Diversa Limited, in the matter of Diversa Limited [2016] FCA 1137 - FCA 2016 case summary — Zoe

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Diversa Limited, in the matter of Diversa Limited [2016] FCA 1137

[2016] FCA 1137

Federal Court of Australia|2016-08-11|Before: Exhibit VP, Rares J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2016-08-11

Before

Exhibit VP, Rares J

Catchwords

Number of paragraphs: 22

Source

Original judgment source is linked above.

Catchwords

Number of paragraphs: 22

Judgment (6 paragraphs)

[1]

Pursuant to subsection 411(1) Corporations Act 2001 (Cth) (Act), the plaintiff convene a meeting of its members (Scheme Meeting), for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement proposed between the plaintiff and its members (Scheme) being the scheme of arrangement set forth in Annexure B of the explanatory statement in relation to the Scheme, which is Exhibit 1 in the proceeding (Scheme Booklet).
The Scheme Meeting be held on 20 September 2016 at the offices of McCullough Robertson Lawyers, Level 11, 66 Eagle Street, Brisbane, Queensland, commencing at 10 am.
Pursuant to subsection 411(1) of the Act, the Scheme Booklet be approved for distribution to the members of the Plaintiff.
The Scheme Booklet to be dispatched to members of the Plaintiff be in the form, or to the effect of, that which is Exhibit 1.
Ronald Richard Dewhurst or, in his absence, Stephen Grant Bizzell, act as Chairperson of the Scheme Meeting.
Except for procedural motions, all voting at the Scheme Meeting be by poll as declared by the Chairperson.
The Chairperson of the Scheme Meeting has the power to adjourn such meeting in his absolute discretion.
Regulations 5.6.12, and 5.6.14 to 5.6.36A, Corporations Regulations 2001 (Cth) shall not apply to the Scheme Meeting.
Pursuant to section 1319 of the Act, on or before 17 August 2016, there be dispatched to: (a) each member of the Plaintiff who has nominated, to Diversa's share register provider Link Market Services Limited, an electronic address for the purposes of receiving notices of meeting and proxy forms from Diversa, at such address, an email substantially in the form of the document behind Tab 7 of Exhibit VP-1, including URL links to the Scheme Booklet, a sample proxy form in respect of the Scheme Meeting substantially in the form of the document behind Tab 8 of Exhibit VP-1 (Proxy Form), and a sample election form in respect of the Scheme consideration substantially in the form of the document that is Annexure BAM-2 to the affidavit of Brigette Amy Garbin affirmed 10 August 2016 (Election Form); and (b) each other member of the Plaintiff, by hand at, or prepaid post or courier to, or the case of a member whose registered address is outside the country, by pre-paid airmail post, or dispatched by air courier for overseas pre-paid post to, the address of that Scheme Shareholder as set out in the register of members of Diversa, a copy of the Scheme Booklet and a personalised Proxy Form and personalised Election Form.

[4]

The nature of the proposed scheme 8 The proposed scheme appears to be in a form that is not unusual. It includes mechanisms for the satisfaction of conditions precedent prior to it coming into operation and for the payment of the consideration to Diversa's shareholders if it does. This includes making provision for overseas shareholders of Diversa who are ineligible to receive the consideration for the acquisition of their shares otherwise than in cash. 9 The deed has a provision for the payment by Diversa of a break fee of $400,000 to OneVue where Diversa accepts or offers to accept a competing arrangement or recommends a takeover offer from another person. The fee is payable where OneVue is entitled to terminate the deed because of some breach, relevantly, on the part of Diversa, or any of its directors, or were the independent expert's report to have concluded that the scheme is not in the best interests of Diversa shareholders. Correspondingly, OneVue is obliged to pay Diversa $400,000 if, in effect, the scheme does not go ahead as a direct result of OneVue's failure to perform or satisfy any of its material obligations under the deed. 10 The evidence discloses that each of OneVue and Diversa had invested considerable money and internal resources in progressing the proposal to implement a scheme of arrangement. There is some material to suggest that the two break fees are capable of being viewed as genuine pre-estimates of loss. 11 The proposed scheme booklet contains an independent expert's report prepared by Andrea De Cian, a director of Grant Thornton Corporate Finance Pty Limited. The report concluded that: the proposed scheme is fair and reasonable and in the best interests of Diversa shareholders having regard to both the forms of proposed consideration; and based on analyses performed by Grant Thornton, that both forms of consideration fell within most of the three different assessed ranges that the expert had used for determining the value of Diversa shares on a transfer-of-control basis before the announcement of the proposed scheme to the market.

[5]

The explanatory material 12 The report and the scheme booklet deal with both factors in favour of, and risks associated with, the acceptance of the scheme proposal, including the facts that the value of both companies' shares is subject to market forces and, that both forms of consideration involve a premium, in the order of 20% over the Diversa share price when the market closed on 10 June 2016, if Diversa shareholders decide to sell their shares. 13 Diversa's non-executive chairman, Ronald Dewhurst, will become a director of OneVue if the scheme is implemented. He holds one million shares in Diversa. He proposes to accept the offer. The other directors of Diversa will not become directors of OneVue. Another non-executive director, Stephen Bizzell of Diversa, who holds six million shares, owns and controls, Centec Securities Pty Ltd. Centec will be the vendor for sale of the shares of foreign shareholders who are ineligible to receive shares in consideration of their divesting their interest in Diversa shares. That company will receive a fixed fee of $5,000 as consideration for its role in arranging for the sale of the OneVue share component for ineligible overseas shareholders. Centec's sale of those shares will realise cash for payment to the ineligible overseas shareholders who cannot take part in the scheme. 14 In addition, Diversa has resolved to pay its non-executive directors additional fees for the work they carried out in the period leading up to the proposal for the scheme and its progression through the Court. Those fees appear to be payable in any event. 15 The managing director of Diversa, Vincent Parrott, will become a senior employee of OneVue, although not a director, and receive an equivalent remuneration to that which he currently receives. Two other shareholders who are also senior employees of Diversa, namely, Angus Craig, its current company secretary and chief financial officer, and Andrew De Vries, its head of superannuation, will become redundant if the proposal is accepted. It is proposed that Mr Craig will receive an additional 17 weeks salary on termination of his employment, equivalent to about $72,000 before tax, and Mr De Vries, $75,000, in addition to what would otherwise have been their entitlements. On the evidence before me, each of Mr Craig and Mr De Vries has participated actively in his duties to Diversa in seeking to implement the proposal for the scheme. 16 Mr De Cian, has today opined that the additional payments or remuneration to the non-executive directors and to Mr Craig and Mr De Vries, on the material known to him, including his own interactions during the time of his preparation of the report, are not unreasonable. 17 Diversa has also disclosed that Thorney Opportunities Limited, a shareholder holding 18.66% of issued capital in Diversa, and one of its subsidiaries, which holds about 4.96% of the issued capital of OneVue, has publicly stated that it intends to vote in favour of the scheme in the absence of a superior proposal.

[6]

Consideration 18 In my opinion, in the circumstances, which I discussed with senior counsel for Diversa in the course of argument, on the material in evidence, each of the Diversa directors, senior employees and Thorney does not appear to have a sufficiently different interest to that of Diversa's other shareholders to warrant the recognition of a separate class in respect of any of those persons whose position I have mentioned. As Emmett J held in CCI Holdings Limited [2007] FCA 832 at [19]: The aim, ultimately, of a separate meeting of shareholders, who have a different interest, is to ensure that the Court will be satisfied that members whose interests do not coincide will be given the opportunity of expressing support or opposition to the scheme separately. 19 In that case, Emmett J expressed a reservation as to whether a single shareholder could be treated as a separate class in respect of some, but not all, of its shareholding. He convened two meetings, on the application of the company and the particular shareholder. However, his Honour said that he would have been disposed to hold only one meeting so long as it was possible to establish at the second hearing called to approve the scheme under s 411 what shares that shareholder had voted in favour and what against the proposal to agree to the scheme: CCI Holdings at [20]. 20 Diversa intends to record how each of its directors, Mr Craig, Mr De Vries and Thorney voted on all resolutions at the meeting on the poll that I will order, so that any effect of their votes can be ascertained. 21 The Australian Securities and Investments Commission wrote to Diversa on 9 August 2016 saying it did not currently propose to appear to make submissions or intervene today to oppose the calling of the scheme meetings. 22 I am satisfied that the proposal in the scheme appears, on the material in evidence, to be at least fair and reasonable from the viewpoint of an intelligent and honest person, that is, a person who might approve it, so as to justify the calling of a meeting of the shareholders of Diversa under s 411(1) in order that they may consider their commercial future: Re Permanent Trustee Co (2002) 43 ACSR 601 at 604 [10] per Barrett J, approving what RD Nicholson J had said in Re Challenge Bank Limited (1995) 19 ACSR 421. Accordingly, I will make the orders sought by Diversa to convene a meeting of its shareholders to consider the proposed scheme under s 411(1). I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.

Diversa Limited, in the matter of Diversa Limited [2016] FCA 1137

At a glance

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Catchwords

Source

Catchwords

Judgment (6 paragraphs)

Legislation Cited (3)

Cases Cited (1)

Cited By (2)