CSR LIMITED [2003] FCA 285

REASONS FOR JUDGMENT 1 On 7 February 2003, I made an order pursuant to s 411(1) of the Corporations Act 2001 (Cth) ("the Act") for the convening by CSR Limited ("CSR"), a substantial listed public company, of a meeting of shareholders for the purpose of considering, and if thought fit approving, a scheme of arrangement, with or without modification, proposed to be made between CSR and its shareholders, the terms of which are contained in an Explanatory Statement, and since incorporated into a so-called Scheme Booklet and sent to CSR shareholders in conformity with those orders. The essence of the scheme is the demerger of about 30% of the current CSR group's asset structure, based on pre-tax profit and revenues, comprising the Rinker Group Limited ("Rinker"), a wholly owned subsidiary of CSR engaged in the production of heavy building materials, along with Rinker's subsidiaries. My reasons for making those orders appear in CSR Limited [2003] FCA 82, where the details of the scheme are broadly described. I further ordered, inter alia, that Rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) should not apply to the Scheme meeting, and that compliance with Rule 3.4(3)(a) of those Rules be dispensed with. 2 Pursuant to s 411(4) of the Act, the scheme was required to be approved by a 75% majority of shareholders of CSR voting in person or by proxy at the scheme meeting. In the events which happened, 15,228 shareholders voted on the resolution, whereof 14,508 voted for the resolution, 717 voted against the resolution, and 3 voted (apparently by mistake) both for and against the resolution. Thus the number of CSR shareholders voting for the resolution constituted 95.3% of the total number of CSR shareholders voting in favour of the resolution. In terms of votes cast in favour of the resolution as a percentage of the total votes cast thereon, the majority was even more overwhelming, constituting 99.5% thereof. 3 The Court is not of course bound to approve a scheme of arrangement, merely because it has previously made orders for the convening of meetings for that purpose, and because the requisite majority of members attending the same in person or by proxy have agreed thereto (Re Stockbridge Ltd (1993) 9 ACSR 637). Nevertheless it has been judicially accepted that the Court should approach its task on the basis that the shareholders voting upon a shareholders' scheme are normally better equipped than the Court to resolve what constitutes their best commercial advantage (Re Chevron (Sydney) Ltd [1963] VR 249). As has been already demonstrated, the CSR shareholders have spoken in general meeting in virtual unison in favour of the scheme of arrangement and its implementation. 4 I find that the relevant requirements of s 411 of the Act have been satisfied. I have no reason to think otherwise than that the clear majority of shareholders have expressed their respective views in good faith, and that the proposals the subject of the scheme of arrangement are fair and reasonable, such that any hypothetical intelligent and honest shareholder, acting alone, might well rightly approve the same (Re NRMA Ltd (No 2) (2000) 34 ACSR 261 at 264), and do so upon the perception that implementation of the scheme is likely, according to his, her or its commercial sense and judgment, to be in his, her or its best interests, as the case may be (Re Foundation Healthcare Ltd (No 2) (2002) 43 ACSR 680 at 690). 5 In the course of my reasons for judgment for making the orders sought by CSR, pursuant to s 411(1) of the Act, that the meeting of shareholders be convened, I recorded the existence of a number of "in principle" approvals to the waiver of certain Listing Rules granted by the Australian Stock Exchange ("ASX"), and also of certain confirmations made by ASX in relation to other Listing Rules. I also recorded the existence of certain exemptions, modifications and consents granted by the Australian Securities and Investment Commission ("ASIC"), in favour of CSR from, or in relation to, or else pursuant to, the Corporations Regulations, save as to the approval required pursuant to s 411(17)(b) of the Act, which ASIC said must await the outcome of the meeting of shareholders. As indicated in that latter regard in [34] of those reasons for judgment, ASIC had informed CSR's solicitors that any statement on its part as to any absence of objection or otherwise to the scheme of arrangement should await the outcome of the intended meeting of CSR's shareholders. A statement by ASIC as to the absence of any such objection on its part has been forthcoming, subsequent to that meeting, in the following terms: "Under paragraph 411(17)(b) of the Corporations Act 2001, the Australian Securities and Investments Commission ("ASIC") wishes to advise you that it has no objection to the above Scheme on the basis that it is satisfied that the Scheme has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Corporations Act 2001. Therefore I advise you that ASIC does not currently propose to appear to make submissions, or intervene to oppose the demerger of Rinker Group Limited (CAN 003 43 118) from CSR Limited (CAN 000 001 276) by way of Scheme of Arrangement, at the second hearing on 28 March 2003." 6 The evidence placed before me has demonstrated that the following formalities have been duly implemented or complied with: (i) the advertising of the meeting of shareholders of CSR to be held on 25 March 2003 for the purpose of the shareholders considering, and if thought fit, agreeing to the scheme of arrangement (with or without modification); (ii) the advertising of the hearing by the Court on 28 March 2003 of the application by CSR for orders approving the scheme of arrangement; (iii) the execution by Rinker of the Deed Poll referred to in [4(vii)] of my earlier reasons for judgment. (iv) the timely dispatch of the printed scheme booklet, together with all other relevant material, to shareholders both in Australia and overseas, save that in relation to the ineligible overseas shareholders, ABN AMRO Equities Australia Limited has agreed to perform the functions ascribed to the "Nominee" by clause 7 of the scheme of arrangement. 7 No notice of appearance was served by any creditor or member, as invited by the media published Notice of Hearing to Approve Compromise or Arrangement, in the manner required thereby or at all. 8 I would next refer to what appears in [3] and [4(v)] of my earlier reasons for judgment in relation to those ineligible overseas shareholders (ie not having registered addresses located in Australia, the United States, the United Kingdom, New Zealand, Singapore, Hong Kong and Abu Dhabi). The evidence placed before me is that the number and proportion of CSR shares registered in relation to shareholders having addresses located overseas, being shareholders which fall within the notion of ineligibility as at 31 January 2003, then constituted 0.1295% of the total number of shareholders involved in that category. 9 I should also record what is described in the scheme of arrangement in relation to the impact thereof upon the various CSR employee equity plans, namely the Executive Share Option Plan, the new Option Plan, the Employee Share Acquisition Plan, the Universal Share Option Plan and the Cash Award Share Plan. The comprehensive Booklet sent to shareholders, following upon the making of the Court's orders on 7 February 2003, contained an appropriate summary of each of those CSR Employee Equity Plans. It also contained a statement of CSR's intention that after the demerger, it would continue to utilise all of those plans, except possibly the Executive Share Option Plan, and further that CSR had adopted the new Option Plan, because recently enacted legislation in the United States has the effect of prohibiting CSR, subject to certain exceptions, from making personal loans to its directors or executive officers, or deferring payment of option prices, and the Executive Share Option Plan might conceivably be caught by that prohibition. 10 In my opinion, the orders sought by the present application presented by CSR to the Court should be made. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti.