Solicitors:
Ashurst Australia (plaintiffs)
File Number(s): 2015/88147; 2015/88363
[2]
Judgment (ex tempore)
HIS HONOUR: On 14 April 2015, I made orders for the convening of a meeting pursuant to (CTH) Corporations Act 2001, s 411, to consider a proposed scheme of arrangement between the plaintiff Novion Limited and its members and also gave judicial advice to Novion RE Limited that it would be justified in convening a meeting of unitholders to consider and vote on associated resolutions in connection with the Novion Trust, in circumstances where the securities in the Novion Group comprise a stapled security of a share in Novion Limited and a unit in the Novion Trust. I gave reasons at that time as to why I thought the scheme was one that, at least if unopposed, could be approved by the Court and as to why, otherwise, it was appropriate to order that the meetings be convened and to give the judicial advice sought.
The meetings were duly convened and held on 27 May 2015.
The evidence establishes that the appropriate procedures were followed in order to convene those meetings and that the Explanatory Memorandum, substantially in the form approved by the Court, was distributed to those entitled to participate.
At the scheme meeting, an impressive 86 per cent of all votes able to be cast were cast. I do not think I have previously seen so high a voter turn-out at a scheme meeting.
In the matter of Novion Limited (No 2) [2015] NSWSC 1296 | Case summary | Zoe
Of the votes cast, 99.88 per cent, representing 91.55 per cent of all members present and voting, were cast in favour of the resolution to approve the company scheme and only 0.12 per cent, representing 8.45 per cent of members present and voting, were cast against the resolution.
The resolutions to give effect to the trust scheme were passed, in each case by approximately 99.92 per cent of all votes cast.
In other words, it is fair to say that an overwhelming majority of the beneficial interests in the company - approaching as close as one could to unanimity - voted in favour of the scheme.
Accordingly, for the purposes of s 411(4), I can be satisfied that, under subparagraph (a)(ii), the resolution in favour of the compromise or arrangement in respect of the company scheme has been passed by a majority in number of the members and by 75 per cent of the votes cast on the resolution.
The Court is not concerned to second-guess the commercial judgment of shareholders who have so clearly approved the scheme, and all the more so when no-one appears to oppose it at the second hearing.
I have recorded in the earlier reasons that the independent expert was of the view that the scheme was and is fair and reasonable and, in those reasons, I also explained that, notwithstanding the independent expert's acknowledgment that it would result in a reduction in the net tangible asset backing of the shares, that did not carry through to overall net asset backing, nor was it expected to carry through to share value. More particularly, the scheme appeared to offer Novion security-holders a premium over the price at which the securities had been trading before the scheme was announced.
The Court must not approve the scheme unless satisfied that it has not been proposed for the purposes of enabling a person to avoid the operation of any of the provisions of Corporations Act, Ch 6, or there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement. By letter dated 28 May 2015, ASIC advises, for the purposes of s 411(17)(b), that it has no objection to the scheme of arrangement. Accordingly, that requirement is satisfied.
In accordance with the orders previously made by the Court, notice of this hearing of the application for approval of the scheme and the judicial advice was published in a national newspaper on 22 May 2015, and the entitlement of security-holders to appear at the hearing and oppose approval of the scheme, if so minded, was drawn to their attention in the Explanatory Memorandum. No person has given a notice of intention to appear at the hearing to oppose approval of the scheme and the proceedings have been called outside the Court at shortly after 10 am this morning. No person has announced their appearance to oppose the approval of the scheme.
Federation Centres is the other party to the merger that will be effected by the scheme, and it intends to rely on this Court's approval of the scheme for the purposes of qualification for exemption from the registration requirements of (US) Securities Act of 1933, provided for by s 3(a)(10) of that Act, in connection with the issue of Federation securities by way of implementation of the scheme. It is a requirement of such an exemption that the Court whose order is to be relied on must be advised that the issuer will rely on the exemption. The Court has been so advised, and I will incorporate a notation to that effect in the Court's order.
Federation has requested that, in accordance with the practice outlined in cases in the Federal Court [see Re Simavita Holdings Limited [2013] FCA 1274, [50] - [52] (Farrell J); Re Atlantic Gold NL (No 2) [2014] FCA 869, [8] (Jacobson J)], the Court include certain statements in its judgment on the applications so that there is a record of those matters if it becomes necessary to have regard to them. Accordingly, I record the following matters.
First, the company scheme and the trust scheme contemplate that Novion security-holders will receive Federation stapled securities for each Novion stapled security held on the record date. In essence, the consideration for Novion security-holders accepting the scheme is approximately 0.8225 of a Federation stapled security for each Novion stapled security.
Secondly, before this second hearing of the application for approval of the scheme commenced, the Court was advised that the Federation Group would rely on the s 3(a)(10) exemption, on the basis of this Court's approval and judicial advice.
Thirdly, this Court does not act as a valuer, but the Court has had before it evidence of the value of the relevant securities by an independent valuer, namely, the independent expert, whose report accompanied the Explanatory Memorandum in a sworn valuation. As my reasons at the first hearing indicated, I took that evidence into account in determining whether the schemes were fair and could be approved and, as I have indicated above, I have, in deciding whether to approve the scheme, taken into account the independent expert's conclusion that the scheme is fair and reasonable, together with the expert's observations about the impact of the scheme on net tangible asset backing, net asset backing, its anticipated impact on trading price, and the price at which securities have traded before the scheme was announced.
Fourthly, the Court has held two hearings, the first to consider whether an order should be made convening a meeting for security-holders to consider the schemes, at which one of the considerations involved the fairness and reasonableness of the scheme; and the second, being this hearing, at which an essential consideration is the fairness and reasonableness of the company scheme and the trust scheme. I have been satisfied - largely on the basis of the independent expert's report that the scheme is fair and reasonable.
Fifthly, notice of the date of this hearing was included in the scheme booklet sent to security-holders prior to the proposal being considered at the schemes meetings and was advertised, as I have said, in a national newspaper.
Finally, as I have already recorded, no Novion security-holder gave notice in accordance with the notice in the scheme booklet, or the advertisement, of an intention to appear to oppose the scheme, and none in fact appeared at this hearing to do so.
So far as the judicial advice sought is concerned, the matters to which I have adverted sufficiently explain why it is appropriate to give that advice, having already advised that the proposed amendments to the trust constitution would be within the power of the trustee - either under the trust deed, or pursuant to the Corporations Act.
In proceedings 2015/88147, the Court therefore orders that:
1. Pursuant to Corporations Act, s 411(4)(b), the scheme of arrangement between the plaintiff and its members, the terms of which are contained in annexure E to the document behind tab 6 of exhibit PXO3 in this proceeding, be approved.
2. Pursuant to s 411(12) of the Act, the plaintiff is exempted from compliance with s 411(11) of the Act in relation to the scheme.
And the Court notes that Federation Limited and Federation Centres Limited will rely on the Court's approval of the scheme for the purposes of qualification for exemptions from the registration requirements of the (US) Securities Act of 1933, provided for by s 3(a)(10) of that Act, in connection with the implementation of and provision of consideration under the scheme.
These orders are to be entered forthwith.
In proceedings 2015/88363, the Court orders that:
1. The plaintiff would be justified in giving effect to and implementing the transactions contemplated by the resolutions passed by unitholders of the Novion Trust at the General Meeting of members of the Novion Trust held on 27 May 2010, in giving effect to the amendments to the constitution of the Novion Trust approved at the meeting and in doing all things necessary to implement the transactions contemplated by those resolutions.
2. The costs of and incidental to the summons be paid out of the assets of the Novion Trust on the trustee basis, pursuant to (NSW) Trustee Act 1925, s 93.
These orders are to be entered forthwith
[3]
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Decision last updated: 03 September 2015