HPAL Limited [2007] FCA 1570

THE COURT ORDERS THAT: 1 Pursuant to section 411(1) of the Corporations Act 2001 (Cth): (a) the Plaintiff ('HPA') convene a meeting of its shareholders for the purpose of considering and if thought fit, agreeing (with or without modification) to a scheme of arrangement proposed to be made between HPA and its shareholders ('the Scheme'), being the scheme substantially in the form of the draft contained in Schedule 4 of the booklet containing the explanatory statement in relation to the Scheme, being Exhibit A ('the Explanatory Memorandum'); (b) the meeting referred to in subparagraph (a) ('Meeting of Shareholders') be held on 17 October 2007 at the Museum of Sydney, Cnr Phillip and Bridge Streets, Sydney 2000, in the state of New South Wales at 9:30am; (c) Ed Hoppe, or failing him, Rod Atfield be chairperson of the Meeting of Shareholders; (d) the chairperson appointed to the Meeting of Shareholders has the power to adjourn the meeting in his absolute discretion; (e) the explanatory statement in the Explanatory Memorandum be approved for distribution to HPA shareholders; and (f) the Explanatory Memorandum to be despatched to each of the shareholders of HPA be in the form or to the effect of Exhibit A and may be posted by pre-paid post, in the case of a shareholder of HPA whose registered address is outside the country by pre-paid post or despatched by air courier for overseas pre-paid post. 2 Regulations 5.6.12 and 5.6.14 to 5.6.36A of the Corporations Regulations shall not apply to the Meeting of Shareholders. 3 HPA publish a Notice of Hearing of any application to approve the Scheme in the form of Annexure 'A' hereto no later than 18 October 2007 and HPA is relieved from compliance with Rule 3.4 of the Federal Court (Corporations) Rules 2000 to the extent necessary. 4 This proceeding be stood over to 18 October 2005 at 2.15pm before Justice Jacobson for the hearing of any application to approve the Scheme. 5 There be liberty to restore on 2 days' notice. 6 These Orders be entered forthwith. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT 1 This is the first court hearing of an application to approve a scheme of arrangement under s 411 of the Corporations Act 2001 (Cth). Accordingly, I am asked to make orders under section 411(1) to convene a meeting of shareholders for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement proposed to be made between HPAL Limited and its shareholders. Prior to the hearing, counsel for the plaintiff, Mr Oakes SC, provided me with comprehensive written submissions outlining the scheme and setting out in detail the evidence necessary for me to make the orders at this hearing. 2 In accordance with the practice referred to by Gyles J in Peplin Limited [2007] FCA 1387 at [2], I will not reproduce the submissions but I will mark them as MFI 1 and direct that they remain with the papers so that they may be available for inspection by any interested party. 3 Mr Oakes has taken me through the scheme booklet and the evidence in some detail this morning. I am satisfied from what he told me from the bar table and from what appears in the written submissions that all the relevant statutory conditions for convening the meeting have been satisfied. Briefly, the scheme is proposed between HPAL, which is a company providing outsourced business services, inbound and outbound communication management, results processing and information management services, and its shareholders. 4 HPAL is listed on the Australian Securities Exchange ('ASX'). The proposal is that HPAL shareholders will transfer their shares to Salmat Document Management Solutions Pty Limited (the Salmat bidder) which is a subsidiary of Salmat Limited (Salmat). That company is a leading "one-to-one communications business" which is also listed on the ASX. The consideration provided in the scheme is for a cash consideration or for an exchange of shares in Salmat. The ratio of the Salmat shares which would be provided as the consideration is between 0.5040 and 0.5784 Salmat shares. This is subject to a scale-back and a formula as set out in the scheme documentation. 5 Mr Oakes pointed out that there are no novel jurisdictional or procedural issues that fall within the disclosure principle described by Barrett J in Re Permanent Trustee Co Ltd (2002) 43 ASCR 601 at [7]. Nevertheless, Mr Oakes drew my attention to a number of aspects of the scheme. I am satisfied that the structure of the scheme which was explained fully to me this morning addresses the "performance risk" raised in authorities of the court. See, eg. Investa Properties Limited [2007] FCA 1104 at [18]-[19]. Reference is there made to a number of earlier decisions on this question. I am also satisfied that the issue referred to in [27] of Investa, namely, the "vesting free of encumbrances" term is sufficiently addressed. 6 There was some discussion of the provision of the implementation agreement under which HPAL has agreed to pay a "break fee" not exceeding $3 million if the scheme does not proceed. The break fee is less than one per cent calculated on the transaction value. This topic was addressed by Lindgren J in APN News & Media Limited [2007] FCA 770, in particular at [43], [46]-[49] and [55]. Although there is no affidavit evidence along the lines of that referred to by Lindgren J at [55], I would infer that there had been arm's length negotiations between the parties because each of the parties is independently represented by experienced firms of solicitors. 7 It is true, as Mr Oakes points out, that there may be some cases in which the requirements referred to by Lindgren J at [55] would need to be dealt with; for example where the acquirer had a substantial shareholding in the target company. That is not the case here and that issue does not need to be further considered by me today. 8 I am satisfied that the orders proposed to be made today are in accordance with the existing and usual practice and I propose to make orders in terms of the short minutes of order which have been handed up to me this morning.

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