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[2014] FCA 483
Federal Court of Australia
2014-05-09
Mr JA, Yates J
Original judgment source is linked above.
REASONS FOR JUDGMENT (REVISED FROM TRANSCRIPT) 1 This is an application under s 1319 of the Corporations Act (2001) (Cth) (the Act). Section 1319 provides that where under the Act the Court orders a meeting to be convened, the Court may, subject to the Act, give such directions with respect to the convening, holding or conduct of the meeting, and such ancillary or consequential directions in relation to the meeting, as it thinks fit.
Background 2 On 7 April 2014, the Court made orders pursuant to s 411(1) of the Act for the convening of a meeting of a class of shareholders of the plaintiff Envestra Limited (Envestra), to consider, and if thought fit approve, a proposed scheme of arrangement (scheme meeting): Envestra Limited, in the matter of Envestra Limited [2014] FCA 395 (my earlier reasons). Order 2 made on 7 April 2014, provided that the scheme meeting be held at Riverbank Rooms 1-3, Adelaide Convention Centre, North Terrace, Adelaide, South Australia on Tuesday 13 May 2014 at 10 am Adelaide time. 3 The proposed scheme of arrangement provides for Australian Pipeline Limited (APL), in its capacity as responsible entity and trustee of the Australian Pipeline Trust (APT), to acquire all the ordinary shares in Envestra not already owned by APA Group comprising APT, the APT Investment Trust (APTIT), APL and each of the entities controlled by APL in its capacity as responsible entity of APT and APTIT (the scheme shares). 4 As I noted in my earlier reasons, Envestra has two substantial shareholders. APA Group holds 593,755,789 shares, representing 33.05 % of Envestra's issued capital. Cheung Kong Infrastructure Holdings (Malaysia) Limited (CKI), holds 313,645,693 shares, representing 17.46 % of Envestra's issued capital. CKI has appointed two directors to Envestra's board, Ivan Chan and Dominic Chan. 5 CKI's holding in Envestra represents more than 25 % of the scheme shares. If CKI votes against the scheme, the majority required under s 411(4)(a)(ii)(B) of the Act will not be obtained. CKI has not informed Envestra of its voting intentions at the scheme meeting. At the time of making the orders on 7 April 2014, it had advised Envestra that it did not intend to make a public statement regarding its voting intentions.
New developments 6 Since 7 April 2014, the following events have occurred. 7 On 7 May 2014 at approximately 6 pm, Cheung Kong Holdings Limited, CKI and Power Assets Holdings Limited, together the Consortium, submitted a confidential, indicative, non-binding proposal for a transaction to acquire up to 100 % of the issued shares in Envestra, by way of an off-market takeover (the Consortium proposal). 8 On 8 May 2014 at approximately 10 am, shares in Envestra were placed in a trading halt pending further announcement. On the same day at approximately 5 pm, a statement containing details of the Consortium proposal was provided to the Australian Securities Exchange (the ASX). That statement advised that Envestra would be applying to the Court for an adjournment of the scheme meeting that had been scheduled for 13 May 2014. The statement advised that a further announcement concerning the adjournment would be made following the application to the Court, which the statement noted was expected to be held today. The statement also advised that Envestra would be reconstituting its Independent Board Committee to exclude the APA Group and CKI nominated directors from considering both the Consortium proposal and the APA Group proposal reflected in the proposed scheme of arrangement. 9 These developments mean that realistically, the scheme meeting scheduled for 13 May 2014, cannot proceed. Given the proxy deadline of 10 am on Sunday 11 May 2014, under Order 6 of 7 April 2014, there is now insufficient time for Envestra's participating shareholders to be sufficiently informed of material information concerning the Consortium proposal before submitting their proxies.
Consideration 10 In these circumstances, I am satisfied that it is appropriate to exercise the power under s 1319 of the Act to adjourn the scheme meeting. 11 I have considered whether it is appropriate to leave it to Envestra's participating shareholders to determine whether, in light of the changed circumstances, the meeting already ordered should be adjourned. There is a substantial reason militating against that course. As I have noted, CKI's shareholding is sufficient to defeat the proposed scheme if the scheme meeting were to be held on 13 May 2014, at a time when the Consortium's non-binding indicative proposal is plainly unlikely to have been developed into a binding proposal. Indeed, it is not known at the present time whether the Consortium proposal will proceed. 12 Whilst there is no evidence of CKI's voting intentions if the scheme meeting were to proceed as ordered, I would be blind to reality to think that it would not be at least likely that CKI would vote against the proposed scheme if Envestra's participating shareholders did not vote in favour of an adjournment, to provide the Consortium the opportunity to develop its proposal. In these circumstances, the better course, it seems to me, is for the Court to exercise the power under s 1319 of the Act to itself adjourn the meeting it has ordered. By taking this course the APA Group proposal, which remains in effect, will be preserved. 13 This then leads to the question of the appropriate period for the adjournment. The evidence before me indicates that a period of at least 21 business days is likely to be required to enable the Consortium proposal to be developed into a binding proposal or be discontinued. This time will allow for the Consortium to complete its due diligence on Envestra. It will then be necessary for the reconstituted Independent Board Committee of Envestra to consider any binding proposal. A supplementary disclosure statement and a supplementary independent expert's report may then need to be prepared for dispatch to shareholders so that there is sufficient time to consider that material before the scheme meeting. 14 The evidence before me indicates that, at this stage, it is difficult to predict with any precision all of the issues that may eventuate as a result of the Consortium proposal, that may be relevant to determining the appropriate time for adjourning the scheme meeting. Nevertheless, the plaintiff has suggested that the meeting be adjourned to 10 am on 13 June 2014. I am satisfied that the scheme meeting should be adjourned to that time and date. 15 I note that the Australian Securities and Investments Commission (ASIC) has been informed of these new developments, including that Envestra would be applying to the Court for orders in relation to the adjournment of the scheme meeting scheduled for 13 May 2014. The evidence before me shows that, as at 8 May 2014, ASIC had indicated that it did not intend to appear on the application to adjourn the scheme meeting. I have been informed by senior counsel for Envestra today that this indication from ASIC has not changed. 16 It is apparent that if the scheme meeting is adjourned, that other orders made on 7 April 2014 are no longer appropriate. In that connection, Order 5 providing for the entitlement to vote, Order 6 providing for the receipt of proxies, Order 10 providing for the publication of a notice of hearing of any application to approve the scheme and Order 12 providing for the date of the approval hearing, are no longer appropriate in their current form. In my view, these orders are all interlocutory orders and, notwithstanding that they have been entered, can be set aside in reliance on r 39.05 of the Federal Court Rules 2011 (Cth). 17 Rather than making further orders now, to in effect replace Orders 5, 6, 10 and 12 made on 7 April 2014, I propose to stand the matter over for directions at 9.30am on 30 May 2014, including for the making of directions, if that is appropriate, for the holding or conduct of the scheme meeting and for making such ancillary consequential directions in relation to the scheme meeting as are then appropriate. 18 I will also order that notice be given to the ASX and to Envestra's participating shareholders of the adjournment of the scheme meeting to 10 am on 13 June 2014 and of the hearing for directions at 9.30am on 30 May 2014, substantially in the form of the draft documents I have marked, respectively, as Exhibits C, D and E.
Disposition 19 After a short adjournment of the hearing of the present application, a draft minute of orders was prepared. I make the orders set out in that draft which I will sign, date and place with the papers. I certify that the preceding nineteen(19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.