REASONS FOR JUDGMENT
1 This is an application under s 411(1) of the Corporations Act 2001 (Cth) (the Act), seeking orders for the convening of a meeting of the holder of ordinary shares in the plaintiff, Macquarie Equipment Finance Pty Limited (MEF), the sole shareholder being MTF Holdings Pty Limited (the MEF Member), to consider a proposed scheme of arrangement between MEF and the MEF Member under which it is proposed that all of the assets and liabilities of MEF will be transferred to the defendant company, Macquarie Bank Limited (Macquarie Bank), pursuant to s 413(1) of the Act.
2 Section 411(1) refers to the circumstances in which a meeting may be convened where a compromise or arrangement is proposed between a Part 5.1 body (here, MEF) and, relevantly, its members. Section 413, which is sought to be invoked in this case, depends upon an application having been made to the Court under Part 5.1 of the Act for the approval of a compromise or arrangement and, in which event, if it is shown to the Court that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for reconstruction of a Part 5.1 body and that, under the scheme, the whole or any part of the undertaking or of the property of a body concerned in the scheme (the transferor body), is to be transferred to a company (the transferee company), the Court may then approve the compromise or arrangement and also provide for any of the matters set out in subsections (a) through to (g) of s 413. These subsections provide for, relevantly, the transfer of assets and liabilities, the continuation of legal proceedings, the deregistration by the Australian Investments and Securities Commission (ASIC) without winding up of the transferor body (as is relevant in this case), and other provisions incidental, consequential or supplemental to those matters.
3 In this case, the scheme of arrangement which is proposed involves a compromise or arrangement between MEF, as defined, and the MEF Member (that is, the holder of the shares in MEF) as set out in cl 5.1 of the scheme. That clause provides for the scheme to bind MEF and the MEF Member and also provides for the MEF Member to approve the scheme and consent to the reconstruction or amalgamation as defined "notwithstanding the diminution in the value of shareholding in the Scheme Company and any rights that it may have in connection with the Reconstruction or Amalgamation…and waives any rights it may otherwise have as against the Scheme Company in connection with the Reconstruction or Amalgamation". As the submissions for the plaintiff disclose, this provision reflects the reasoning of Emmett J in AGL Energy Services (Queensland) Pty Limited v AGL Energy Services Pty Limited [2010] FCA 452 (AGL), in which his Honour noted at [13] that there was a difference "between the compromise or arrangement with members contemplated by s 411, on the one hand, and the scheme for reconstruction or amalgamation contemplated by s 413, on the other hand". It is for this reason that the scheme of arrangement includes the compromise or arrangement with the MEF Member as set out in cl 5.1, consistently with those principles.
4 As the submissions for the plaintiff also disclose, it is appropriate that the defendant being the company into which it is proposed in effect to collapse the plaintiff is joined as a party to this proceeding. I note here the decision of Finkelstein J, referred to in the plaintiff's submissions, in Royal Victorian Institute for the Blind Ltd v RBS.RVIB.VAF Ltd (2004) 206 ALR 581; [2004] FCA 735.
5 The substance of the reconstruction or amalgamation (as it is referred to) is set out in cl 4 of the proposed scheme and by this clause is to occur from what is defined to be the Implementation Time, being the date of 8 December 2012. That clause provides for: - (i) transfer of all of the assets of the scheme company to the defendant, being the transferee company, (ii) transfer of all of the liabilities of the scheme company to the transferee company, (iii) any legal proceedings pending by or against the scheme company are to be continued by or against the transferee company without the need for any further act or deed, other than an amendment of the record of the relevant court or tribunal, and (iv) as I have noted, the deregistration by ASIC of the scheme company without winding up. In this regard, I note that the definition of liabilities in the scheme of arrangement includes not only existing liabilities but "all liabilities however arising and whether present, unascertained, immediate, future or contingent, including any 'liabilities' within the meaning in subsection 413(4) of the [Act]".
6 The explanatory statement discloses the details of the scheme and the fact that the relevant implementation date is 8 December 2012, although the proposed date for the second court hearing, assuming that the MEF Member votes in favour of the scheme, is 15 November 2012. There is also reference to the fact that each of the directors of the scheme company, MEF, has considered the terms of the scheme and believes it to be fair and reasonable and in the best interests of the MEF Member and, importantly, that it will not adversely affect the interests of MEF's creditors.
7 There is a detailed section - section 4.1 of the explanatory statement - which explains the reasons for the directors' view that there will be no adverse effect on the creditors by the implementation of the scheme. The scheme proposes the transfer of all liabilities, as broadly defined, from MEF to the transferee company. The transferee company, Macquarie Bank, is described as a company which is a "much larger and financially stronger company than MEF, with net assets of $8.7 billion" compared with the net assets of MEF of $30,000 as at 31 March 2012. It is also noted that the transferee company is an authorised deposit-taking institution regulated by the Australian Prudential Regulation Authority (APRA) and is subject to the minimum capital requirements of APRA.
8 The explanatory statement also explains that MEF in fact has few and no significant external creditors. It is almost entirely funded by the transferee company and other companies in the Macquarie Group. In addition to that, the directors have confirmed in the explanatory statement, but also in affidavits in support of the application, that MEF has no employees and no existing litigation against it.
9 The application is supported by affidavit material which, amongst other things, verifies the accuracy of the various parts of the explanatory statement, including the corporate structure by which MEF is a wholly owned subsidiary of the defendant, Macquarie Bank, albeit through an intermediate holding company structure which in turn is a wholly owned subsidiary of Macquarie Group Limited, an Australian listed public company. There is otherwise a reference to the fact that there are two ordinary shares in MEF on issue, and both of these are held by the MEF Member.
10 The evidence also includes, relevantly, two letters from ASIC. The first is dated 23 October 2012. It will be noted that the explanatory statement to which I referred does not have an expert report annexed to it. By the letter dated 23 October 2012, in response to an application by MEF, ASIC confirmed pursuant to reg 5.1.01 of the Corporations Regulations 2001 (Cth) (the Regulations) that it allowed MEF to send out the explanatory statement in relation to the scheme without having an expert report annexed to it, as required by cl 8303 of Pt 3 of Schedule 8 to the Regulations. The other ASIC letter is in the usual terms. It is also dated 23 October 2012. In this letter ASIC confirms that, as required, it has been given more than 14 days' notice of the hearing of this application, as referred to in s 411(2)(a) of the Act, and has had a reasonable opportunity to view the explanatory statement and does not propose to currently appear to make submissions, intervene or to oppose the scheme at this first court hearing; and indeed, ASIC has not done so.
11 Otherwise, as set out in the written submissions, I accept that this scheme is appropriately propounded as a members' scheme only, consistent with the authorities to which reference has been made in [12] of the written submissions for the plaintiff. I also accept that in terms of s 413 the important issue is the potential effect on third parties, being existing or contingent creditors. I have referred to the details of the scheme and the explanatory statement which provide the basis for the opinion that the directors have reached. I have also referred to the decision in AGL and note that I am satisfied that the powers in both ss 411 and 413 of the Act are appropriately invoked in this case.
12 There are no other matters of concern and, accordingly, I am satisfied that orders in accordance with the short minutes of order handed up in Court today should be made. I make orders 1 through to 5 of those short minutes of order.
I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.