In the matter of Westfield Holdings Limited & ors (No 4) [2014] NSWSC 818

Judgment (ex tempore) 1HIS HONOUR: Pursuant to orders made on 11 April 2014 [see [2014] NSWSC 158] for the convening of a meeting of members of the first plaintiff Westfield Holdings Limited, under (Cth) Corporations Act 2001, s 411(1), and giving judicial advice to the second plaintiff, Westfield Management Limited, as responsible entity of the Westfield Trust, and the third plaintiff Westfield America Management Limited, as the responsible entity of the Westfield America Trust, in relation to two associated trust schemes, and also approving, pursuant to (Cth) Corporations Act 2001, s 412, a Securityholder Booklet for distribution to securityholders and, subsequently, on 9 May 2014 [see [2014] NSWSC 601], approving the distribution of a Supplementary Securityholder Booklet, meetings of securityholders in the first plaintiff company and the second plaintiff and third plaintiff trusts were convened on 29 May 2014, at which the company scheme was approved by 84.8 per cent of members present in person or by proxy, and 97.8 per cent of votes cast. The resolutions concerning the trust schemes were approved by similar majorities. 2The plaintiffs now seek an order pursuant to Corporations Act, s 411(4)(b), approving the company scheme and judicial advice pursuant to (NSW) Trustee Act 1925, s 63, that Westfield Management Limited, as responsible entity of the Westfield Trust, and Westfield America Limited, as responsible entity of the Westfield America Trust, would be justified in acting upon the securityholders' resolutions approving the trust schemes and in taking necessary steps to implement those schemes. 3The orders sought arise out of a proposed restructure of Westfield Development Corporation, which presently comprises Westfield Holdings, the Westfield Trust and the Westfield America Trust. Securities in WDC trade on the ASX as stapled securities, comprising one share in Westfield Holdings and one unit in each of the Westfield Trust and the Westfield America Trust. 4The undertakings are very substantial. The group has total assets of approximately $37.2 billion, and assets under management of approximately $67.9 billion. 5Separately, the Westfield Retail Trust Group, comprising Westfield Retail Trust 1 and Westfield Retail Trust 2, is listed on the Australian Stock Exchange. Their respective responsible entities RE1 and RE2 are wholly owned subsidiaries of Westfield Holdings, and WRT securities trade as stapled securities each comprising one WRT1 unit and one WRT2 unit. 6In outline, the restructure involves: (1) separating the Australian and New Zealand businesses of WDC from its international businesses, (2) merging the Australian and New Zealand businesses of WDC with WRT into a new listed retail property group to be called "Scentre Group", combining the Australian and New Zealand businesses formerly operated by WDC with WRT and, (3) separately, establishing a listed retail property group called "Westfield Corporation", comprising the remaining international assets of WDC. Upon completion, each eligible securityholder in WDC will hold 1246 securities in Scentre Group and 1000 securities in Westfield Corporation for every 1000 existing WDC securities presently held. 7The Court has - contemporaneously until today - considered an application for judicial advice by the responsible entities of WRT 1 and WRT 2 and has, on three occasions now, given advice in connection with those trust schemes. Those schemes are interdependent with those presently under consideration, as each is expressed to be conditional upon the approval of the other. 8For reasons which will emerge from the judgment recently delivered in respect of the RE1 and RE2 applications, they are not before the Court today, and will be considered at a later date. It therefore cannot be foretold at this stage whether or not those schemes, ultimately, will secure the court's approval - or, for that matter, the requisite securityholder approval at a meeting to be held on 20 June 2014. Nothing I say or indicate in the course of considering the present application ought to be taken as implying that any particular fate awaits the other application. It is, for example, quite conceivable that, while on the present application the schemes presently under consideration could well be seen to be in the interests of those affected by them, at the same time, it could be found on the other application that those schemes ought, having regard to the interests of those affected by the WRT schemes, not be approved. In short, approval of the company scheme and the Westfield trust schemes does not imply approval of the WRT schemes. 9So far as the company scheme is concerned, under Corporations Act, s 411, the court's essential considerations are that the orders for the convening of a meeting have been complied with; that the requisite majorities were secured at the meeting; that any other statutory requirements have been satisfied; that the scheme is fair and reasonable; and that there has been full and fair disclosure of all information material to the decision of the shareholders and securityholders. 10The affidavit evidence establishes that the Court's orders of 11 April and 9 May in respect of the distribution of the Securityholder Booklet in substantially the same form as that considered by the Court, a notice of hearing, supplementary disclosure in the form of the Supplementary Securityholder Booklet and the conduct of the scheme meeting was effected in accordance with the orders of the Court. 11At the meeting, very substantial majorities of those present voted in favour of the relevant resolutions. Section 411(4)(a)(ii) requires a majority in number of members present and voting and (b) requires 75 per cent of the votes cast and those majorities were comfortably exceeded. 12For the purposes of s 411(17)(b), a statement in writing by ASIC stating that ASIC has no objection to the arrangement has been produced to the Court. In respect of s 412(6), which provides that, in the case of an arrangement other than between a company and its creditors, the body must not send out an Explanatory Statement unless a copy has been registered by ASIC, the evidence establishes that the Explanatory Statement was registered with ASIC. 13As to the fairness and reasonableness of the scheme, it is significant that the independent expert concluded that it was in the best interest of WDC securityholders in the absence of a superior proposal. In addition, the substantial majority obtained at the hearing is strong evidence that the scheme is fair and reasonable. In that respect, it should be noted that while the votes cast represented only some 7 per cent of the number of securityholders on a per capita basis, they represented almost 75 per cent of the shareholding by value in the company. 14Certain features of the scheme, brought to the court's attention at the first hearing, were then considered by me not to pose an obstacle to the approval of the scheme by the Court if it were approved by the shareholders. 15So far as the trust schemes are concerned, the Court proceeds by analogy with the approach under s 411(4), and substantially the same considerations apply. Once again, the substantial majority support for the scheme by those shareholders who chose to participate, and the fact that 75 per cent by value participated, is strong evidence in that respect. No securityholder or other person has appeared to object to the scheme, nor given notice in compliance with the notice of hearing of any intention to do so. 16At the first hearing, I concluded that the amendments proposed to the constitutions of the Westfield Trust and the Westfield America Trust were within power. 17In those circumstances, it seems to me that there is no reason not to grant the court's approval to each of the schemes, subject to the approval, in due course, of the WRT schemes. However, if the WRT schemes were ultimately not approved, that would be a reason to decline approval to these schemes, since an essential part of what was put to the securityholders in respect of them could not then be implemented. In those circumstances, it is preferable to defer making formal orders until the WRT schemes come before the Court on 23 June 2014. 18The plaintiffs also seek an order pursuant to s 411(12) exempting them from compliance with s 411(11), which requires that a copy of every order of the Court made approving a scheme must be annexed to every copy of the constitution of the body issued after the order has been made. As the scheme will be effected by amendment to the constitution, in any event, it does not appear necessary or helpful to require in addition that a copy of the order be annexed to every copy of the constitution. It is, therefore, appropriate to grant an exemption under s 411(12). 19I would, therefore, propose to make orders substantially in accordance with the draft minute of order at tab 8 of the court book, but I will defer formally doing so until the WRT applications are considered. 20The formal order of the Court is that the proceedings be adjourned to 23 June 2014 at 10am, for orders.