BACKGROUND FACTS
7 Apparently PGA can trace its origins back to 1911 when a group of expatriate Scottish golf professionals formed a national Australian organisation to promote the game of golf and to help elevate the vocation of the golf professional in Australia. Apparently this makes PGA through its antecedents the second oldest association of professional golfers in the world.
8 PGA itself was incorporated in October 1984. It is the peak national sporting association for professional golf in Australia. Among other activities, PGA conducts a wide range of golfing events and tournaments. As at 8 October 2007, PGA had 2,344 members. They include club professionals, accredited golf coaches and tournament professionals.
9 PGA has 44 staff, 29 of whom are based at its national office in Victoria and 15 of whom are spread across its state offices in Queensland, New South Wales and Western Australia. The Victorian, Tasmanian and South Australian staff are "co-located" at the national office, while three national staff are "co-located" within the New South Wales state office in Sydney.
10 Approximately 90 percent of PGA's members work primarily at local golf facilities teaching, administering and promoting the game. Only a small number play tournament golf for a living.
11 In 1978 a "Tournament Players Division" of the PGA's predecessor body was created for the purpose of recognising and identifying champion tour golfers in Australia and New Zealand. In 1982, this Tournament Players Division formed a separate organisation for the specific purpose of promoting tournament golf. That entity is now PGA Tour.
12 PGA Tour is the official sanctioning body for elite men's professional tournament golf in Australia and New Zealand, and is the regional representative on the International Federation of PGA Tours. The PGA Tour Members total 178, of whom 155 are also members of PGA.
13 PGA Tour promotes golf within Australia and New Zealand, attending specifically to the interests of tournament players. The PGA Tour Members are predominantly tournament players who mostly play and are based overseas.
14 PGA Tour has five staff, four in Sydney and one in Melbourne.
15 On 26 June 2007, PGA and PGA Tour entered into a Merger Agreement by which they agreed, subject to the agreement of their respective memberships, to merge their activities into a new company, on the basis that their members would become members of the new company and that the assets and liabilities of the two companies would be transferred to the new company.
16 The Merger Agreement provided (cl 10.2) that the obligation to implement the merger would be terminable if certain conditions should occur, such as that either the PGA Scheme meeting or the PGA Tour Scheme meeting should not agree to the merger by the required majority, or that the Court should not grant its approval.
17 I need not discuss the reasons for the proposed merger. They include streamlining of administration and the saving of administrative costs.
18 Derek Maxwell Ryan, a Fellow of the Institute of Chartered Accountants in Australia, has given affidavit evidence that in his opinion the proposed Schemes are in the best interests of PGA Members and PGA Tour Members. Mr Ryan and his co-director of DMR Corporate, Paul Lom, have provided a report giving reasons for that opinion.
19 Although it is perhaps a matter for the second court hearing rather than the first, Messrs Ryan and Lom also express the opinion that the proposed scheme of arrangement will not prejudice the interests of creditors of PGA and PGA Tour. As they explain in their report, as at 30 June 2007 both PGA and PGA Tour were solvent and were able to pay their debts as and when they fell due. They explain that following a merger, New PGA would have, on the basis of figures as at 30 June 2007, a net cash surplus of $3,271,821. That figure represents the total of the cash surpluses of PGA and PGA Tour.
20 The draft Explanatory Statement referred to in s 411(2) and (3) of the Act takes the form of a Scheme Book. I decided to approve of the draft so that it would become the Explanatory Statement referred to in s 411(1) of the Act, which is required by s 412(1)(a) of the Act to accompany notices of the meetings. As is common in applications under s 411, the draft Explanatory Statement is a lengthy document with several lengthy appendices.
21 I was satisfied that 14 days' notice of the hearing had been given to the Australian Securities and Investments Commission (ASIC) and that ASIC had had a reasonable opportunity to do the things referred to in s 411(2)(b) of the Act. There was before the Court on the hearing the "usual" letter from ASIC to the effect that it did not wish to be heard on the first hearing.
22 There was also evidence of the willingness of certain individuals to fill the roles of chairperson and deputy chairperson of each of the PGA Scheme meeting and the PGA Tour Scheme meeting.
23 The two proposed Schemes are interdependent, so that if one is not agreed to the other will not proceed either.
24 By a Deed Poll, New PGA undertakes to "issue New PGA Memberships" to all the Participating PGA Members and Participating PGA Tour Members, and to accept the transfer of the assets and liabilities of PGA and PGA Tour. New PGA acknowledges that the Deed Poll may be enforced by any PGA Member and any PGA Tour Member, even though the person is not a party to the Deed Poll.
QUORUM
25 A question was raised as to the quorum for the meetings of the PGA Members and the PGA Tour Members.
26 It is important to note that s 411(1) of the Act speaks of a compromise or arrangement between a Pt 5.1 body on the one hand and, relevantly, its members on the other. The decision on the company's part to enter into the scheme is taken by its directors in the usual way. When para (a)(ii) of s 411(4) speaks of the resolution in favour of the compromise or arrangement being passed by "a majority in number of the members … present and voting (either in person or by proxy)", it is not referring to a resolution passed at a general meeting of the company, but to a resolution passed at a Court-ordered meeting of, relevantly, "the members" - those with whom the company proposes to enter into the scheme.
27 At a meeting convened under s 411 all members are entitled to vote, even if some of them would not be entitled to do so at a general meeting of a company. Without more, the quorum for the meeting would be that required at common law for the meeting of the members of an unincorporated voluntary association of individuals - in the absence of a consensual arrangement to the contrary, all of the members: see, for example, Green v The Queen (1891) 17 VLR 329; Municipality of St Leonards v Williams [1966] Tas SR 166; and Ball v Pearsall (1987) 10 NSWLR 700. Obviously, there is no question here of the members having consented to fewer members than all being the quorum for a scheme meeting.
28 However, r 3.3(2) of the Federal Court (Corporations) Rules 2000 (the Rules) provides, in substance, that unless the Court otherwise orders, a meeting of members ordered under s 411 of the Act must be convened, held and conducted in accordance with, relevantly, the scheme company's constitution. In my view, a quorum requirement is a requirement for the holding and conduct of meetings.
29 Article 54 of PGA's constitution provides for a quorum of "twenty members" at meetings of the company, and art 9.1 of PGA Tour's constitution provides for a quorum of "Twenty Members (excluding Non-Voting Members)" at meetings of the company. Both constitutions provide for some classes of members not to have the right to vote at general meetings.
30 Should the Court make an order for a different quorum for the Scheme meetings? The proposed merger will affect non-voting classes, as well as voting classes, of PGA Members and PGA Tour Members.
31 The Court's power to make an order with respect to the holding and conduct of scheme meetings was considered by McLelland CJ in Eq in Re Australian Consolidated Press Ltd (1994) 14 ACSR 639. His Honour stated (at 640):
The power of the court under s 411 is limited by the terms of that section, and the constitutional source of the power of any meeting convened under that section is the section itself, activated by the order of the court. Such a meeting is not a general meeting of the company, even if it happens that all the persons and the only persons entitled to attend it are the members of the company. It is a meeting which is convened for a specific statutory purpose and which is subject to provisions different from those to which a general meeting of the company convened under its articles of association is subject. The court can, pursuant to s 1319 of the Corporations Law, give procedural directions in relation to such a meeting which may not correspond with the procedural requirements of a general meeting of the company convened under its articles of association.
32 The statutory power to which his Honour referred is now found in s 1319 of the Act, which provides:
Where, under this Act, the Court orders a meeting to be convened, the Court may, subject to this Act, give such directions with respect to the convening, holding or conduct of the meeting, and such ancillary or consequential directions in relation to the meeting, as it thinks fit.
33 I was of the view that the Court should, for the purpose of r 3.3(2) of the Rules, "otherwise order". Accordingly, I ordered, having regard to the provisions in the articles in the two constitutions, that the quorum at the two Scheme meetings be simply 20 PGA Members present in person or by proxy, or 20 PGA Tour Members present in person or by proxy, as the case may be.