Clough Limited, in the matter of Clough Limited (No 2) [2013] FCA 1346

REASONS FOR JUDGMENT 1 This is the second hearing of the application by the plaintiff, Clough Limited, for the approval of a scheme of arrangement between the plaintiff and its members. Pursuant to the scheme, all the shares in the plaintiff will be acquired by a subsidiary of Murray & Roberts Limited, a public company incorporated in South Africa, and the existing majority shareholder of the plaintiff. 2 On 11 October 2013, I made orders for the convening of a meeting to consider and, if thought fit, approve the entry into a scheme of arrangement between the plaintiff and its members (Clough Limited, in the matter of Clough Limited [2013] FCA 1149). The meeting of members has been held. The plaintiff now seeks the Court's approval of the scheme of arrangement which was approved by the members at the meeting. 3 At the second hearing of an application for the approval of a scheme of arrangement, the Court is concerned to see that the requirements of the Corporations Act 2001 (Cth) (the Act) have been complied with, that the scheme has been proposed in good faith and not for some illegitimate purpose, and that the scheme is at least so fair and reasonable that an intelligent and honest person acting independently might approve it. In determining whether the scheme is fair and reasonable, the Court will essentially act on the basis that the shareholders are the best arbiters of their own commercial interests. 4 As to the requirements of s 411(4)(a)(ii) of the Act, Mr Rajiv Virendra Ratneser has deposed that at the meeting 96.07% of the members who voted, voted in favour of the resolution for the approval of the scheme, and in respect of the number of votes cast, 99.21% were cast in favour of the resolution. Accordingly, the evidence discloses that the statutory majorities were easily achieved. 5 The submissions of Mr Leigh Warnick and the affidavit of Mr Ratneser drew attention to the fact that there was non-compliance with the Court's orders made on 11 October 2013 for the dispatch of the scheme explanatory statement and notice of the meeting to members. The orders required that the scheme booklet be sent to those shareholders who were registered as such on 11 October 2013. Mr Ratneser deposed that by oversight, the scheme booklet and notice of the meeting was in fact sent to the shareholders who were registered as such, on 8 October 2013. 6 Mr Ratneser went on to depose that the error came to the attention of the plaintiff on 6 November 2013, and that the plaintiff then took the steps to determine how many shareholders had acquired shares between 8 October and 11 October. The plaintiff learned that there were nine shareholders who had purchased shares during that period. However, by the time the plaintiff contacted those shareholders, only four of them still held their shares. The evidence went on to disclose that of those four shareholders, two of them had received a scheme booklet and notice of the meeting anyway, one of whom had already submitted a proxy for the meeting. The plaintiff was not able to contact the other two shareholders. 7 The evidence also shows that the combined percentage holding of the four affected shareholders is 0.012% of the total shareholding of the plaintiff. 8 It is obvious, therefore, that even though there has been an irregularity in relation to the giving of notice of the meeting, it is not an irregularity which could have had any possible impact upon the integrity of the resolution that was passed at the meeting. The defect in giving notice of the meeting is a procedural irregularity for the purpose of s 1322(1)(b)(ii) of the Act. 9 Section 1322(2) of the Act provides: A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid. 10 In my view, s 1322(2) operates in relation to the meeting, such that the meeting and the resolution are valid, notwithstanding the defect referred to above. 11 This is because the Court has not been asked to declare the meeting invalid. In my view, no such declaration would in any event have been made because I am not of the view that there is any substantial injustice which has been caused by reason of the omission to give the shareholders notice in accordance with the Court's orders. 12 Likewise, no one has sought an order seeking to invalidate the meeting under s 1322(3) of the Act which reads as follows: A meeting held for the purposes of this Act, or a meeting notice of which is required to be given in accordance with the provisions of this Act, or any proceeding at such a meeting, is not invalidated only because of the accidental omission to give notice of the meeting, or non-receipt by any person of notice to the meeting, unless the Court, on application of the person concerned, a person entitled to attend the meeting or ASIC, declares the proceedings at the meeting to be void. 13 There is also attached to the submissions of Mr Warnick a checklist which identifies the evidence relied upon to show that there had been compliance with the requirements of the Act. 14 Mr Ratneser's affidavit also deposes that the conditions precedent in respect of the scheme, which are set out in the scheme implementation agreement, have been satisfied or waived. 15 As to s 411(17) of the Act, there is annexed to Mr Ratneser's affidavit, a copy of a letter from the Australian Securities and Investments Commission (ASIC) written pursuant to s 411(17), which states that ASIC has no objection to the proposed scheme of arrangement between the plaintiff and its members. Further, there is nothing on the face of the evidence which would cause the Court to exercise its residual discretion under s 411(17) not to approve the scheme. 16 As to the question of the scheme being fair and reasonable, as I have mentioned before, the Court takes the view that primarily this is a matter for the commercial judgment of the members. The size of the majorities obtained is reflective of the members' views on this question. In addition, there was also in the scheme booklet the expert evidence from Grant Samuel & Associates Pty Limited to the effect that the scheme was fair and reasonable. 17 Also, on 16 November 2013, notice was given of today's hearing in the Australian and the West Australian newspapers, in accordance with the Court's orders. No one has appeared in Court today suggesting that the scheme is unfair, unreasonable or is otherwise oppressive. 18 There is also an application by the plaintiff for an order under s 411(12) of the Act dispensing with compliance with s 411(11) of the Act. That subsection of the Act requires that a copy of this order be annexed to every copy of the plaintiff's constitution issued hereafter. In light of the fact that the plaintiff will now become a wholly-owned subsidiary of Murray & Roberts Limited, there is, in my view, no reason why an order in the terms sought should not be made. 19 In the circumstances, I will make orders in terms of the minute of proposed orders which has been handed up in Court today. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.