Australian Unity Funds Management Limited v NorthWest Healthcare Australia Re Limited

The parties' views as to the length of an adjournment of the meeting

1. The dispute between the parties is now in relatively small compass. Mr Crutchfield emphasises Mr Mead's evidence that AUFM sought six weeks to respond to the proposal, albeit that evidence was given in an affidavit dated 9 June 2021, and an amended proposal has since intervened. Mr Crutchfield points out that there is no evidence contradicting Mr Mead's evidence. I bear in mind that (as Ms Wong, who appears for NorthWest, points out) evidence in this application has plainly been prepared under significant time pressure and there would have been limited time for NorthWest to lead evidence in response to Mr Mead's evidence. I draw no adverse inference by reference to any absence of evidence on NorthWest's part in that respect.
2. Ms Wong in turn points to the probability of commercial prejudice to NorthWest in respect of a delay in unitholders' consideration of its proposal. I infer that such prejudice is likely to arise, given the size of the proposed transaction and the necessity to fund it. Equally, it seems to me that unitholders have at least two interests in respect of a proposal of this kind. The first, importantly, is to be adequately informed as to the proposal, but a second is to have the opportunity to consider such a proposal, and to determine whether it is to their advantage, in a timely way. Here, any delay in the meeting has the potential to be adverse to unitholders who wish to accept the proposal if it is a proper proposal, and to receive the funds that they would receive from implementation of the proposal sooner rather than later.
3. I also bear in mind Mr Crutchfield's submission that, if the Court allows a shorter period than that for which AUFM contends by way of an adjournment, that will be "cutting it fine" or, to put it in a different way, will run the risk that that period is ultimately too short to allow unitholders to be properly informed of relevant matters. I squarely raised that matter with Ms Wong, because it seemed to me that, on one view, it might have been in NorthWest's interests to err on the side of caution in that respect. If unitholders are not properly informed in respect of the meeting, then the Court may well make the orders that AUFM presently seeks, that it would be justified in not lodging any constitutional amendment arising from the meeting with the Australian Securities and Investment Commission ("ASIC"). I have not neglected the fact that that NorthWest foreshadows a submission that would likely turn the practice of trust schemes in this country on its head, that a responsible entity has no power not to lodge an amendment to a trust constitution with ASIC after it has been voted upon, with the likely consequence that responsible entities have been pointlessly seeking and Courts have been pointlessly giving judicial advice for many years in respect of trust schemes. That submission need not be addressed at this point.
4. The risk, on one view, of reducing the period of adjournment which AUFM proposes is that it may increase the risk that there are difficulties in its communicating with unitholders and then the meeting is ultimately not properly informed. However, as I have noted, that risk has been squarely exposed in the course of submissions and it is a risk that NorthWest has elected to assume, by contending for a shorter period for the adjournment. It is to be hoped that that risk does not come home.
5. On balance, so far as there is a dispute between the parties as to the period of the adjournment, it seems to me that the evidence does not ultimately establish that the date of 26 July is critical to AUFM's ability to inform unitholders adequately in respect of the proposal. I bear in mind there the period for which versions of the proposal have already been in play, and the fact that there has been media publicity about them, and a number of communications from both parties to the unitholders to date, so it is unlikely that even unitholders with small holdings are unaware of the circumstances that are developing. I bear in mind that there is likely to be some prejudice to NorthWest by way of delay, given the amount involved in the proposal, and that there is a prejudice to unitholders by way of delay, at least if they are properly informed and wish to accept the proposal, and the proposal is a proper one. In these circumstances, it seems to me that the proper course, albeit it does have a somewhat arbitrary quality, is to adopt a date which is midway between the dates that AUFM and NorthWest respectively propose and adjourn the meeting, if the Court has power to do so, to 19 July, which is a week longer than the adjournment which NorthWest supports, and a week shorter than the period which AUFM sought. I appreciate that there is risk involved in any decision of that kind, but it seems to me that approach balances the interests of AUFM (as responsible entity) and NorthWest and, much more importantly, recognises the obligations of AUFM in respect of informing unitholders, and unitholders' interests in being properly informed, but also in not being unduly delayed in having the opportunity to consider the proposal.

The Court's power to adjourn the meeting

1. A question remains, although it seems to me to be straightforward, whether the Court has power to make the order that was sought. AUFM contends, and I am satisfied that, it is a person that has an interest in seeking an adjournment of the meeting, for the purposes of s 1322(4) of the Corporations Act. That interest arises because, as responsible entity, it has rightly recognised that it has obligations in respect of communicating its position as to the offer that has been made by NorthWest to unitholders, at least to the extent of using its best efforts to ensure that unitholders are properly informed as to relevant matters.
2. The Court has power under s 1322(4) of the Corporations Act to extend the time for a meeting of this character, and that power has frequently been exercised in the context of meetings convened by groups of shareholders, including in National Roads & Motorists Association Ltd v Parkin (2004) 49 ACSR 386; [2004] NSWSC 296 and in Woolworths Ltd v Get Up Ltd (2012) 90 ACSR 670; [2012] FCA 726. The extension of time for such a meeting under that section does not require that the Court exercise any power under s 1319 of the Act, which would ordinarily be exercised in respect of a trust scheme where, in this case, the Court has not ordered that a meeting be convened, so the power under s 1319 of the Act would not be available. I am satisfied that it is at least just and equitable that the order be made, and that it will not cause substantial injustice to any person, where, as matters stand, unitholders would have great difficulty in being adequately informed as to a position which has changed rapidly if the meeting were to go ahead on 1 July 2021.
3. I have borne in mind one other matter that had troubled me, namely, that, on one view, the exercise of the Court's power to extend time for the meeting to take place assumes that NorthWest's proposed resolution(s) could properly be passed at the meeting, in the light of the information provided to unitholders, and that an extension of time would remedy any difficulties which had arisen in respect of the information provided to date, including the characterisation of the transaction as a "trust scheme", and, to put it differently, that these matters have not had the effect that the meeting could not now be properly held. While I have been troubled by that issue, it seems to me that it is not reason to decline to extend the time for the meeting, where both parties accept that unitholders will be better informed by an extension of the time to hold the meeting, and the validity of the meeting and the resolutions that are passed at it will ultimately be determined (or at least the question whether AUFM would be justified in lodging any resolution passed at the meeting with ASIC) will ultimately be determined in AUFM's application for judicial advice in these proceedings.
4. For these reasons, I make an order under s 1322 of the Corporations Act that the meeting of the AUHPT called by NorthWest, and presently scheduled to take place on 1 July 2021, be adjourned to 10am on 19 July 2021, to take place at 123 Collins Street, Melbourne, or otherwise by such alternative means as may be agreed between the parties or approved by the Court, if the parties are unable to reach such agreement. I have added a provision in this order for alternative means to call the meeting, both to recognise the potential uncertainties of the COVID-19 pandemic, and in case the parties ultimately consider that it may be desirable to adopt (as is now often the case in company schemes and trust schemes) some combination of a physical meeting and a virtual meeting. I recognise that the Court has no power to require such an approach where this is not a trust scheme under the Court's supervision.

Future conduct of the proceedings

1. It is common ground that the Court should now vacate the hearing that was presently scheduled to commence on 22 June 2021 and will allocate the matter for hearing commencing about 20 July 2021 after the meeting has occurred. As matters have developed in the last week, it is apparent that late developments may affect the conduct of the meeting and it is preferable that the hearing be determined after, and not before, the meeting, when those developments are known. The parties will, of course, need to inform unitholders of the risk that, if the approach adopted by NorthWest is not lawful or not such that AUFM would be justified in lodging an amending resolution passed at the meeting with ASIC, then the resolutions passed at that meeting will not be able to be implemented. No doubt, relevant matters in that regard may include the extent to which unitholders are ultimately properly informed in respect of relevant issues; the extent to which they, when properly informed, vote in favour of or against NorthWest's proposal; and the split of those votes as between proponents of the transaction including NorthWest which might ordinarily not be permitted to vote within a "trust scheme", unitholders (including AUFM) which NorthWest contends are excluded from voting, although they would ordinarily be permitted to vote so far as their shares are to be acquired under NorthWest's proposal; and unitholders who do not fall within either of those categories.

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