to accompany the explanatory statement.
18 The written submissions then move on to the question whether DFMC, which owns about 20 per cent of the shares in ACF, constitutes "a separate class in respect of the scheme". Having raised that question, the submissions proceed to say, first, that DFMC is not a "separate class" and, second (and in any event), that Part 13 of the Co-operatives Act, in contradistinction to Part 5.1 of the Corporations Act, does not reflect or involve any relevant concept of class, the latter being a proposition said to be supported by an observation of Santow J in Re Australian Co-operative Foods Ltd [2001] NSWSC 382; (2001) 38 ACSR 71 at [68] and [69].
19 The submissions then pose the question, "Who is entitled to vote?" and go on to discuss various statutory provisions with respect to the particular type of ballot and voting rights generally, before venturing a conclusion that active members are entitled to vote, but inactive members are not, a proposition again said to be supported by an observations of Santow J in Re Australian Co-operative Foods Ltd (above).
20 The next part of the written submissions is headed, "Should ACF hold a plebiscite for ACF inactive members?" It is said in this part that, in the 2001 case, Santow J made "favourable comment" about such a plebiscite; but that when, in 2004, I made an order under s 344(1) approving an earlier ACF scheme, I observed that a plebiscite of inactive members is not mandated or even contemplated by the Act.
21 Next follows discussion of Chapter 6 of the Corporations Act. The written submissions point out that, if things go to plan, National Foods' acceptance of the transfers of the shares in ACF to be generated pursuant to the compromise or arrangement will occur at a time when ACF has become a company registered under the Corporations Act. It is also said that there will be no acquisition in contravention of s 606 of that Act because National Foods will already have a relevant interest in all the shares concerned, so that there will be no increase in aggregate voting power as contemplated by s 606(1)(c). Reference is made in that connection to the decision of O'Bryan J in TVW Enterprises Ltd v Queensland Press Ltd [1983] 2 VR 529 on the roughly analogous regime under s 11 of the Companies (Acquisition of Shares) (Victoria) Code. Alternatively, it is said, National Foods' acquisition will be, in terms of item 15 of s 611 of the Corporations Act, "through operation of law".
22 The written submissions next move on to the instructions proposed to be given to members concerning voting on the special postal ballot and the form of resolution to be submitted to members. As to the latter matter, it is apparently proposed that, although each of three distinct aspects of the overall plan involves the passing of a separate special resolution as already noted, only one resolution embodying all three aspects together will be placed before members for consideration. Arguments in favour of the validity and effectiveness of that approach are then rehearsed by reference to a number of decided cases, including the decision of Hodgson J in Simon v HPM Industries Pty Ltd (1989) 15 ACLR 427 (particularly at 439), the precise relevance of which, at the moment, I find elusive, given that we are here concerned with advance steps to meet statutory requirements. There is also reference to the Court of Appeal's decision in J Aron Corporation v Newmont Yandal Operations Pty Ltd [2006] NSWCA 46; (2006) 57 ACSR 149 and to Campbell v Australian Mutual Provident Society (1906) 7 SR(NSW) 99 and Ansett v Butler Air Transport Ltd (No 2) (1958) 75 WN(NSW) 306.
23 Finally, the written submissions refer to exemptions that have been obtained under certain provisions of the Co-operatives Act. These include an exemption from s 289, which sets a limit on the number of shares in a co-operative in which a person may have a relevant interest (an expression defined in generally the same way as in the Corporations Act) and a Ministerial order under s 143.
24 I have been given a large number of documents relevant to the proposal. These are a scheme booklet of 99 pages, a scheme booklet supplement of more than 170 pages (including the proposed company constitution), the voting guide of 12 pages and a quantity of other documents, including the implementation agreement and a related deed poll. The written submissions were received in my chambers at 5.45 last night. A copy of the scheme booklet by itself had been received at about 4.30 yesterday afternoon. A full volume of documents, some six centimetres thick, was received at 10.30am today.
25 In accordance with arrangements made in advance, ACF's originating process was listed for hearing at 2pm today and the court was convened at that time.
26 Needless to say, I have done no more than skim some of the many documents (including the written submissions) in a preliminary way. There has not been time for more than a cursory review. Numerous complexities and difficulties have been referred to in submissions, both written and oral. A document headed "Offer of Convertible CCUs by Australian Co-Operative Foods Limited Disclosure Statement" was referred to extensively in the course of oral submissions in such a way as to suggest that considerable time will be needed to absorb all relevant matters raised by it if and when it becomes necessary for the document, its effect and implications to be grasped and understood.
27 I go back to the point at which I began. As I see it, the court has no function to perform at this point, beyond dealing with the application for allocation of a date for the hearing of an application by ACF for an order under s 344(1) of the Co-operatives Act. That is a matter that poses no difficulty.
28 To the extent that the court is invited to pass some form of judgment or express some form of opinion on the various difficult and complex matters raised in written and oral submissions, the invitation is one that must be declined.
29 As I have observed already, the function of approving the explanatory statement is explicitly confided by the legislature to the Registrar under the Co-operatives Act. There is no warrant for the court to encroach upon that territory. Nor is the court invested by s 368 of the Co-operatives Act or otherwise with any jurisdiction analogous with that created by s 411(1) of the Corporations Act.
30 The invitation to which I have referred is similar, in relevant respects, to that extended to Jessup J a month ago in Re GMHBA Ltd [2008] FCA 1360. The applicant in that case, GMHBA, had agreed to purchase the health insurance business of a society regulated by the Life Insurance Act 1995 (Cth). Implementation of the transaction entailed a scheme requiring confirmation by the Federal Court under s 193 of that Act.
31 It appears that, in the course of formulating such a scheme, the parties came upon a point of doubt or difficulty as to whether certain policyholders of GMHBA were "affected policy owners" for the purposes of s 191(2)(c) of the Act. GMHBA alone then approached the court seeking a declaration to the effect that the persons concerned were not within the statutory definition. Jessup J considered it inappropriate that such a declaration be made. His Honour said at [7]:
"As indicated above, the applicant also sought a declaration that its own policy owners are not 'affected policy owners' for the purposes of s 191(2) of the Act. I was not, and am not, persuaded that there is presently a 'matter' within the meaning of s 39B of the Judiciary Act 1903 (Cth) such as would provide the court with jurisdiction to make such a declaration. There appears to be no controversy: Druids has apparently consented to the applicant making the present application and, inferentially, would support the making of a declaration of the kind that the applicant seeks. I am not persuaded that the application goes further than to seek from the court an advisory opinion, in advance of the event, as to whether the applicant's policy owners would fall within the definition in s 191(1) of the Act. If there were a dispute on the subject, the most obvious contradictors would be those policy owners themselves. It is not proposed, either by the applicant or, apparently, by Druids, that those policy owners should be notified of the present application. Neither would they be bound by a declaration in the terms which the applicant seeks. For that reason also I took the view that it would be quite irregular, to say the least, for the court to make a declaration in those terms."
32 After the proceedings had been re-constituted, Jessup J saw fit to exercise a statutory power of dispensation and, in doing so, to determine the particular issue.
33 The concern expressed by Jessup J in the passage I have quoted is based on the distinction between an advisory opinion and a declaratory judgment, as identified by the High Court in Bass v Permanent Trustee Company Limited (1999) 198 CLR 334 - in essence, that an advisory opinion does not amount to a binding decision raising a res judicata between parties, whereas a declaratory judgment does. Except as statute may otherwise allow (see, for example, s 63 of the Trustee Act 1925 the boundaries of which were recently considered by the High Court in Macedonian Orthodox Community Church of St Petka Inc v His Eminence Petar [2008] HCA 42), it is not part of the judicial function to give advisory opinions, as distinct from determining litigated controversies (including by declaratory judgment) or exercising some other clearly conferred jurisdiction.
34 There are in the particular issues that have been outlined to me today aspects of speculation. For example, why should the court consider whether inactive members are entitled to vote when, at this point, no voting has occurred and no-one knows whether inactive members will vote or not? The matter, like a number of others, is entirely hypothetical. This emphasises the difficulty to which I have just referred.
35 All that I need do - indeed, all that is contemplated by the originating process at this point - is to appoint a date for the hearing of an application by ACF for an order under s 344(1) of the Co-operatives Act.
36 I therefore make order 1 in the originating process appointing 18 November 2008 at 9.30am.