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[2005] FCA 1848
Federal Court of Australia
2005-12-16
Zelling J, Mitchell J, Barrett J, Needham J, Gyles J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 The plaintiff seeks orders pursuant to Pt 5.1 of the Corporations Act 2001 (Cth) (the Act) for approval of a scheme of arrangement between Investorinfo Limited (Investorinfo) and its members. 2 On 21 October 2005 I made orders pursuant to s 411(1) of the Act that there be separate meetings convened of certain of the holders of ordinary shares of Investorinfo. Those meetings were held and the requisite resolutions were passed in each case by all requisite majorities. 3 On 6 December, having read the affidavit evidence, I was satisfied that all of the relevant matters requiring proof had been proved. Being satisfied of what might be called the formalities and having been satisfied from the first court hearing that this was an appropriate matter to put before those interested in the scheme for their judgment, that judgment having been received in favour, I was prepared to make the orders sought subject to one issue that arose on the hearing. 4 Clause 2(a) of the proposed scheme provided: 'This Scheme is conditional on all of the conditions in Clause 3.1 of the Implementation Agreement…having been satisfied or waived in accordance with the terms of the Implementation Agreement by 5.00 pm on the day before the Second Court Date.'
The conditions in cl 3.1 of the Implementation Agreement included cl 3.1(c) in the following terms:
'Court approval: the Court approves the Scheme in accordance with section 411(4)(b) of the Corporations Act.'
A director of the plaintiff having responsibility for the scheme proposal and the managing director of the acquirer each gave evidence, in affidavits which were affirmed and filed on 5 December 2005, that each of the conditions precedent in cl 3.1 of the Implementation Agreement, save for cl 3.1(c), had either been fulfilled or waived.
5 Senior Counsel for the plaintiff applied for the proposed scheme to be amended by the Court under s 411(6) of the Act so that cl 2(a) of the proposed scheme would read: 'This Scheme is conditional on all of the conditions in Clause 3.1 of the Implementation Agreement, other than the condition in clause 3.1(c), having been satisfied or waived in accordance with the terms of the Implementation Agreement by 5.00 pm on the day before the Second Court Date.' 6 Section 411(6) of the Act provides that: 'The Court may grant its approval to a compromise or arrangement subject to such alterations … as it thinks just'.
The provision first appeared in the Uniform Companies Acts adopted by the Australian states and territories in the late 1950s and early 1960s. It does not appear in s 206 of the English Companies Act 1948. I was referred by counsel to authorities that satisfied me that this provision confers on the Court the necessary jurisdiction to accede to the application to amend and accordingly made the orders sought. I record my reasons for doing so.
7 The following propositions emerge from the cases on s 411(6) and its predecessors, s 315(6) of the Companies Code and s 181(3) of the Uniform Companies Acts: (1) If the alteration is of a minor kind which does not really affect the details of the scheme, then the Court has power to approve the scheme as amended: Re Adelaide Air Conditioning and Domestic Engineers Ltd (In Liq) [1972] 6 SASR 603 at 605 (Zelling J); Re H Craig Pty Ltd (1971-73) CLC 40-026 (Mitchell J); Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [21] (Barrett J).
(2) The discretion under the section has to be exercised at the time the scheme is approved and cannot be exercised once the approval order has been made: Re BTS Bearings and Transmission Supplies Pty Ltd (1983) 8 ACLR 287 (Needham J).
(3) The discretion under the section may be exercised to omit wording in a scheme which is not appropriate for inclusion in a scheme: Re Homemaker Retail Management Ltd (2001) 187 ALR 520 (Barrett J).
(4) The discretion under the section may be exercised, with the consent of the creditors at the scheme meeting and a priority creditor, to omit a priority creditor from the definition of "creditor" in the scheme, thereby maintaining the priority of the omitted priority creditor: Re V & M Diagnostic Services Pty Ltd (1985) 9 ACLR 663 (Cohen J).
(5) The discretion may be exercised where the amendment improves the smooth working of the scheme without affecting its substance: Re Evandale Estates Ltd 1962 VSC unreported (Adam J), noted in WE Paterson & HH Ednie, Australian Company Law, 2nd edn, Butterworths, Sydney, 1971- at par 181/43; Re H Craig Pty Ltd (1971-73) CLC 40-026 (Mitchell J); Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [21] (Barrett J).
8 Propositions (1), (2) and (5) are clearly satisfied on this application. Propositions (3) and (4) are not relevant. It is clear from the evidence that the shareholders of the plaintiff support the scheme proposal, and it should not be hampered by a technicality arising from the drafting of the scheme, and the way in which events have unfolded. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.
Associate: Dated: 16 December 2005 Counsel for the Plaintiff: M Oakes SC
(2001) 187 ALR 520