- Barrick (Australia Pacific Exploration) Pty Ltd v Barrick

Supreme Court of NSW|2023-12-15|Before: Black J

Solicitors: K & L Gates (Plaintiffs) File Number(s): 2023/430092

Judgment

By Originating Process filed on 28 November 2023 the Plaintiffs, Intersnack Mid Co Pty Ltd ("Intersnack Mid Co") and others as named in the Schedule of the Originating Process seek orders under ss 411 and 413 of the Corporations Act 2001 (Cth) ("Act") to convene a meeting to consider schemes of arrangement between each of the Plaintiffs and its respective shareholder or, in the case of one Plaintiff company, its two shareholders. Broadly, the proposed schemes of arrangement provide for the transfer of the undertaking, property and liabilities the subject of the schemes of arrangement from the Plaintiffs to the Defendants, Snack Foods Pty Ltd ("Snack Foods") (which is wholly owned by Consolidated Snacks Pty Ltd) and Intersnack ANZ Pty Ltd ("Intersnack ANZ"). The Plaintiffs, Intersnack ANZ, Snack Foods and the shareholders in those companies are all part of the same corporate group and are direct or indirect wholly owned subsidiaries of Intersnack International B.V.
I made orders sought by the Plaintiffs at the first Court hearing on 1 December 2023 for the reasons set out in my judgment in Re Intersnack Mid Co Pty Ltd [2023] NSWSC 1549 ("First Judgment"). At the second Court hearing on 15 December 2023, continued on 9 January 2024, the Plaintiffs sought orders approving the schemes of arrangement and giving effect to the proposed transfer of the undertaking, property and liabilities the subject of the schemes from the Plaintiffs to Snack Foods and Intersnack ANZ. I made the orders sought by the Plaintiffs on 9 January 2024. These are my reasons for doing so and I have drawn on the helpful submissions of Ms Scott who appears for the Plaintiffs in this judgment.

Affidavit evidence

On 15 December 2023, the Plaintiffs read the affidavit dated 14 December 2023 of Mr Benjamin O'Connor, the finance director of the Intersnack Australia Group consisting of Intersnack ANZ and its subsidiaries. Mr O'Connor there outlined the steps which had been taken in respect of meetings of the members of the and referred to his attendance at this meetings, as corporate representative of the shareholders, and exhibited the minutes of each of those meetings. Mr O'Connor also noted that approval of the Foreign Investment Review Board ("FIRB") had been obtained in respect of the relevant transactions, satisfying a condition precedent of the schemes, and also identified waivers which satisfied several conditions subsequent to the scheme. Mr O'Connor also there referred to the position in respect of employees of the Intersnack Group, the proposal for the transfer of their employment and the Snack Brands Australia Operations Agreement 2022 to Snack Foods and to Snack Food's proposed approach to consultation with employees and their union in respect of the implementation of the scheme. The making of orders was deferred to allow that consultation to take place. By a second affidavit dated 15 December 2023, Mr O'Connor provided further information concerning the enterprise agreements applicable to employees of the Intersnack Group.
By her affidavit dated 14 December 2023, Ms Naomi Philip, who is a partner in the solicitors acting for the Intersnack companies, addressed the lodgement of the scheme booklet with Australian Securities and Investments Commission ("ASIC"), the dispatch of the scheme booklet to members of the companies and the publication of notice of the scheme on the Intersnack website.
At the further listing of the matter on 9 January 2024, the Plaintiffs tendered an email dated 19 December 2023 to employees of the Intersnack Group which referred to the proposed transactions and to the transfer of employees' employment and relevant enterprise bargaining agreements to Snack Foods and to the preservation of the terms of their employment, service start date, entitlements, provisions and benefits, and a further notice of the hearing on 9 January which had been published on the Intersnack Group website. I am satisfied that employees have had appropriate notice of the proposed restructuring and neither the employees nor their union appeared to oppose the schemes. The Plaintiffs also tendered a letter dated 15 December 2023 from ASIC confirming it had no objection to the proposed schemes of arrangement for the purposes of s 411(17)(b) of the Act.

Relevant matters at the second Court hearing

Ms Scott addresses, uncontroversially, the general principles which guide the court's discretion to approve a scheme at the second Court hearing. She submits and I accept that the Court will determine whether the procedural requirements in respect of a scheme have been satisfied; has a discretion to approve a scheme; and is not bound to approve a scheme merely because it has made orders for the convening of meetings or because the statutory majorities have been achieved: Re Seven Network Ltd (No 3) (2010) 267 ALR 583; [2010] FCA 400 at [31]; Re Staging Connections Group Ltd (No 2) [2015] FCA 1102 at [12]; Re Ellerston Global Investments Ltd [2020] NSWSC 1108 at [10]. Ms Scott also refers to Re Amcor Ltd (No 2) [2019] FCA 842 at [7]-[11], where Beach J summarised the matters that the Court would consider in deciding whether to approve a scheme as including whether the scheme complies with the law, including relevant procedural requirements; whether the scheme was approved by shareholders acting in good faith and for proper purposes; whether there has been an accurate and comprehensive disclosure of the details of the scheme and its effect to those voting on it; whether there is any suggestion of oppression of any minority; whether any third parties will be disproportionately adversely affected by the operation of the scheme; whether the scheme offends against any aspect of public policy; and whether all conditions to which the scheme is subject (other than Court approval and lodgement of the Court's orders with ASIC) have been met or waived. His Honour also there noted the question whether the scheme is fair and reasonable so that an intelligent and honest shareholder, properly informed and acting alone, might approve it and observed that, in considering that question, it is not the Court's role of the Court to substitute its commercial judgement as to the scheme for that of shareholders or to consider whether a better scheme might have been proposed.
Ms Scott points to the evidence that the scheme booklet and proxy form were dispatched in electronic form to directors of the scheme companies, with minor changes made to the version of the scheme booklet that was approved by the Court at the first Court hearing to address formatting errors. The scheme meetings were held in accordance with the orders made at the first Court hearing and, as I noted above, shareholders in the relevant companies appointed Mr O'Connor to be their corporate representative at those meetings. The Plaintiffs published a notice of the second Court hearing on 21 December 2023 on the Intersnack Group's website in the form required by the orders made at the first Court hearing, and I have referred above to the further notice that was published in the same way as to the further hearing on 9 January 2024. No notice of appearance was served on the Plaintiffs' solicitors by any person intending to appear at the second Court hearing or the further hearing to oppose the approval of the schemes and no-one appeared at those hearings to seek to oppose them.
Ms Scott points out that the resolution to approve the schemes was passed at the scheme meetings by the requisite majorities and that other statutory requirements for the schemes have been satisfied, where the scheme booklet has been registered by ASIC as required by s 412(6) of the Act; as I noted above, ASIC has confirmed that it has no objection to the schemes for the purposes of s 411(17)(b) of the Act, and that is sufficient to satisfy the requirements of s 411(17) of the Act; and the Court's orders made at the first Court hearing were sealed and lodged with ASIC as required by rule 3.5 of the Supreme Court (Corporations) Rules 1999. Ms Scott also addressed the position as to conditions precedent and conditions subsequent to the schemes at the second Court hearing, and noted that conditions as to FIRB approval, the consent of a lessor to assign a lease to Snack Foods, financier approval and the tax treatment of the proposed transactions have been satisfied or waived. I have referred above to the further evidence as to that matter that was read at the further hearing on 9 January 2024.
Ms Scott submits and I accept that several considerations support the conclusion that the scheme is fair and reasonable, including the fact that the schemes effect an internal reconstruction which is supported by scheme shareholders who voted in favour of the scheme resolution at the scheme meetings; the schemes are bona fide and properly proposed and there is evidence that they will not have any prejudicial effect upon the interests of the creditors or employees of the Plaintiffs; and no third parties have opposed the approval of the schemes.

Other matters brought to the Court's attention

Ms Scott also drew attention to a matter raised at the first Court hearing, that the Plaintiffs are parties to about 130 contracts including nine leases, and they seek orders under ss 413(1)(a), 413(2) and, to the extent necessary under s 413(1)(g) of the Act, transferring the contracts to Snack Foods. Ms Scott also notes that the Intersnack Group has a total of 570 employees; approximately 348 of those employees are employed by Snack Brands Australia, a partnership between Snack Brands Industries Pty Ltd ("SBI") and Snack Brands Foods Pty Ltd ("SBF") T/A Snack Brands Australia under the Snack Brands Australia Operations Agreement 2022 (Snack Brands Enterprise Agreement) made under the Fair Work Act 2009 (Cth) ("FWA"); and approximately 122 employees are employed by the Real McCoy Snackfood Co Pty Ltd ("The Real McCoy") under the Real McCoy Snack Food Company Enterprise Agreement 2023 and the Real McCoy Snackfood Company Factory and Warehouse Staff) Enterprise Agreement 2019 (together, "Enterprise Agreements"). Ms Scott also refers to the Plaintiffs' submissions at the first Court hearing that they were seeking orders effecting the transfer of their employees and the transfer of the Enterprise Agreements to Snack Foods.
Ms Scott points out that the question whether orders under s 413(1) of the Act can transfer the rights and obligations of an employee under an enterprise agreement with an employee's present employer to their new employer was considered in Bombardier Transportation Australia Pty Ltd v Alstom Transport Australia Pty Ltd (No 2) [2022] FCA 880 ("Bombardier") at [64]-[81]. She notes that Bombardier there submitted and Jackson J there accepted (at [68]) that the fact that an enterprise agreement has a legislative character does not mean that an order under s 413(1) of the Act will be ineffective to transfer the rights and obligations under such an agreement. His Honour there referred (at [81]) to s 53(3)(c) of the FWA which contemplates that an order of the Court may provide for or have the effect that an enterprise agreement covers a given employer and/or employees. Ms Scott notes that, adopting the approach taken in Bombardier, the Plaintiffs seek orders transferring the Assets and Liabilities (as defined) from the Plaintiffs and the Snack Brands Australia Partnership to Snack Foods pursuant to ss 53(3)(c) and 53(4)(c) of the FWA. I see no reason not to follow the approach taken in Bombardier, recognising the importance of consistent decision-making between Courts exercising jurisdiction in respect of schemes of arrangement.
Ms Scott also noted, in submissions at the second Court hearing, that the Enterprise Agreements contain terms requiring SBI, SBF and The Real McCoy to consult with their employees and their employees' representatives in relation to any major changes in/to production, program, organisation structure or technology, the effect of the change on employees and the measures the employer is taking to mitigate the adverse effect of the change on employees. Between the second Court hearing and the further hearing on 9 January 2024, the Plaintiffs discussed the schemes with the Australian Workers Union ("AWU") which represents those employees and provided further information concerning the schemes to employees. I am satisfied that, for the reasons addressed by Barker J in Barrick (Australia Pacific Exploration) Pty Ltd v Barrick (PD) Australia Pty Ltd, in the matter of Barrick (Australia Pacific Exploration) Pty Ltd (No 2) [2017] FCA 1076 at [94] and by Jackson J in Bombardier at [82]-[84], these matters do not prevent the approval of the schemes. The most important of those matters is here that employees and the AWU were notified of the schemes in advance of their proposed implementation; they were given an opportunity to appear at the further Court hearing on 9 January, and none did so, so it appears that they do not seek to contend that the relevant consultation requirements were breached; and there is no reason to think that the interests of employees are likely to be adversely affected by the schemes, where Snack Foods is assuming all obligations under the Enterprise Agreements including those in respect of leave and superannuation and deregistration of the Plaintiffs (other than Snack Foods) is not intended to be undertaken immediately following implementation.
Ms Scott also points out that the effect of the schemes on creditors was addressed at the first Court hearing, by an expert report addressing the position of creditors and employees ("IER") to which I referred in the First Judgment. Ms Scott recognises that the IER identifies three scheme companies with external creditors, namely Snack Brands Australia Partnership, Proper Snack Foods Australia Pty Ltd and Intersnack Australia Holding Company Pty Ltd; and indicates that, in respect of each of those companies, the total assets available to fund external creditors will increase after implementation of the schemes, by the transfer to Snack Foods of assets previously held in other companies which had no external creditors. Ms Scott also points out that, prior to the implementation of the schemes, there were two deeds of cross-guarantee involving the Intersnack Group; she notes that IER expresses the view that, following implementation of the schemes, creditors will have direct recourse to all the assets of the Intersnack Group which places them in a better position than if they had to rely on the provisions of the deeds of cross-guarantee; and she also notes that the Intersnack Group's management have confirmed that the clause in those deeds of cross-guarantee which guarantees payment to each creditor in full will be replicated in any new deed of cross-guarantee which replaces the earlier deeds. Ms Scott also points to evidence that there has been no material change to the financial position of the Plaintiffs since the first court hearing. No creditors gave notice to the Plaintiffs informing them that they intended to appear at the second Court hearing to oppose the schemes and none did so. I am satisfied that there is no reason to think that the implementation of the schemes will be adverse to creditors of the relevant companies.
The Plaintiffs also seek an exemption from the requirement in s 411(11) of the Act. Ms Scott submits and I accept that, in the context of the schemes to effect an internal reconstruction, there is no utility in having the Court orders annexed to plaintiffs' constitutions as the Court orders do not effect any change to their constitutions: Re Anaconda Nickel Holdings Pty Ltd (2003) 44 ACSR 229 at 240.

Orders

For these reasons, I made the orders sought by the Plaintiffs on 9 January 2024.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 January 2024

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