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[2013] FCA 441
Federal Court of Australia
2013-05-03
Mr P, Barker J
Original judgment source is linked above.
OVERVIEW 1 On 3 May 2013, I approved a scheme of arrangement in relation to the plaintiff (Ebooks). These are the reasons for so doing.
second hearing 2 This is the second hearing of Ebooks' application for orders approving a scheme of arrangement between it (Ebooks) and its members (shareholders) pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Corporations Act) (scheme), and exempting Ebooks pursuant to s 411(12) of the Corporations Act from compliance with the requirements of s 411(11). 3 The primary question that arises is whether approval should be granted for the scheme whereby all of the issued shares in Ebooks will be acquired by ProQuest Australia Pty Ltd (ACN 161 699 743) (PQA), and in return each Ebooks shareholder will receive approximately US$1,648.78 to US$1,857.24 cash per Ebooks share, or a combination of cash and shares in a subsidiary of Ebooks, called Ebooks.com Limited. 4 On 2 April 2013, at the first hearing of the application, an order was made for the convening of a meeting of shareholders (scheme meeting) and the Court also approved the scheme booklet (which contained an explanatory statement required by s 412(1)(a) to accompany notices of the meeting): see Ebooks Corporation Limited (ACN 079 690 679); in the matter of Ebooks Corporation Limited [2013] FCA 305. 5 Section 411(4) primarily controls the process by which a scheme of arrangement may become binding, and so the matters to be considered at the second hearing, in the following terms: (4) A compromise or arrangement is binding on the creditors, or on a class of creditors, or on the members, or on a class of members, as the case may be, of the body and on the body or, if the body is in the course of being wound up, on the liquidator and contributories of the body, if, and only if: (a) at a meeting convened in accordance with an order of the Court under subsection (1) or (1A): (i) in the case of a compromise or arrangement between a body and its creditors or a class of creditors - the compromise or arrangement is agreed to by a majority in number of the creditors, or of the creditors included in that class of creditors, present and voting, either in person or by proxy, being a majority whose debts or claims against the company amount in the aggregate to at least 75% of the total amount of the debts and claims of the creditors present and voting in person or by proxy, or of the creditors included in that class present and voting in person or by proxy, as the case may be; and (ii) in the case of a compromise or arrangement between a body and its members or a class of members - a resolution in favour of the compromise or arrangement is: (A) unless the Court orders otherwise - passed by a majority in number of the members, or members in that class, present and voting (either in person or by proxy); and (B) if the body has a share capital - passed by 75% of the votes cast on the resolution; and (b) it is approved by order of the Court. It is understood that the Court has a broad discretion to approve a scheme under s 411(4)(b).
PROCEDURAL REQUIREMENTS 6 The first question is whether there has been a meeting convened in accordance with the orders made by the Court at the first hearing and whether other matters required by the orders have been attended to. 7 In this regard all procedural matters have been satisfied. An office copy of the orders made by the Court was lodged with the Australian Securities and Investments Commission (ASIC) and the scheme booklet approved by the Court has also been registered with ASIC. Further: the scheme booklet in the form approved by the Court (save for one minor amendment to a date); proxy forms in the form approved by the Court; and a request form in respect of Ebooks shareholders' election to receive their scheme consideration as a mixture of cash and shares in Ebooks.com Limited; were dispatched to shareholders on 5 April 2013. 8 The scheme was conditional upon the passing of a special resolution at a general meeting of Ebooks shareholders for approval for financial assistance to be given by Ebooks and Ebooks.com Limited to PQA. This resolution was passed at a general meeting on 29 April 2013. 9 The scheme meeting was then convened and held in accordance with the constitution of Ebooks, the Corporations Act and the orders of the Court, and statutory majorities were obtained at the meeting. Further, proxies received were collated, Ebooks was provided with a proxy report and at the scheme meeting the votes cast were recorded. 10 The orders of the Court on 2 April 2013 required that notice of the second hearing of Ebooks' application be published on or before 27 April 2013 on the ASIC website. However, due to technical difficulties with uploading a notice on the ASIC website, notice was instead provided in the form of an advertisement in "The West Australian" newspaper on 27 April 2013. I accept that this was a sensible and logical alternative in the circumstances, and that appropriate notice of the second hearing was given.
COURT'S DISCRETION 11 So far as the Court's discretion is concerned, I am satisfied that the scheme has been advanced in good faith and is fair and reasonable in that it will yield commercial benefits for the shareholders and is of a kind that is fair and reasonable from the viewpoint of an intelligent and honest person: Re Central Pacific Minerals NL [2002] FCA 239 at [14]. Moreover, an independent expert has concluded that the scheme is in the best interests of the shareholders. 12 There is also no person who has indicated an intention to appear at this second hearing or otherwise intends to object to the approval of the scheme. 13 Finally, the conditions precedent to the scheme have been satisfied, save for the approval of the scheme by order of the Court.
SECTION 411(17) CONDITIONS 14 The Court's ultimate approval of the scheme is dependent upon the fulfilment of one of the two alternative conditions set out in s 411(17) of the Corporations Act: The Court must not approve a compromise or arrangement under this section unless: (a) it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6; or (b) there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement; but the Court need not approve a compromise or arrangement merely because a statement by ASIC stating that ASIC has no objection to the compromise or arrangement has been produced to the Court as mentioned in paragraph (b). 15 First, ASIC has provided a written statement to the effect that it has no objection to the scheme. 16 Secondly, I accept that the scheme has not been proposed for the purpose of avoiding the operation of Ch 6 of the Corporations Act. The acquisition of shares in Ebooks by PQA is part of a broader transaction which could not be given effect simply by PQA acquiring shares in Ebooks. The terms on which PQA and Ebooks agreed to the transaction included that: the retail businesses of Ebooks be transferred to Ebooks.com Limited; Ebooks.com Limited be demerged from Ebooks prior to the scheme implementation; cash and shares in Ebooks.com Limited be offered to eligible and electing Ebooks shareholders as an alternative consideration to cash only for their Ebooks shares; the acquisition be subject to a working capital adjustment; and a portion of the purchase price be placed into an escrow account for a period of 15 months to satisfy certain possible claims that may arise in favour of PQA. 17 In my view, the complexities of the transaction and the inability for a takeover bid to provide the flexibility needed to facilitate the overall commercial objectives of the parties meant that proceeding under Ch 6 was not an option and, instead, that a scheme of arrangement is an appropriate structure to give effect to the transaction. 18 Therefore, both of the conditions in s 411(17) are satisfied, even though satisfaction of only one is necessary.
SECTION 411(11) EXEMPTION 19 The Court is also asked to make an exemption order under s 411(12) of the Corporations Act, which will exempt the plaintiff from the s 411(11) obligation requiring a copy of every order of the Court made for the purposes of s 411(4)(b) to be annexed to every copy of the company's constitution issued after the order was made. In circumstances where Ebooks will, from implementation of the scheme, become a wholly owned subsidiary of PQA, the s 411(11) requirement will serve no useful purpose. The Court will therefore make an order to that effect.
conclusion and order 20 In those circumstances the Court approves the scheme in the terms proposed by the plaintiff and grants it an exemption from compliance with s 411(11). I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.