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Mercedes-Benz Financial Services Australia Pty Limited v Daimler Truck Financial Services Australia Pty Limited, in the matter of Mercedes-Benz Financial Services Australia Pty Limited - [2021] FCA 1410 - FCA 2021 case summary — Zoe
Mercedes-Benz Financial Services Australia Pty Limited v Daimler Truck Financial Services Australia Pty Limited, in the matter of Mercedes-Benz Financial Services Australia Pty Limited
[2021] FCA 1410
Federal Court of Australia|2021-11-01|Before: McKerracher J
CORPORATIONS - scheme of arrangement - second court hearing - application for approval - scheme approved
Source
Original judgment source is linked above.
Catchwords
CORPORATIONS - scheme of arrangement - second court hearing - application for approval - scheme approved
Judgment (13 paragraphs)
[1]
Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between the plaintiff and its sole member Daimler Mobility Australia Pty Ltd ACN 629 142 212 (Scheme Shareholder), in the form contained in annexure A to the explanatory statement being at pages 45 to 61 of Exhibit 1 (Scheme) in the proceeding, be approved.
Pursuant to s 411(12) of the Act, the plaintiff be exempted from compliance with s 411(11) of the Act.
Pursuant to s 413(1) and s 413(2) of the Act and, using the definitions contained in the Scheme, with effect from the Implementation Date:
(a) the CV Business be transferred to the defendant;
(b) the CV Contracts (save for the Combined Fleet Contracts referred to in order 4) be transferred to and vested in the defendant without the need for any further act or deed, and all Assets and Liabilities associated with the CV Contracts be Assets and Liabilities of the defendant without the need for any further act or deed;
(c) the Transferring Employees become employees of the defendant on the terms and conditions of their employment applicable immediately prior to the Implementation Date, without the need for any further act or deed, and all rights, obligations, Assets and Liabilities associated with those Transferring Employees be rights, obligations, Assets and Liabilities of the defendant without the need for any further act or deed;
(d) the CV Data and Customer Base Data be transferred to and vested in the defendant without the need for any further act or deed, and all Assets and Liabilities associated with the CV Data and Customer Base Data be Assets and Liabilities of the defendant without the need for any further act or deed;
(e) the CV IP be transferred to and vested in the defendant without the need for any further act or deed, and all Assets and Liabilities associated with that CV IP be Assets and Liabilities of the defendant without the need for any further act or deed;
(f) the CV Mortgages be transferred to and vested in the defendant without the need for any further act or deed, and all Assets and Liabilities associated with that CV Mortgages be Assets and Liabilities of the defendant without the need for any further act or deed;
(g) the CV Plant and Equipment be transferred to and vested in the defendant without the need for any further act or deed, and all Assets and Liabilities associated with that CV Plant and Equipment be Assets and Liabilities of the defendant without the need for any further act or deed;
(h) the CV Inventory be transferred to and vested in the defendant without the need for any further act or deed, and all Assets and Liabilities associated with that CV Inventory be Assets and Liabilities of the defendant without the need for any further act or deed.
Pursuant to s 413(1) and s 413(2) of the Act, using the definitions contained in the Scheme, with effect from the Implementation Date:
(a) the rights, powers, duties, obligations, Assets and Liabilities of the plaintiff under the fleet master agreements identified at Tab 1d to Attachment 1 to Exhibit RP-1 to the affidavit of Rafael Marcelo Pasquet affirmed 29 October 2021 (the Property and Liabilities Schedule), in respect of the schedules to those fleet master agreements which relate to CV assets, as identified in Tab 1e to the Property and Liabilities Schedule, be transferred to the defendant;
(b) in the fleet master agreements identified in Tab 1d to the Property and Liabilities Schedule, references to the plaintiff be read as a reference to the defendant, in relation to the schedules to those fleet master agreements which relate to CV assets, as identified in Tab 1e to the Property and Liabilities Schedule;
(c) the rights, powers, duties, obligations, Assets and Liabilities of the plaintiff under the guarantees and indemnities identified in Tab 1d to the Property and Liabilities Schedule, in relation to moneys advanced under schedules to the fleet master agreements which relate to CV assets, as identified in Tab 1e to the Property and Liabilities Schedule, be transferred to the defendant;
(d) in the guarantees and indemnities identified in Tab 1d to the Property and Liabilities Schedule, references to the plaintiff be read as a reference to the defendant, in relation to moneys advanced under schedules to the fleet master agreements which relate to CV assets, as identified in Tab 1e to the Property and Liabilities Schedule;
(e) on and from the Implementation Date, in contracts which form part of the Property and Liabilities Schedule transferred to and vested in the defendant, and to which the plaintiff is named as a party (with the exception of the combined fleet contracts identified in the Property and Liabilities Schedule which are dealt with in Orders 4(a)-(d) above), any reference to the plaintiff be read as a reference to the defendant; and
(f) the defendant may use, disclose and otherwise handle all information transferred and vested in it by the plaintiff provided always that the defendant shall receive the information upon the same terms as the plaintiff held the information and subject to the Liabilities (as defined in the Scheme) of the plaintiff in respect of that information.
Pursuant to s 413(1)(g) of the Act, using the definitions contained in the Scheme, as from the Implementation Date, the defendant or any director of the defendant from time to time, may sign all documents and do all things required to be done by the plaintiff to complete or perfect the transfers provided for in these orders, whether by lodgement, registration, notification or otherwise.
Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), on the ground that the order is necessary to prevent prejudice to the proper administration of justice, until further order the documents marked RP-4, being the updated Assets and Liabilities Matrix, to the third affidavit of Rafael Marcelo Pasquet affirmed 29 October 2021 be marked "confidential" on the electronic court file, not to be published or accessed by any party other than the parties and their solicitors except pursuant to an order of the Court.
These orders be entered forthwith.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
[2]
MCKERRACHER J:
1 The plaintiff, Mercedes-Benz Financial Services Australia Pty Ltd (MBFSA) seeks orders under s 411(1) and s 413 of the Corporations Act 2001 (Cth) to:
(a) to approve a scheme of arrangement (Scheme) between MBFSA and the sole member of the MBFSA, Daimler Mobility Australia Pty Ltd ACN 629 142 212 (Scheme Shareholder); and
(b) to transfer the undertaking, property and liabilities the subject of the Scheme from the MBFSA to the defendant, Daimler Truck Financial Services Australia Pty Ltd (DTFSA) on the date the Scheme is to be implemented.
2 DTFSA is the transferee company. DTFSA, MBFSA and the Scheme Shareholder are all part of the same corporate group with their ultimate holding company being Daimler AG.
3 An outline of the Scheme was set out in reasons for orders made following the first court hearing on 14 October 2021: Mercedes-Benz Financial Services Australia Pty Limited v Daimler Truck Financial Services Australia Pty Limited, in the matter of Mercedes-Benz Financial Services Australia Pty Limited [2021] FCA 1279.
4 By way of summary, the Scheme is a reconstruction scheme whereby MBFSA seeks to transfer its trucks and buses financial services business in Australia (CV Business) to DTFSA. MBFSA will retain the passenger car financial services business in Australia.
5 On 14 October 2021, the Court made Orders pursuant to s 411(1) of the Act approving the despatch of the scheme booklet and convening a meeting of the Scheme Shareholder (Scheme Meeting).
6 The evidence confirms that the Scheme Meeting was held on 21 October 2021 and the requisite statutory majorities in favour of the scheme were achieved.
7 The general principles which guide the Court's discretion to approve a scheme at the second court hearing are well established. The Court has a discretion to approve a scheme, and is not bound to approve it merely because it has made orders for the convening of meetings or because the statutory majorities have been achieved: Re Seven Network Ltd (No 3) [2010] FCA 400; (2010) 267 ALR 583 per Jacobson J (at [31]); and Re Staging Connections Group Ltd (No 2) [2015] FCA 1102 per Gleeson J (at [12])
8 In Re Konekt Ltd (No 3) [2019] FCA 2105, Farrell J summarised (at [4]) the matters that the Court must consider in deciding whether to approve a scheme. They include whether:
(a) the orders of the Court convening the scheme meeting were complied with;
(b) the resolution to approve the scheme was passed by the requisite majority and whether other statutory requirements have been satisfied;
(c) all conditions to which the scheme is subject (other than Court approval and lodgement of the Court's orders with the Australian Securities and Investments Commission (ASIC)) have been met or waived;
(d) the scheme is fair and reasonable so that an intelligent and honest shareholder, properly informed and acting alone, might approve it. In considering this question, it is not the role of the Court to usurp the decision of shareholders by imposing its own commercial judgement on the scheme or to consider whether a better scheme might have been proposed;
(e) MBFSA has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion; and
(f) there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme.
(see also Re Solution 6 Holdings Ltd [2004] FCA 1049 per Jacobson J (at [18]-[24]); Re Permanent Trustee Co Ltd [2002] NSWSC 1177 per Barrett J (at [8]-[10]); Re Central Pacific Minerals NL [2002] FCA 239 per Emmett J (at [8]-[14]); Re Seven Network Ltd (No 3) per Jacobson J (at [35]-[39])).
[3]
COMPLIANCE WITH ORDERS CONVENING THE SCHEME MEETING
9 The evidence discloses that the Scheme Booklet and proxy form were despatched in electronic form to the email address of Mr Rafael Pasquet, being the email nominated by the Scheme Shareholder to receive notices of meeting and proxy forms from MBFSA in accordance with Order 5. Minor changes were made to the version of the scheme booklet that was approved by the Court at the first court hearing to address formatting errors.
10 Mr Rafael Rochert chaired the Scheme Meeting in accordance with Order 1(c). He also conducted the Scheme Meeting at the time of 4.00 pm (AEDT) on 21 October 2021 by telephone, without the Scheme Shareholder being physically present, in accordance with Order 1(b).
11 He has given evidence that he did not go into the offices of MBFSA to conduct the Scheme Meeting because there had been two independent positive cases of COVID-19 reported at the offices of MBFSA and his physical attendance at the offices of MBFSA did not satisfy MBFSA's COVID Safe Plan.
12 In Woolworths Group Ltd v Pinnacle Liquor Group Pty Ltd (No 2) [2019] FCA 2182, Farrell J was untroubled by the scheme meetings being held at a location which was not consistent with the Court's orders (at [7]), observing that that 'in the context of wholly owned subsidiaries each with a single shareholder, that non-compliance is immaterial to the Court's decision whether or not to approve the schemes…'. Similarly, in SGIC Insurance Ltd v Insurance Australia Ltd [2004] FCA 1638, another reconstruction scheme, Jacobson J concluded that scheme meetings held at the wrong time and at a different venue were errors that fell within s 1322 of the Act (at [12]-[15]).
13 I would follow the approach taken in Woolworths and SGIC. I am satisfied that this is an explicable departure from the requirement that a scheme meeting be held at the place specified in the notice of meeting and that it should not and does not prevent the Court making the proposed orders, particularly in this case, as MBFSA has only one member and that member was unaffected by this change having regard to the orders that the Scheme Meeting be by telephone without the Scheme Shareholder being physically present.
14 The Scheme Shareholder appointed Mr Pasquet to be its corporate representative in accordance with Orders 1(e) and 1(f) and notified Mr Rochert of this ahead of the Scheme Meeting.
15 On 25 October 2021, MBFSA published a notice of the present hearing in The Australian in the form required by Order 9.
16 No notice of appearance has been served on Hogan Lovells, solicitors for MBFSA, by any person (including any creditor) intending to appear at the second court hearing to oppose the approval of the Scheme.
[4]
REQUISITE MAJORITY AND OTHER STATUTORY REQUIREMENTS
17 The resolution to approve the Scheme was passed at the Scheme Meeting by the requisite majorities under s 411(4)(a)(ii); the Scheme Shareholder, being the sole member, voted in favour of the scheme resolution.
18 Other statutory requirements are also satisfied:
(a) on 18 October 2021 the Scheme Booklet was received by ASIC for registration and on 19 October 2021 it was registered by ASIC as required by s 412(6) of the Act;
(b) ASIC has confirmed that it has no objection to the Scheme and provides a letter to that effect under s 411(17)(b) of the Act. This is sufficient to satisfy the requirements of s 411(17) of the Act; and
(c) the orders were sealed and lodged with ASIC as required by r 3.5 of the Federal Court (Corporations) Rules 2000 (Cth).
[5]
SATISFACTION OF CONDITIONS
19 The evidence makes clear that there are no outstanding conditions precedent under the Scheme Facilitation Deed (SFD). The Scheme is conditional on, amongst other things:
(a) the SFD not having been terminated before 8.00 am on the second court hearing date, being 1 November 2021;
(b) the Scheme is approved by the Scheme Shareholder at the Scheme Meeting by the majorities required under s 411(4)(a)(ii) of the Act;
(c) approval of this Scheme by the Court under s 411(4)(b) and s 413(1) of the Act, including with any alterations made or required by the Court under s 411(6) of the Act as are agreed to in writing by DTFSA and MBFSA;
(d) such other conditions required by the Court under s 411(6) of the Act having been satisfied; and
(e) the orders of the Court made under s 411(4)(b) (and if applicable s 411(6)) and s 413(1) of the Act approving the Scheme coming into effect, pursuant to s 411(10) of the Act.
20 There is also of course evidence that the Scheme has not been terminated.
[6]
SCHEME IS FAIR AND REASONABLE
21 The following considerations support the conclusion that the scheme is fair and reasonable:
(a) as at 1 November 2021, MBFSA had not received notification that any person will come forward to oppose the Scheme;
(b) the Scheme is an internal reconstruction fully supported by its sole Scheme Shareholder who voted in favour of the scheme resolution at the Scheme Meeting; and
(c) the Scheme is bona fide and properly proposed, and the Scheme will not have any prejudicial effect upon the interests of the creditors of MBFSA.
[7]
Separate proceedings in the Federal Court of Australia
22 I sought assurances concerning the effect of subsisting litigation on the proposed Scheme. On 18 October 2021, proceedings were commenced in the Court's Victorian Registry by AHG WA (2015) Pty Ltd T/A Mercedes-Benz Perth & Westpoint Star Mercedes-Benz and 37 other Mercedes-Benz passenger car dealers against Mercedes-Benz Australia/Pacific Pty Ltd (ACN 004 411 410) (MBAuP) (proceeding VID 604 of 2021) (VIC Proceedings).
23 The evidence indicates, and senior counsel for MBFSA has confirmed, that MBFSA is not a party to the VIC Proceedings, and no relief is sought in the VIC Proceedings that would directly or indirectly involve MBFSA. By way of summary, the VIC Proceedings concern a change in MBAuP's relationship with its authorised dealer network which involves moving from a traditional dealership model to an agency model. The new agency model between MBAuP and its dealers only applies to the sale of new passenger cars, and not the sale of used passenger cars, vans, trucks or buses.
24 MBFSA, since its incorporation in 1996, has always provided financial services under an agency-type relationship with dealers. The financing contracts entered into between MBFSA and customers for the purchase of new passenger cars will remain with MBFSA and will not be transferred to DTFSA as part of the Scheme. Following the implementation of the Scheme, MBFSA will continue to finance the purchase of new passenger cars under the agency-type relationship with dealers that it has had to date, and commission structures in relation to the provision of financial services by MBFSA to its customers will remain the same for MBFSA's dealers for the foreseeable future. MBFSA says the Court should therefore be satisfied that approval of the Scheme will not have any impact upon the VIC Proceedings.
[8]
Transfer of contracts
25 MBFSA's existing business is predominantly composed of entering into contracts with customers for the financing of vehicle purchases by the customers from the Daimler Group, and with dealers for the financing of the dealer's selling facilities and the financing of cars that the dealers wish to sell. As part of the Scheme, MBFSA will transfer to DTFSA various contracts which pertain to the CV Business being:
(a) contracts between MBFSA and its retail and corporate customers (Customer CV Contracts); and
(b) contracts between MBFSA and its authorised dealers (Dealer CV Contracts).
26 MBFSA sought orders under s 413(1)(a), s 413(2) and, to the extent necessary under s 413(1)(g), transferring the Customer CV Contracts and Dealer CV Contracts to DTFSA.
27 MBFSA drew all relevant matters to the Court's attention concerning its proposal to transfer the Customer CV Contracts and Dealer CV Contracts to DTFSA.
[9]
Property and liabilities schedule
28 Since the first court hearing, the Assets and Liabilities Matrix dated 25 October 2021, referred to as Attachment 1 to the Property and Liabilities Schedule has been updated to include changes in the CV Business since that date, including listing out all the fleet contracts relating to the CV Business.
[10]
No material change to the financial position of MBFSA
29 Since the first court hearing there has been no material change in the financial position of MBFSA, so that the earlier conclusions regarding the effect of the Scheme on creditors remain accurate.
30 No creditors served notice on MBFSA informing them that they intended to appear at the second court hearing to oppose the Scheme, and indeed, no person attended the second hearing to oppose the Scheme.
[11]
AFCA complaints
31 There are two customers of the CV Business of MBFSA who have current complaints with the Australian Financial Complaints Authority. MBFSA does not propose to transfer these two contracts to DTFSA such that any unresolved complaint will continue to be managed by MBFSA.
[12]
EXEMPTION FROM SECTION 411(11)
32 In the context of this Scheme, being a scheme to effect an internal reconstruction, there is no utility in having the Court orders annexed to MBFSA's constitution as the Court orders do not effect any change to MBFSA's constitution: Re Anaconda Nickel Holdings Pty Ltd [2003] WASC 19; (2003) 44 ACSR 229 per McLure J (at [65]).
[13]
CONCLUSION
33 For reasons set out above and in reasons for orders following the first court hearing, I was satisfied that the Scheme should be approved pursuant to s 411(4)(b) and s 411(6) of the Act and that orders should be made pursuant to s 413(1)(a), s 413(2) and, to the extent necessary under s 413(1)(g), transferring the Customer CV Contracts and Dealer CV Contracts to DTFSA.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McKerracher.
Parties
Applicant/Plaintiff:
Mercedes-Benz Financial Services Australia Pty Limited
Respondent/Defendant:
Daimler Truck Financial Services Australia Pty Limited, in the matter of Mercedes-Benz Financial Services Australia Pty Limited