In re Hudson Conway Ltd [2000] VSC 21 (21 January 2000)

11. At meetings of option holders held on 17 December 1999 pursuant to the order of Gillard, J. made on 23 November 1999, 96.3 % of option holders voted in favour of the creditors' scheme. That represented 99.9% of the votes cast.

14. At the meeting of shareholders held the same day, again pursuant to the order of Gillard, J., 78.92% of members holding fully paid shares in HCL voted in favour of the shareholders' scheme. That represented 98.32% of the votes cast. 100% of partly paid shareholders voted in favour of the scheme and 100% of what are described as remaining shareholders also voted in favour of the scheme.

17. Neither scheme is opposed by the Australian Securities & Investment Commission (ASIC). In that regard I refer to the press release the ASIC handed to the media on 12 November 1999. The press release reads:

"The Victorian Supreme Court today ordered meetings of members and option holders of Hudson Conway Limited to approve schemes of arrangement in relation to these security holders. The schemes of arrangement were announced by Hudson Conway on 15 July 1999. The members' scheme of arrangement proposes that all shareholders, other than shareholders associated with Lloyd Williams, receive two shares in Publishing and Broadcasting Limited (PBL) for every three Hudson Conway shares. The option holders' scheme of arrangement proposes that all option holders receive one PBL share for every 150 options which they hold. ASIC has a role under the Corporations Law to comment on the standard of disclosure in the explanatory material which goes to security holders for schemes of arrangement so security holders will have sufficient information to make a decision whether or not to vote in favour of the scheme (see in particular s.412(1), s.412(6) and s.412(8) of the Corporations Law). Subsection 411(2) of the Corporations Law states that a Court must not make an order for a meeting to approve a scheme of arrangement unless it is satisfied that ASIC has been given a reasonable opportunity to examine the standard of disclosure in the scheme documentation. The Australian Securities and Investments Commission (ASIC) received draft documentation in relation to the schemes of arrangement on 9 August 1999. ASIC was concerned with the adequacy of the proposed disclosure in the explanatory material for the Hudson Conway members' scheme. ASIC commissioned a report by Wayne Lonergan of Pricewaterhouse Coopers to comment on the explanatory material, in particular the independent expert's report of SG Hambros Australia Limited. On 7 September 1999 ASIC informed Hudson Conway that: * ASIC was concerned with the adequacy of the proposed disclosure in the Explanatory Material; and * Hudson Conway should send out a copy of the Pricewaterhouse Coopers report with the Explanatory Material to its shareholders. Hudson Conway on 12 October 1999 responded comprehensively to ASIC's concerns. Hudson Conway had obtained further advice from Ernst & Young Corporate Finance and KPMG Corporate Recovery. On 5 November 1999 ASIC informed Hudson Conway that many of ASIC's concerns had been addressed and that, instead of the Pricewaterhouse Coopers report being sent out to shareholders with the Explanatory Material, Hudson Conway could provide the Pricewaterhouse Coopers report to shareholders on request. On 9 November 1999 ASIC Hudson Conway informed ASIC that it decided to send out copies of the Pricewaterhouse Coopers report and reports from Ernst & Young Corporate Finance and KPMG Corporate Recovery to shareholders with the Explanatory Material. ASIC is of the view that shareholders in Hudson Conway will now be better informed so they can make a decision as to whether they should approve the members' scheme of arrangement. Shane Tregillis, National Director, Regulation stated that market participants should expect ASIC's scrutiny of schemes of arrangement which expropriate the interests of some shareholders. 'ASIC is of the view that shareholders should be given all relevant information to help them decide whether the scheme of arrangement is in their best interests', Mr Tregillis said."

21. However, the shareholders' scheme is opposed by three shareholders: Peter Forbes MacLaren who holds 12,000 shares in HCL and two companies of which he is a director, Lemra Pty Ltd which holds 86,500 shares in HCL and Morrmac Pty Ltd which holds 24,417 shares in HCL.

24. The total number of issued shares in HCL is 47,316,082. If my arithmetic is correct, Mr MacLaren's interests in HCL represent therefore less than .03 %.

27. Mr MacLaren's opposition to the shareholders' scheme appears in an affidavit sworn by him on 17 January last and in a statement he read to shareholders at the meeting on 17 December 1999 which is exhibited to his affidavit.

30. His main complaints relate to the period of time allowed to shareholders to consider the shareholders' scheme before being required to vote in respect of it and the lack of prominence given to the report prepared at the instigation of the ASIC by Pricewaterhouse Coopers in respect of the scheme in the explanatory memorandum sent to the shareholders prior to the meeting, by comparison with the prominence given to the report which was commissioned from SG Hambros Australia Limited by HCL and the opinions of the directors of HCL.

33. He also contends that because of the views expressed in the Pricewaterhouse report concerning the likely benefit to one shareholder Lloyd Williams, and interests associated with Mr Williams if the shareholders' scheme is approved, it would be unfair to other shareholders.

36. As to the time factor, Mr MacLaren claims that the period of one month which was allowed to shareholders to digest and analyse the explanatory memorandum and accompanying documentation was inadequate, having regard to the fact that a total of 247 pages of material was delivered to shareholders, much of it being of a complex nature.

39. Insofar as the Pricewaterhouse report is concerned, Mr MacLaren complains that the explanatory memorandum focused upon the other reports relating to the shareholders' scheme sent to the shareholders which could be said to be favourable to the scheme, and the views of the directors that the scheme should be approved, rather than the Pricewaterhouse report which was critical of the scheme.

42. The period of four weeks for the holding of the meeting was that fixed by Gillard, J. In his order of 23 November 1999.

45. In my opinion it allowed ample time for the shareholders of the company to consider the material provided to them. In that regard it is to be noted that no shareholder other than Mr MacLaren has complained that the period of four weeks was too short. Indeed, no such complaint appears in the statement Mr MacLaren read to the shareholders at the meeting on 17 December.

48. In his affidavit of 18 January 2000 the secretary of HCL, Daniele Virginio Agnoletto, has sworn that after the material was dispatched to shareholders he spoke to at least 150 different shareholders. Not one of those shareholders made any complaint in relation to the matter. Nor has he received any other complaint to the effect that inadequate time was provided prior to the meeting. He has further confirmed that the question of timing was not raised by any shareholder, including Mr MacLaren at the meeting.

51. A further matter to be noted is that following the distribution of the explanatory statement and accompanying material to shareholders, considerable publicity was given to the matter, particularly the content of the Pricewaterhouse report. In that regard see Exhibit DVA26 to the affidavit of Mr Agnoletto sworn 18 January 2000. By the time shareholders attended the meeting on 17 December they can have been in no doubt as to the nature of the proposals to be put to the meeting and the options open to them in relation to the proposals.

54. Similar observations can be made in relation to content of the explanatory statement.

57. Whilst it may well be that the explanatory statement did not focus on the Pricewaterhouse report as much as Mr MacLaren would have wished, the fact of the matter is that the report was referred to in the statement on a number of occasions and a copy of the report was sent to each of the shareholders.

60. Further, the Pricewaterhouse report received a deal of coverage in the financial press at about the time it was sent to shareholders. Again see Exhibit DVA26 to Mr Agnoletto's affidavit. On 17 November 1999 nearly every newspaper in Australia seems to have published an article relating to the explanatory statement and Pricewaterhouse report.

63. A short article which will demonstrate the point was that which appeared in the Melbourne Herald Sun that day. The article reads:

"Corporate high-flyer Lloyd Williams could be set for a $65 million windfall. That is the most he can hope for under plans to privatise his investment holding company, Hudson Conway. But an independent expert says the proposal benefits the Crown casino boss at the expense of shareholders. HudCon has cleared the regulatory hurdles necessary to press ahead with its plans. The company released detailed documents to shareholders yesterday in which HudCon shareholders swap their shares for a slice of Kerry Packer's media empire, Publishing & Broadcasting Ltd. Under the arrangement, shareholders would receive two PBL shares for every three HudCon shares. HudCon's principal asset used to be a key stake in Crown casino before it was swallowed by Mr Packer's media conglomerate six months ago. HudCon's independent expert, SG Hambros, believes the scheme will be approved by shareholders next month. But Pricewaterhouse Coopers, appointed by the Australian Securities and Investments Commission, said SG Hambros's assessment undervalued HudCon's shares. SG Hambros estimated Mr Williams could pocket more than $27 million if the proposal succeeded. HudCon directors estimated Mr Williams would gain $25 million to $45 million while Pricewaterhouse Coopers tipped $42 million to nearly $66 million."

67. A further matter to be borne in mind is that it was only after it had carefully examined the explanatory statement and accompanying material that the ASIC approved the statement and material.

70. It is interesting to note what Mr MacLaren said to the meeting on 17 December in relation to that aspect of the matter.

73. The relevant paragraph in the statement he read to the meeting reads:

"Four months ago the ASIC received draft documentation in relation to the Scheme. Over this period ASIC has clearly looked at the matter very closely to ensure that shareholders are fully informed before casting a vote. I believe that ASIC should be commended for its vigour in examining the proposal and for assisting the shareholders in looking after their own interests."

77. Finally, one cannot overlook the fact that on 15 November 1999 Gillard, J. Made an order approving the explanatory statement:

"2. Subject to Order 3, pursuant to s.411(1) of the Corporations Law the explanatory statement in the form of Exhibit ""RC1" to the affidavit of Sir Roderick Carnegie sworn 10 November 1999 and incorporating the amendments set out in Schedule ""B" hereto, (being the explanatory statement required by s.412(1)((a) of the Corporations Law to accompany the notices of the meetings referred to in paragraph 1) is approved."

81. Whilst clearly that order does not preclude me reconsidering the matter and making my own determination in relation to it having regard to the material now before the court, nevertheless it is a factor which one cannot overlook. That that is so is clear from the decision of Owen, J. in Re Bond Corporation Holdings Ltd (1991) 5 A.C.S.R. 304 at p.316 and the decision of O'Loughlin, J. in Re ACM Gold Ltd [1992] FCA 89; (1992) 7 A.C.S.R. 231 at 237.

84. In that regard one must bear in mind that members of a company affected by the scheme will not see an explanatory statement until such time as the order granting leave to convene the meeting in question is granted. Dissenting members of the company must then be given an opportunity to make submissions opposing approval of the scheme if they consider that it is in their best commercial interests to do so.

87. In my opinion the complaints made by Mr MacLaren in his affidavit in relation to the timing of the meeting and the explanatory statement cannot be sustained. As to Mr MacLaren's complaint that the scheme of arrangement is unfair to the shareholders other than the Williams' interests, I simply say: by the time the shareholders came to vote on the scheme they were fully aware of Pricewaterhouse's views as to the benefit the Williams' interests may receive if the scheme was approved. Notwithstanding that fact, 78.92 % of the shareholders of HCL voted in favour of the scheme, their votes representing 98.32 % of the votes cast.

90. It was not incumbent upon shareholders to accept the views expressed by Pricewaterhouse in preference to the views expressed by SG Hambros and the directors of HCL.

93. The shareholders of HCL were required to make a commercial decision on the matter. They were better judges of what was to their commercial advantage than this court. In that regard see the decision of Adam, J. in Re Chevron (Sydney) Ltd [1963] VicRp 39; (1963) V.R. 249 at p.255.

96. In his affidavit of 18 January 2000 Mr Agnoletto has sworn the following in relation to the institutional investors in HCL:

"4. As is the case with most public companies, Hudson Conway has a number of sophisticated professional investors, sometimes referred to as institutional investors. Amongst such shareholders I include Credit Swisse First Boston Australia, Portfolio Partners and Guinness Peat Group. There are also a number of superannuation funds, such as AMP and National Mutual. I am familiar with the votes cast in relation to the proposed members' scheme and can say that all institutional investors who voted, voted in favour of the scheme."

100. Is it to be suggested that those investors did not vote according to what they considered to be in their company's best commercial interests?

106. In my opinion the fact that one independent expert expressed a view in relation to the scheme of arrangement contrary to the views of Hambros and the directors of HSC is no ground in the circumstances of this case for not approving the scheme.

109. The scheme in this case involves difficult questions of commercial judgment and matters of conjecture as to the future. It is hardly surprising that different opinions are expressed in relation to it. In that regard see the decision of Thomas, J. In Re Crusader Ltd (1995) 13 A.C.L.C. 1008 at p.1014.

112. When counsel for Mr MacLaren and the two companies with which he is associated first commenced her submissions in relation to HCR's application concerning the members' scheme, it became apparent for the first time that an attack was to be made on the scheme on the basis that in preparing the explanatory statement HCL did not comply with the relevant statutory requirements concerning such a statement.

115. The objectors' complaints in that regard are set out in counsel's written submissions, the relevant paragraphs of which read:

"(a) the Directors of HCL have not stated, or sufficiently stated, their reasons for recommending the proposal be accepted by the shareholders, as they are required to do by reg.8301; (b) the Directors have failed to explain, or adequately explain, why they have changed their strategy (as previously advised to the shareholders in the explanatory memorandum relating to the previous scheme of arrangement) in relation to the future conduct of HDC, as they ought to do pursuant to reg.8302(i); (c) the Directors who initially sought a more generous outcome for Participating Shareholders do not give reasons for ultimately agreeing with the proposal, as they ought to do pursuant to reg.8301 and reg.8302(i); (d) the Directors do not give reasons for variously ignoring the contents of the PwC report or preferring the SG Hambros report, specifically as to the exclusion of a consideration whether the scheme is in the best interests of Mr Williams and the reasons for that as being a matter relevant to a consideration of whether the proposal is in the best interests of the Participating Shareholders, as they ought to do pursuant to reg.8301; (e) the 'Independent Expert's Report' of SG Hambros expressly does not consider the interests of Mr Williams and set out the reasons for holding that opinion, as it is required to do pursuant to reg.8303 (the report of PWC expresses the opinion that the benefit to Mr Williams is a relevant consideration in determining whether the scheme is in the best interests of Participating Shareholders); (f) the 'Independent Expert's Report', however, states that it took into account the 'financial impact of the Proposal on interests associated with Mr Lloyd Williams' (p4); the actual factors considered and the weight given to those factors does not appear in the report in reasons for making the recommendation and the report on this further basis fails to satisfy reg.8303."

119. I propose to deal with the contentions in the order in which they are listed.

(a) In my opinion the directors have sufficiently stated their reasons for recommending that the proposal be accepted.

123. In the letter sent by HCL to its members dated 15 November 1999 there appear the following paragraphs:

"Your Directors unanimously recommend that you vote in favour of the Share Scheme and associated resolutions. The reasons for the recommendation are set out in the Explanatory Statement. In particular key advantages of the Share Scheme include: As a Shareholder you will receive a direct shareholding in PBL. PBL is in the top 20 companies listed on the ASX and is a substantial and successful public company whose businesses include The Nine Network, leading magazine titles owned by Australian Consolidated Press, Crown Casino and investments in complementary growth businesses including Foxtel and .ecorp; With PBL's market capitalisation currently in excess of $6.2 billion, there should be a greater level of market interest and liquidity in PBL shares than in Hudson Conway shares. This should be to the benefit of Shareholders; Based on the weighted average ASX trading values for Hudson Conway shares and PBL shares over the month leading up to 8 July 1999, the day speculation of a PBL takeover offer emerged, the 2:3 exchange ratio represents a headline premium of 8.6 per cent. However, the final outcome for each Shareholder will depend on their personal circumstances (Refer to Section 1.5.2 of the Explanatory Statement); and Shareholders' dividend prospects are improved. PBL has a track record of paying regular fully franked dividends. In comparison, Hudson Conway has paid only infrequent dividends in the past and the timing and amount of future dividends may be uncertain. Your Directors believe that these benefits are more attractive for Participating Shareholders than the alternatives if the Share Scheme does not proceed. A number of major Shareholders have expressed their support for the Share Scheme."

127. If one then turns to the explanatory statement, one finds under s.1 of the statement the details of the directors' reasons.

130. The reasons extend over more than 20 printed pages of the statement.

133. At the end of the statement there appears the directors' conclusion which reads:

"Conclusion of your Directors Based on the investigations undertaken by the Directors, advice received from relevant third parties, and their own commercial assessments, the Directors are satisfied that the Share Scheme provides the only realistic and best available course of action open to Participating Shareholders."

137. All aspects of the proposed scheme of arrangement are explained to the shareholders, together with the directors' reasons for arriving at the conclusion they did in the matter.

140. It would be difficult to know what further material the directors could have provided to the members concerning their reasons.

143. At one stage it was argued by counsel for the three objectors that too much prominence was given to the views of the directors and the Hambros report.

146. It must be remembered that there is a statutory requirement that the directors' reasons be included in the explanatory statement, see Clause 8301 of Chapter 5 of Schedule 8, and that the statement be accompanied by a copy of a report made by an expert who is not associated with HCL, see Clause 8303 of Chapter 5.

(b) The previous strategy referred to in para.(b) is contained in the explanatory memorandum sent to the members of HCL by letter of 1 February 1999 at the time of the proposed merger of Crown Limited and Publishing and Broadcasting Limited (PBL).

150. In that memorandum and accompanying letter the directors of HPL recommended to the members that they support the merger.

153. The memorandum contains the following paragraphs:

"Hudson Conway's interest in 33,248,413 PBL ordinary shares will represent approximately 5.5 % of PBLs expanded capital base following the merger. As detailed above, Hudson Conway has agreed not to dispose of these shares for one year except in limited circumstances. It is intended that this investment will be held for the longer term, representing a strategic stake in what, after the merger, will become one of Australia's largest media and entertainment companies. This investment is likely to provide ongoing returns through the receipt of fully franked dividends. PBL has consistently paid fully franked dividends to its shareholders as highlighted in section 2.6.1."

157. It is said that by virtue of the provisions of sub-clause (i) of Clause 8302 of Chapter 5 there was an obligation upon the directors to explain why they have changed their strategy from that stated in para.2.2 and are now recommending approval of the scheme of arrangement.

"8302. The statement must set out: ... (i) any other information material to the making of a decision in relation to the Scheme, being information that is within the knowledge of any director, liquidator or official manager of a company the subject of the Scheme or of a related company and that has not previously been disclosed to the Scheme members."

Paragraph 1.3.2 of the explanatory statement reads:

"1.3.2 Factors Leading to Action by the Directors In light of this background, your directors have concluded that it is in the best interests of Shareholders that the Company not continue to

have its equity listed. In drawing this conclusion your Directors considered a number of factors. These included: In March 1999, Shareholders supported the merger of Crown and PBL resulting in the receipt of the PBL shareholding; Even though Hudson Conway will have investment income, the Company will continue to incur corporate and public company costs. Therefore, not all of Hudson Conway's investment income would be able to be passed on to Shareholders; The Company's major business asset is its shareholding in PBL. The Directors see little rationale for the Company continuing to be a 'proxy' for a shareholding in another listed company. The shareholding in PBL cannot be sold prior to June 2000 but it can be dealt with prior to that date under a reconstruction of Hudson Conway. Therefore, the Directors feel that it is more appropriate that Shareholders be given direct access to the PBL Shares now; In addition to an indirect investment in another public company not being particularly attractive to the market, Hudson Conway's share capital is tightly held with the largest five shareholders holding approximately 78 % of the issued capital. In this environment there is only limited trading in Hudson Conway Shares and this would be likely to contribute to the Shares continuing to trade at a discount to net assets; Indications have been received from some of the major Shareholders that they do not wish to continue as Shareholders, but that they do wish to obtain a direct holding of the PBL Shares. Therefore: - the Directors consider it appropriate to allow the opportunity for Shareholders to approve an orderly exit from the register of those Shareholders who wish to do so. However, given the other points noted above, rather than offering an exit for selected Shareholders, the Directors believe that it is in the interests of all Shareholders to accept the privatisation of the Company; and - the Directors believe it is in the interests of all Participating Shareholders to obtain a direct holding of the PBL Shares."

166. In my opinion the directors have explained their reasons. Whether their reasons are sound is not a matter for the court to determine. So long as they are bona fide, and there is no suggestion that they are not, it is again for the members to make a commercial decision in the matter.

(c) It would be surprising if the directors had not sought a more generous outcome for participating shareholders. The fact that they failed in that regard is hardly to the point. One is entitled to infer that they ultimately agreed to the proposal because no better proposal was forthcoming.

(d) The directors arrived at their own conclusions in relation to the proposal. It is not a question of them preferring the opinion of one expert in the matter to that of another. The members had the opinions of both Hambros and Pricewaterhouse before them. It was for them to determine what weight they would attach to each expert's opinion.

171. It may well be that an individual director preferred the opinion of one expert in relation to certain aspects of the proposal and the opinion of the other expert in relation to other aspects of the proposal.

174. Is it to be suggested that their individual views in that regard should have been provided to members? Of what assistance would they have been to members? Indeed, if there had been any substance in the three objectors' complaints concerning the volume of material sent to members, to have adopted such a course could only have exacerbated the problem.

177. It was not for the directors to attempt to denigrate the Pricewaterhouse report by pointing out to members why it was that they preferred the opinion of Hambros to that of Pricewaterhouse. Indeed, had they done so, they could have been accused of attempting to exert an improper influence on the members in relation to the Pricewaterhouse report.

(e) And nor should Hambros have considered the interests of Mr Williams.

"If: (a) the other party to the proposed reconstruction or amalgamation of the company the subject of the Scheme has a prescribed shareholding in the company; or (b) a director of any corporation that is the other party to the proposed reconstruction or amalgamation is a director of a company the subject of the Scheme; the statement must be accompanied by a copy of a report made by an expert who is not associated with the corporation that is the other party, stating whether or not, in his or her opinion the proposed Scheme is in the best interest of the members of the company the subject of the Scheme and setting out his or her reasons for that opinion."

185. Clearly Mr Williams is the other party to the scheme of arrangement.

188. What Clause 8303 requires the expert to do is to address "the best interest of the members of the company the subject of the Scheme". That must mean the members who are party to and bound to give up rights under the scheme. That is clearly the view Hambros took, and in my opinion it made no error in the matter.

(f) In para.1.4 of its report Hambros states that in forming its opinion as to whether the share scheme was in the best interests of participating shareholders it considered as one of the factors the financial impact of the proposal on interests associated with Mr Williams.

192. Having regard to the fact that Mr Williams' interests held at that time 27.1 % of HCL's shares, it is hardly surprising that it did so. In my opinion it could have been argued that Hambros would have been remiss if it had failed to do so.

195. What it considered was the fact that in its view the value of Mr Williams' interests before the proposal and after making an appropriate discount was between $76.3 million and $84.8 million; after the proposal and based on a simple discount of 12.9 % p.a. For five years it would be between $77.1 million and $88.1 million.

198. On that view of the matter Mr Williams' interests stood to gain a benefit of between $800,000 and $3.3 million, a far cry from the figures of $42.5 million and $65.8 million stated in the Pricewaterhouse report.

201. It is true that Hambros did not state what weight it gave to that factor. It may have attached little or no weight to it. In my opinion that is quite unimportant. What was important was that the participating members know Hambros' view as to what benefit might flow to the Williams' interests if the proposal was approved. And that is what the Hambros report told them.

204. In my opinion there is no substance to the complaints made in sub-paragraphs (a) to (f) on pp.2-3 of counsel's submissions.

207. During the course of submissions counsel for the objectors contended that Hambros was not an independent expert within the meaning of Clause 8303 of Chapter 5.

210. The contention was based on the fact that before it prepared its final report Hambros sent a draft of its report to HCL.

"A draft of this report was provided to Hudson Conway in advance for factual verification. As a result of this, certain changes were made to factual statements. No alterations were made to our methodology or conclusions as a result of the submission of the factual draft. In addition, a draft of this report was lodged with ASIC for their review. ASIC engaged Pricewaterhouse Coopers to review the draft report and provide comments. We made minor amendments to the report to clarify certain issues raised by ASIC and Pricewaterhouse Coopers. However, these amendments did not change the methodology used or our conclusion."

217. In my opinion the argument is without foundation.

220. In each of the reports of Hambros, Pricewaterhouse, and Ernst & Young there is reference under the heading of "Sources of Information" to "discussions with senior management of or from Hudson Conway".

223. In my opinion it would have been most surprising had there not been. Who better to provide the experts with factual information concerning HCL than its senior management?

226. It is argued that the senior management referred to in the reports should have been identified and the subject matter of the various discussions set out in the reports. In my opinion there is simply no basis for such an assertion.

229. During the course of her submissions counsel for the objectors repeatedly stated that it was unfair that one shareholder out of over 1600 shareholders should receive a benefit of up to $65 million at the expense of those shareholders.

232. Such an argument conveniently overlooks three matters: firstly, that on one view of the proposal the Williams' interests may only receive a benefit of $800,000; secondly, that in addition to any benefit it receives, the Williams' interests assume all liabilities of HCL; and thirdly, that the assessment of the benefits which the Williams' interests may receive if the scheme is approved are all based upon a liquidation of HCL which is not going to occur.

235. If, contrary to the views I have formed in this matter, I considered that there were irregularities or deficiencies in the explanatory statement, I would nevertheless have exercised the discretion which I consider is given to the court by s.1322 of the Corporations Law and waved them.

238. The members overwhelmingly voted in favour of the scheme and approval of the scheme is not opposed by the ASIC.

241. As I have previously stated, the decision of the members who approved the scheme was a commercial one and they were in a better position to judge the matter than this court.

244. As White, J. said in Re Pheon Pty Ltd (1986) 47 S.A.S.R. 427 at p.435, when dealing with a creditors scheme of arrangement:

"The court must leave it to the commercial sense of the creditors to judge what is reasonable in their interests. After all, it is their money which is at stake."

248. In my opinion a similar observation can be made in relation to members who are considering a scheme of arrangement.

251. If of course an explanatory statement and/or accompanying expert's report had a tendency to mislead or confuse, that is a totally different matter, as Brooking, J. (as he then was) made clear in Phosphate Cooperative Co. of Australia Pty Ltd v. Shears & Anor. [1989] VicRp 60; (1989) V.R. 665 at p.684.

254. A final matter I wish to advert to is the comments made by counsel for the objectors that "it was a snow job" and that "the directors have not been as up front about the purpose of the scheme as they should have been".

257. In my opinion the comments were both intemperate and without foundation. The members of HCL could not have been provided with more information than they were about the proposal. They were each sent a copy of the Pricewaterhouse report, something HCL was not obliged to do; the Pricewaterhouse report was dealt with extensively in the press and in some ways which might be said to have been detrimental to the Williams' interests. I refer in that respect to the repeated reference to the figure of $65 million and the omission of reference to the figure of $800,000 and the other two factors which have to be taken into account on the other side of the ledger.

260. Not only did Mr MacLaren fully understand the implications of the proposal and the scheme of arrangement, he addressed the meeting in relation to them. He was not misled in any way and no other member of HCL has come forward complaining that he or she was. Indeed the case now sought to be made out by Mr MacLaren was fully set out in the Pricewaterhouse report.

263. I can find no basis on which to refuse approval of this scheme of arrangement and the creditors' scheme of arrangement.

266. The order of the court is that each scheme of arrangement is approved.

269. Pursuant to the provisions of sub-s.411(12) of the Corporations Law, in each case I exempt Hudson Conway Ltd from compliance with sub-s.411(11) of the Corporations Law.

273. In my opinion the proper course to adopt in this case is to make no order in relation to the costs of the application