- Australian Securities Commissions v Marlborough Gold Mines Ltd

Specified issues

Mr Williams drew several aspects of the schemes to the Court's attention. First, he addressed the position of UniSuper, which beneficially owns approximately 15.01% of the securities in Sydney Airport. As I noted above, different consideration is to be provided to UniSuper under the schemes in exchange for those securities, in the form of an equivalent proportion of the equity and debt securities in HoldCo, and the economic effect of the schemes is to preserve UniSuper's 15.01% ownership interest in Sydney Airport. As I also noted above, UniSuper has entered into a voting deed with SAL, under which it has relevantly agreed not to dispose of the UniSuper Securities and to vote those securities in favour of the schemes, and that voting deed is disclosed in section 9.10 of the scheme booklet.
Mr Williams notes that it is proposed to treat the UniSuper Securityholder in respect of the UniSuper Securities as a separate class for both the company scheme and trust scheme. He refers to the test for whether there is a separate class of member (or creditor), involving questions as to the rights that existing members (or creditors) have against the company and to what extent are they different; to what extent are those rights differently affected by the scheme; and does the difference in rights or different treatment of rights make it impossible for the members or creditors in question to consider the scheme as one class?: First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116 at [80]. Mr Williams submits, and I accept, that UniSuper will here be differently affected by the schemes because it will maintain an equity interest in Sydney Airport. This matter is properly addressed by the proposed separate class meetings to avoid any potential that the will of the scheme securityholders as expressed in the outcome of the meetings to consider the schemes might be affected by the different interests of UniSuper.
Mr Williams also points out that the independent expert has not considered whether the schemes are fair and reasonable for UniSuper, or whether the schemes are in its best interests, and directors have not made a recommendation to UniSuper. I am satisfied those matters are not an obstacle to convening the scheme meetings where UniSuper is plainly a sophisticated investor capable of forming an independent view of its own interests, and has already done so by agreeing to the voting deed which obliges it to support the schemes and is in effect retaining its existing equity interest in Sydney Airport.
Second, Mr Williams notes that section 6.8(a) of the scheme booklet discloses that some of the Consortium members hold Sydney Airport securities totalling approximately 2.92% of the Sydney Airport securities on issue, which were acquired by or on behalf of business units, investment teams or external investment managers of Consortium members whose ordinary course of business involved dealing in, trading, or holding listed securities. The notices of scheme meetings contain a voting exclusion statement to the effect that the Bidder and its associates will not vote at the scheme meetings unless, relevantly, the associate is acting as a fiduciary on behalf of a third party investor. This matter is not a reason not to convene the scheme meetings
Third, Mr Williams notes that Chairman's letter and section 9.7 of the scheme booklet disclosed that several directors of Sydney Airport have indirect and non-financial interests in the recommendation made in favour of the schemes. Mr Gonski, the non-executive director and chairman of SAL, is the non-executive Chairman of Barrenjoey, a subsidiary of which is one of two financial advisers to Sydney Airport on the proposed transaction. He was not involved in settling the terms of the mandate, is not a shareholder of Barrenjoey and his remuneration is not tied to any fees that Barrenjoey may receive as part of the mandate. Mr John Roberts, a non-executive director of SAL, is also the non-executive Chairman of Macquarie Infrastructure and Real Assets which is related to Macquarie Capital, the financial adviser to the Consortium on the transaction. Mr Roberts is not privy to any non-public details concerning that engagement and his remuneration is not tied to it. Ms Anne Rozenauers, a member of the Sydney Airport Trust Board, is employed by Perpetual and TTCSAL, the responsible entity for SAT1, is a wholly owned subsidiary of Perpetual. Another subsidiary of Perpetual has been engaged by the Consortium to provide custodial and wholesale trustee services to the Consortium in respect of the proposed transaction. Ms Rozenauers' remuneration from Perpetual is not directly linked to these services and the other members of the Sydney Airport Trust Board considered the potential conflict to be remote.
Fourth, Mr Williams notes that Sydney Airport operates a Long Term Incentive Plan under which performance rights are issued to certain management personnel. Each performance right entitles its holder to acquire one Sydney Airport security upon satisfaction of certain vesting conditions for no consideration. The holders of such performance to rights are identified in section 9.3(c) of the scheme booklet, and,, if the schemes become effective, all outstanding performance rights will vest and be cash settled on the Implementation Date (as defined). No SAL directors hold performance rights so no question arises in respect of the appropriateness of their making a recommendation in respect of the schemes. Mr William submits, and I accept, that holders of performance rights who are also scheme securityholders are not in a separate class of scheme securityholders by reason only that they also holds such performance rights: Re Foster's Group Ltd (No 2) [2011] VSC 547 at [38]-[43]; Re Cashcard Australia Ltd (2004) 48 ACSR 738.
Fifth, Mr Williams points out that the schemes are subject to a number of regulatory conditions precedent as disclosed in section 3.4 of the scheme booklet. A no objection notification under the Foreign Acquisition and Takeovers Act 1975 (Cth) is a condition precedent to the schemes and has not yet been received. Conditions that the Australian Competition and Consumer Commission have notified the Bidder that it does not propose to intervene in respect of the transaction pursuant to the Competition and Consumer Act 2010 (Cth) and that the European Commission declare any concentration with a community dimension as a result of the schemes is compatible with the common market have been satisfied.
Sixth, Mr Williams points out that cl 11 of the SID contains an exclusivity provision which includes a "no shop", a "no talk", and a "no due diligence" restriction and a "notification" and "matching right" obligation. Mr Williams also points out that exclusivity provisions in this form are now commonplace in schemes of arrangement and are not inconsistent with Guidance Note 7: Lock-up devices issued by the Takeovers Panel: Re Villa World Ltd above at [23]. The Court will have regard to whether such any exclusivity period should be for no more than a reasonable period capable of precise ascertainment; whether any exclusivity clause dealing with an unsolicited alternative merger proposal is subject to a fiduciary carve-out; and whether the provision is clearly disclosed in the explanatory statement sent to shareholders: Re Arthur Yates & Co Ltd (2001) 36 ACSR 758; [2001] NSWSC 40 at [9].
Mr Williams points out that the "Exclusivity Period" here lasts from the date of the SID until the earlier of its termination, implementation of the schemes and the "End Date", namely 15 March 2022, unless extended in specified circumstances to 31 May 2022 (cl 1.1). I accept that this is a reasonable period in respect of a substantial and complex transaction, and is comparable with exclusivity periods in other schemes that have previously been accepted by the Courts: Re Sirtex Medical Ltd [2018] FCA 1315 at [37]; Re Tawana Resources NL [2018] FCA 1456 at [33]; Re GBST Holdings Ltd [2019] NSWSC 1280; Re ERM Power Ltd [2019] NSWSC 1502; Re Prime Media Group Ltd [2019] NSWSC 1805 at [23]; Re Webcentral Group Ltd [2020] NSWSC 1279 at [23]. The "no talk" and "no due diligence" restrictions in cl 11.2 in the SID are here subject to an overriding obligation not to breach the directors' fiduciary or statutory duties under cl 11.3 of the SID, and the fact that the "no shop" restriction and "matching right" is not subject to fiduciary carve-out is consistent with authority: Re Bigair Group Ltd [2016] FCA 1296 at [21]; Re DUET Finance Ltd above at [24]. The exclusivity provisions are clearly disclosed in section 9.11(d) of the scheme booklet and there is evidence that they were the product of arm's length negotiations between the parties. These matters do not give rise to any reason not to convene the scheme meetings.
Seventh, Mr Williams observes that a break fee or "Reimbursement Fee" of $150 million is potentially payable by Sydney Airport to the Bidder in specified circumstances under cl 12 of the SID and is disclosed in section 9.11(e) of the scheme booklet. The reimbursement fee is not triggered solely by scheme securityholders failing to approve the schemes and is not a disincentive to securityholders in their consideration of the schemes: Re Adelaide Bank Ltd [2007] FCA 1582 at [31]; Re Bolnisi Gold NL (No 2) (2007) 243 ALR 545; (2007) 65 ACSR 510 at 513; [2007] FCA 2078. A "reverse" break fee of $150 million is also payable by the Bidder to Sydney Airport if Sydney Airport validly terminates the SID for material breach by the Bidder. There is evidence that the reimbursement fee was negotiated between the parties in the course of arms' length negotiations in which all parties were represented by experienced advisers; the reimbursement fee represents approximately 0.64% of the equity value of Sydney Airport, or 0.75% of the equity value of the Sydney Airport Securities which are being acquired for the cash consideration under the schemes, excluding the UniSuper Securities; it is not inconsistent with the guideline percentage in the Takeovers Panel's Guidance Note 7: Lock-up Devices; and such reimbursement fees are commonplace in schemes of this kind: Re TPG Telecom Ltd [2020] NSWSC 772 at [24]. I accept that, although the reimbursement fee is large in absolute terms, this reflects the large size of the proposed transaction and provides no reason not to convene the scheme meeting: Re Afterpay Ltd [2021] NSWSC 1435 at [35].
Eighth, the question of performance risk is ordinarily considered at the first Court hearing in respect of a company scheme or trust scheme, where a third party provides consideration or benefits to shareholders or unitholders under the scheme: Re SFE Corporation Ltd (2006) 59 ACSR 82; [2006] FCA 670 at [4]; Re APN News & Media Ltd (2007) 62 ACSR 400 at 405; [2007] FCA 770; Re Sydney Airport Holdings above at [17]; Re Mirvac Funds Management Ltd [2014] NSWSC 1569 at [7]; Re Villa World Ltd above at [22]; Re Spark Infrastructure RE Ltd above at [29]. Mr Williams points out that the provision here for payment of the cash scheme consideration to a trust account with an Australian ADI operated by SAL or on its behalf, prior to transfer of the scheme securities, is a safeguard against the risk that scheme securityholders will suffer delay or default in the provision of the scheme consideration after their securities have been transferred to the Bidder.
Mr Williams acknowledges that Consortium members are here not party to the deed poll given by the Bidder in favour of securityholders. However, he points out that the Bidder, SAL and TTSCAL have the benefit of equity commitment letters given by the Consortium Members (as defined) which are conditional upon the schemes becoming effective upon lodgement of the Court's orders approving the scheme with ASIC. I accept that condition poses no real risk to Scheme Securityholders as it will be satisfied before their securities are acquired: Re Spark Infrastructure RE Limited [2021] NSWSC 1564 at [20]. The equity commitments will only terminate upon the payment of the scheme consideration or effective termination of the SID and do not provide the Consortium members with any rights of termination and the Bidder has provided a warranty that it will not, and will procure that each member of the Consortium does not, relevantly amend or waive the equity commitment letters or rights under them. Mr Williams also points out that, under cl 9.4 of the scheme of arrangement, SAL undertakes from the effective date of the scheme to enforce the deed poll against the Bidder and HoldCo and, to the extent necessary, enforce SAL's rights under the equity commitment letters given by members of the Consortium, on behalf of scheme securityholders. Mr Williams is anxious to emphasise that this provision should not be taken as a precedent for requiring such a commitment in future schemes. I need not comment on that matter, and it is sufficient to note that it provides additional support for securityholders' entitlement to receive the consideration under the proposed schemes.
In the result, scheme securityholders are in a position to enforce the obligation of the Consortium members to provide the scheme consideration by requiring performance of SAL's undertaking under the scheme to enforce SAL's rights under the equity commitment letters. I accept that similar arrangements with consortium members have been considered and approved previously, including in circumstances where the commitment letters permitted the members of the consortium to terminate on specified grounds: Re Spark Infrastructure RE Ltd [2021] NSWSC 1385 at [31]-[33]; [2021] NSWSC 1564 at [15]-[29].
Ninth, Mr Williams addresses the means of despatch of scheme materials and reminders to vote. Mr Williams notes that the provisions of a hard copy chairman's letter and a link to the balance of the scheme booklet, absent a request for a hardcopy, and the sending of "reminder to vote" emails and letters to scheme securityholders have been accepted in other schemes: Re rhipe Ltd [2021] NSWSC 1170 at [27]; Re Australian Leisure and Entertainment Property Management Ltd [2021] NSWSC 1421.
Tenth, the schemes provide for a deemed warranty by scheme securityholders that their scheme securities will be free from encumbrances (cl 9.5 of the Company Scheme and proposed cl 7.4 of Schedule 1 of the Sydney Airport Trust Deed), and appropriate prominence is given to the deemed warranty in section 3.8 of the scheme booklet . This matter give rise to no reason not to convene the scheme meetings: Re APN News and Media Ltd (2007) 62 ACSR 400; [2007] FCA 770 at [57]-[63]; Re Ardent Leisure Ltd [2018] NSWSC 1665 at [26].
Eleventh, Mr Williams also submits, and I accept, that the Court should address the question posed by s 411(17) of the Act on an application to approve a scheme at the second Court hearing: Re Macquarie Private Capital A Ltd [2008] NSWSC 323 at [25]-[37].

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Judgment (8 paragraphs)

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Legislation Cited (5)

Cases Cited (46)