Cleary v Australian Co-operative Foods Ltd

IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 54 of 2015

IN THE MATTER OF AMCOM TELECOMMUNICATIONS LIMITED ACN 062 046 217 BETWEEN: AMCOM TELECOMMUNICATIONS LIMITED ACN 062 046 217

JUDGE: MCKERRACHER J DATE: 5 MAY 2015 PLACE: PERTH

REASONS FOR JUDGMENT 1 I made orders on 21 April 2015 in relation to this scheme. These are my reasons for doing so in relation to the evidence and circumstances then before the Court. Amcom Telecommunications Limited seeks orders under s 411(1) and s 1319 of the Corporations Act 2001 (Cth) (Act) for leave to forward a supplementary disclosure statement to scheme participants in terms of the orders made on 21 April 2015. Amcom did not seek to adjourn or postpone the scheme meeting scheduled to be held on 6 May 2015. The meeting is to proceed as ordered. 2 Amcom has, in accordance with the Act, consulted with the Australian Securities and Investments Commission (ASIC). Consistent with ASIC's Regulatory Guide 60.91, ASIC was provided with the proposed supplementary statement late on Friday 17 April 2015. An affidavit attaching relevant communications with ASIC was provided to the Court. 3 Amcom's application is supported by several affidavits. 4 Amcom entered into a Scheme Implementation Agreement (SIA) with Vocus Communications Limited under which it is proposed that Vocus will acquire the outstanding 90% of shares that it does not own in Amcom by way of a scheme of arrangement. Under the proposed Scheme, Amcom shareholders would receive 0.4614 new Vocus shares for each Amcom share they hold. I made orders on 30 March 2015 convening a scheme meeting for 6 May 2015: Re Amcom Telecommunications Limited [2015] FCA 341. The proposed Scheme is also the subject of an independent expert report prepared by PricewaterhouseCoopers Securities Limited ACN 003 311 617 (PwCS). 5 On 17 April 2015, with Amcom's consent under the SIA, Vocus announced to the market that it had purchased a relevant interest in Macquarie Telecom Group Limited under a physically-settled equity swap transaction for consideration of $15.619 million, payable on settlement of the swap transaction. Amcom wishes to inform its shareholders of this transaction. The information is intended to be posted on Amcom's Australian Securities Exchange (ASX) platform and will be the subject of the supplementary disclosure statement. 6 As at the time of making the orders, there was no change in the decision of the Amcom directors to support the Scheme. The Amcom board maintained their recommendation to Scheme participants to approve the Scheme. The evidence is that there is no material change to the financial position of Vocus described in s 5.12 of the Scheme Booklet, which contains an overview of Vocus' historical and pro forma historical financial information including in relation to the interim financial statements for the 6 months ended 31 December 2014. There is also no change to s 5.13 of the Scheme Booklet, which contains information in relation to material changes in the financial position of Vocus since that date. 7 PwCS did not consider this transaction had any material impact on their conclusions in the independent expert report. PwCS maintained its opinion that the Scheme is in the best interests of Amcom shareholders and did not consider the Vocus transaction has any material impact on the financial position of Vocus, nor that it affects the PwCS opinion set out in the Scheme. Accordingly, Amcom does not propose to amend the Scheme, nor to adjourn or postpone the Scheme meeting scheduled to take place on 6 May 2015, nor change the proposed hearing date for the second court hearing on 13 May 2015. 8 ASIC informed Amcom that it had an opportunity to consider the documents, and has no comments in relation to the documents. 9 The purpose in sending supplementary material to Scheme participants is to update Amcom's shareholders as to transactions announced in the market. It was not anticipated by Amcom's board that the Vocus transaction would impact on any shareholder's decisions regarding the Scheme.

POWER 10 The Court has power under s 1319 of the Act to vacate or vary orders made under s 411 in relation to meetings in respect of a scheme of arrangement, adjourn a meeting convened under that section or authorise the despatch of further explanatory material in respect of such a meeting: CMPS & F Pty Ltd v Crooks Mitchell Ltd (1997) 76 FCR 366; Re Australian Gas Light Company (2006) 57 ACSR 67; Re Lend Lease Primelife Ltd; Re Lend Lease Village Responsible Entity Ltd [2009] NSWSC 1340; Re Cellestis Limited (No 2) [2011] VSC 329. 11 The Court can make orders under s 1319 as to the validity of proxies lodged in relation to a scheme meeting, and that the meeting proceed. 12 The supervisory jurisdiction of the Court under s 411 of the Act enables the Court to order the despatch of supplementary material arising after the original hearing and before the second hearing date: Cleary v Australian Co-operative Foods Ltd (Nos 2 and 3) (1999) 32 ACSR 701 per Austin J (at 746). Where a meeting has been convened under s 411 of the Act, only information approved by the Court for despatch to shareholders should be provided to members: Re Coates Hire Limited (No 2) [2007] FCA 2105; Re Associated Advisory Practices Ltd (No 2) [2013] FCA 979 per Farrell J (at [8]), Re Horizon Oil Limited [2014] FCA 733 per Farrell J (at [39]). In Re Coates Hire Limited, Justice Emmett stated at [6]: … [w]here the Court orders that a document in a particular form be sent to shareholders, the documents should not be accompanied by any further document that has not itself been approved by the Court … 13 Relevantly, the power under s 1319 has recently been used to give leave to the applicant company to despatch supplementary information in regards to a scheme of arrangement: Re Cape Alumina Ltd (No 2) [2013] FCA 1238; Re Associated Advisory Practices Ltd; Re Nexus Energy Ltd [2014] FCA 558; Re David Jones Ltd (No 2) (2014) 101 ACSR 381.

DISCLOSURE HAS BEEN, AND WILL BE, MADE 14 On Friday, 17 April 2015, Vocus announced to the market the transaction described in the supplementary disclosure statement. On the Amcom ASX platform, Amcom announced the same transaction and attached the Vocus announcement. Amcom has undertaken to announce the supplementary disclosure letter on its ASX platform on approval from ASIC and the Court. 15 Amcom has provided evidence that Scheme participants are likely to receive the supplementary disclosure statement at least 10 days before the scheme meeting on 6 May 2015 (which is consistent with ASIC guidance in RG60.93). The documents will also be available at the Scheme Meeting.

CONSIDERATION 16 Where, as here, there has been no consequent amendment to a proposed scheme of arrangement, there is no, or little, reason to doubt that all original proxy forms are deemed to still be valid. 17 In other situations, the members who originally voted in favour of the scheme are deemed to have voted in favour of the two resolutions relating to the revised scheme: Damian T and Rich A, Schemes, Takeovers and Himalayan Peaks (3rd ed, Ross Parsons Centre of Commercial, Corporate and Taxation Law, 2013) (at 144) and the cases there cited. 18 Importantly, members can withdraw the proxy by revoking it if they so choose: see also Re Citect Corporation Ltd (2006) 225 ALR 137 per Barrett J. 19 It is well established that the obligation on the target company and its directors to provide its members with all material information does not cease once the explanatory statement has been dispatched. The nature of the obligation is similar to that which applies to the initial explanatory statement. Members should be informed of all new material information which arises after the explanatory statement has been sent and before the final court hearing. This includes, where appropriate, a supplementary opinion from the same independent expert and any adjustment to voting or other processes that may be appropriate. 20 The approach of ASIC has been generally that the target membership should have at least 10 days to consider any supplementary information. The Courts have approached this with some flexibility, but factors which govern the exercise of discretion as to the content and timing of the supplementary disclosure include the question of whether the information had already been made available through a market announcement, as it has in this instance, how complex the supplementary information is, how significant the supplementary information is and the corresponding response from the target directors, the expert and ASIC. It may also be, in some circumstances, that the supplementary material was effectively foreshadowed at the time of the first hearing. 21 In the present circumstances, the transaction concerned was of some magnitude and there could be little doubt, in my view, that it was appropriate to bring the transaction to the attention of shareholders to update them. It is conceivable that the information would be material, at least to some shareholders, in terms of the capacity to influence a voting decision, one way or the other, or even to refrain from voting in the sense discussed by Barrett J, as his Honour then was, in Re HIH Casualty and General Insurance Ltd (2006) 57 ACSR 791 (at [82]). 22 One of the difficulties is in striking the balance between taking a conservative view as to providing full disclosure of anything that might be material on the one hand, and over burdening shareholders with so much information that the real effect of a transaction or event is lost within a myriad of detail. It is one thing to advise shareholders to take their own advice, but in reality not all shareholders will be in a position or wish to do so. There is a need for simplicity of communication in circumstances where such a vast amount of material can be made available to shareholders. 23 In the present circumstances, I am satisfied that the communication of this relatively straightforward transaction is appropriate and has not been overly complicated.

CONCLUSION 24 The following orders were made:

1. Valid proxy forms for the meeting of Amcom shareholders to consider the scheme of arrangement (Scheme Meeting) that have been lodged by Amcom shareholders are deemed to still be valid unless revoked, and members who voted in favour of the scheme of arrangement are deemed to have voted in favour of the resolutions to be considered at the Scheme Meeting.
2. Pursuant to s 411(1) and 1319 of the Corporations Act 2001 (Cth), the supplementary explanatory statement in a form substantially equivalent to the form that is annexure MAP11 to the fourth affidavit of Mark Anthony Paganin sworn on 20 April 2015, is approved for despatch to each ordinary shareholder of the plaintiff (Shareholder).
3. The supplementary explanatory statement be despatched to each Shareholder in the manner set out in subparagraphs 4(a), 4(b) and 4(c) of the orders in this proceeding on 30 March 2015.
4. The proceeding remain stood over to 10:15 am on Wednesday, 13 May 2015 before McKerracher J for the hearing of any application to approve the scheme of arrangement. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.