FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd

FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd - [2017] FCA 1265 - FCA 2017 case summary — Zoe

OUTLINE OF SCHEME 2 Programmed is an Australian public company that is admitted to the official list of ASX Limited. Programmed's issued share capital comprises 257,525,748 fully paid, ordinary shares (Programmed Shares). The holders of Programmed Shares (Shareholders) were entitled to participate in the Scheme. 3 The Scheme involves the acquisition of all of the issued share capital in Programmed by Autalent Solutions Pty Ltd ACN 620 805 647, an indirect wholly-owned subsidiary of PERSOL HOLDINGS CO., LTD, a company incorporated in Japan under Corporate Number 8011001058176 and listed on the Tokyo Stock Exchange. Autalent is an Australian proprietary company limited by shares and incorporated in Western Australia. It was established by PERSOL for the purpose of acquiring the Programmed Shares. 4 For each Programmed Share, Shareholders will receive an aggregate cash payment of $3.02 which will comprise: (a) a fully franked special dividend of $0.16 to be paid by Programmed (Special Dividend); and (b) a cash payment of $2.86 to be paid by Autalent (Scheme Consideration). 5 PERSOL has undertaken to provide sufficient funding to Autalent to pay the Scheme Consideration. The Scheme Consideration will be funded by a combination of PERSOL's own cash reserves and funds made available to it pursuant to two new, external debt facility agreements with Sumitomo Mitsui Banking Corporation and The Bank of Tokyo-Mitsubishi UFJ, Ltd. 6 On the Scheme becoming effective, Programmed will pay the Special Dividend, and Autalent will pay the Scheme Consideration, to Shareholders. 7 Programmed has on issue 4,567,000 unlisted performance rights, each of which entitles the holder to be issued one new Programmed Share on and subject to vesting (Performance Rights). 8 PERSOL's objective (through Autalent) is to acquire 100% of Programmed. As such, PERSOL and Programmed have agreed that Programmed would ensure that all unlisted performance rights on issue to Shareholders would vest prior to the relevant record dates for the Scheme, such that the Programmed Shares issued on vesting of the Performance Rights participate in the Scheme and holders of Performance Rights are entitled to receive both the Special Dividend and the Scheme Consideration.

[6]

Relevant Principles 10 The principal questions relevant to the first stage are as follows: (a) Is there a compromise or arrangement? (b) Is there a Pt 5.1 body? (c) Are there members of a company? (d) Are there classes of members? (e) Should the Court make orders to convene a meeting? 11 The standard of review at the first stage is whether the proposed scheme is not inappropriate and is one that sensible business people might consider is of benefit to its members: Re Sonodyne International Ltd (1994) 15 ACSR 494 (at 499) per Hayne J. 12 If the proposed arrangement is one that seems fit for consideration by a meeting of members and is a commercial proposition likely to gain the Court's approval if passed by the necessary majorities, then leave should be given to convene the meeting: Re ACM Gold Limited; Re Mt Leyshon Gold Mines Ltd (1992) 34 FCR 530 (at 535) per O'Loughlin J. 13 The Court is not required to be satisfied either at the convening or approval stage that no better scheme could have been devised: Re Amcom Telecommunications Ltd [2015] FCA 341 (at [10]). 14 While s 411(2) contains a statement of the circumstances in which a scheme meeting must not be ordered, s 411 contains no statement of the criteria that must be satisfied before a meeting is ordered: Re CSR Ltd (2010) 183 FCR 358 (at [10]). 15 The convening of the Scheme Meeting and approval of the dispatch of the scheme booklet (explanatory statement) in relation to the Scheme (Scheme Booklet) should be ordered if the Court is satisfied of the following matters: (a) the Scheme is an arrangement in respect of which the Court may order a meeting of the participating Shareholders: s 411(1). That is: (i) the Scheme is an arrangement; (ii) Programmed is a Pt 5.1 Body; (iii) the participating Shareholders are members of Programmed; and (iv) the Scheme Meeting will be convened between members of the same class; (b) ASIC has had a reasonable opportunity to examine the terms of the Scheme and Scheme Booklet and to make submissions to the Court in relation to them: s 411(2)(b); (c) the Scheme Booklet: (i) provides adequate disclosure: s 412(1)(a)(i); and (ii) contains the prescribed information: s 412(1)(a)(ii), and reg 5.1.01 and Sch 8 cll 8301-8310 of the Corporations Regulations 2001 (Cth). (d) the procedural requirements of the Federal Court (Corporations) Rules 2000 (Cth) have been met; and (e) there is no apparent reason why the Scheme should not, in due course, receive the Court's approval if the necessary majority of members' votes is achieved. Re International Goldfields Ltd (2003) 21 ACLC 1199 (at [9]-[32]) per Barker J.

[17]

ASIC's consideration 38 ASIC considers that its role is to assist the Court by, inter alia, reviewing the content of scheme documents, reviewing the nature and function of a proposed scheme, representing the interests of investors and creditors, and bringing all relevant matters to the court's attention before it orders a scheme meeting or confirms a scheme: see ASIC Regulatory Guide 60 at RG 60.4. 39 The jurisdiction of the Court to make an order convening meetings under s 411(1) is conditional upon the matters set out in s 411(2). Section 411(2) requires that the Court be satisfied of two matters before making an order. First, that ASIC has been given 14 days' notice of the hearing, or such lesser period of notice as the Court or ASIC permits: s 411(2)(a). Second, that ASIC has had a reasonable opportunity to examine the terms of the scheme and the draft explanatory statement and to make submissions to the Court: s 411(2)(b). 40 The Scheme Booklet was first lodged with ASIC on 7 August 2017. ASIC has examined the terms of the Scheme and the draft Scheme Booklet and provided comments to Programmed. Programmed has lodged revised versions of the Scheme Booklet, and a revised version of the Independent Expert's Report which is Annexure E to the Scheme Booklet, with ASIC responding to those comments. 41 On 7 August 2017, ASIC was given notice that Programmed intended to seek to have the first Court hearing listed for hearing on 30 August 2017. On 11 August 2017, ASIC was given notice that the first Court hearing had been provisionally listed for hearing on 30 August 2017. On 16 August 2017, ASIC was provided with the filed and stamped copy of the originating process which stated that the first Court hearing would take place on 30 August 2017. 42 On the evening of 29 August 2017, ASIC informed the Programmed's solicitors by letter that it did not 'propose to appear to make submissions, or intervene to oppose the Scheme at the first hearing'. ASIC also confirmed its view that it had been given at least 14 days' notice of the first scheme hearing and that it had a reasonable opportunity to examine the terms of the Scheme and the draft explanatory statement. 43 Further, Programmed confirmed that the Scheme Booklet would be registered by ASIC before it was dispatched in accordance with s 412(6) and that prior to the second Court hearing, Programmed would seek and provide a statement from ASIC pursuant to s 411(17)(b).

[30]

Issues and standard of review for Second Court hearing 68 The Court's primary concern at the second Court hearing in respect of a scheme is that all legal requirements have been met. The Court must be satisfied that Programmed has complied with the orders made by this Court at the first Court hearing on 30 August 2017 (Orders) and any statutory requirements. 69 In relation to the statutory requirements, the Court must be satisfied: (a) under s 411(17) of the Act that the Scheme has not been proposed to avoid the operation of Chapter 6 of the Act or, alternatively, that Programmed has received a written statement from ASIC to the effect that ASIC has no objection to the Scheme; and (b) under s 411(4)(b) of the Act that the Scheme is otherwise properly proposed, fair and reasonable. 70 In considering the principles which govern the Court's discretion to approve a scheme, Jacobson J in Re Seven Network Ltd (No 3) (2010) 267 ALR 583 (at [35]-[40]) referred to the following list of considerations set out by the Corporations and Markets Advisory Committee in its December 2009 report: (a) whether the members have voted in good faith and not for an improper purpose; (b) whether the proposal is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it. This leading test of fairness was set out by Fry LJ in Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 (at 247); (c) whether the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion; (d) whether there has been full and frank disclosure of all information material to the members' decision; (e) whether minority shareholders would be oppressed by the scheme; and (f) whether the scheme offends public policy. 71 The Court's jurisdiction in relation to an arrangement is supervisory. The Court is to be satisfied that there has been no oppression and the arrangement is one that is capable of being accepted. The Court must be satisfied that the meeting to approve the scheme has been completed and that the resolution has been passed in accordance with the statutory requirements and that the scheme is fair and reasonable to members in a general sense.

[31]

Materials 72 In addition to its submissions and the affidavits filed for the first scheme hearing (identified above at [9]), Programmed also relied upon: (a) the affidavit of Christopher Glen Sutherland sworn on 6 October 2017 (6 October Sutherland Affidavit) which provided evidence: (i) that a copy of the Scheme Booklet approved by the Court on 30 August 2017 was registered with ASIC on 31 August 2017; (ii) that a copy of the Orders as made on 30 August 2017 was lodged with ASIC on 31 August 2017; (iii) relating to the printing and dispatch of the Scheme Booklets and related materials to the Members; (iv) that the Scheme Meeting was held in accordance with Programmed's constitution, the Act and the Orders, and that the Scheme was approved at the Scheme Meeting by the requisite statutory majorities of Members; and (v) that notice of the second Court hearing was given in accordance with the Orders; (b) the affidavit of Mark Barrie Sheedy, Creative Services Manager at Financial & Corporate Relations Pty Limited (FCR), affirmed on 4 October 2017 (Sheedy Affidavit), which provides evidence of the preparation of the typeset Scheme Booklet for printing, and of the printing of the Scheme Booklet; (c) the affidavit of Rodney Rex Somes, Senior Relationship Manager at Computershare Investor Services Pty Ltd (Computershare), affirmed on 6 October 2017 (Somes Affidavit), which provides evidence relating to the dispatch of the Scheme Booklet and other meeting materials and related documents to the Members; and (d) the supplementary affidavit of Christopher Glen Sutherland sworn on 10 October 2017 (10 October Supplementary Sutherland Affidavit), which provides evidence that: (i) the conditions precedent to the Scheme becoming effective have all been satisfied or waived, with the exception of the condition precedent relating to the Court's approval of the Scheme; (ii) no party has given Programmed notice that it intends to object to the application for orders to approve the Scheme; and (iii) ASIC has no objection to the Scheme for the purposes of s 411(17)(b) of the Act.

At a glance

Court

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Before

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Judgment (40 paragraphs)

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Legislation Cited (3)

Cases Cited (13)