Mincom Ltd v EAM Software Finance Pty Ltd - [2010] FCA 1309 - FCA 2010 case summary — Zoe

CTHFCA

Mincom Ltd v EAM Software Finance Pty Ltd

[2010] FCA 1309

Federal Court of Australia|2010-11-26|Before: Besanko J

View original source

At a glance

Source facts

Court

Federal Court of Australia

Decision date

2010-11-26

Before

Besanko J

Source

Original judgment source is linked above.

Judgment (24 paragraphs)

[1]

Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (Act), there be convened a meeting (Scheme Meeting) of all holders of fully paid ordinary shares of the Plaintiff for the purpose of considering and, if thought fit, agreeing, with or without modification, to a scheme of arrangement between them and the Plaintiff in the form of the draft Scheme of Arrangement a copy of which is in Exhibit A ("Scheme").
The Scheme Meeting be held at 11:00 am on 9 September 2009 at the Holiday Inn Adelaide, 65 Hindley Street, Adelaide, South Australia.
The draft: (a) explanatory statement for the Scheme, a copy of which forms part of the documents comprising the Scheme Booklet which is Exhibit A; (b) voting forms for the resolutions to be passed at the Scheme Meeting copies of which are in Annexure 'JSK9' to the affidavit of John Storrie Keeves sworn on 27 July 2009, be and are hereby approved.
On or before 3 August 2009 there be despatched by prepaid ordinary post (or in the case of overseas members, by airmail), to each ABB Grain Shareholder appearing in the register of the Plaintiff's shareholders, a document substantially in the form or to the effect of the Scheme Booklet together with the voting forms, election forms, reply paid envelopes and fly sheets.
The meeting convened pursuant to paragraph 1 will be conducted in accordance with the Constitution of the Plaintiff and Part 2G.2 of the Act, except to the extent provided otherwise by these orders.
ABB Grain Shareholders who are recorded in the share register of the Plaintiff at 6:30 pm (Adelaide time) on 7 September 2009 shall be eligible to vote at the Scheme Meeting.
A form of proxy in respect of the Scheme Meeting will be valid and effective if: (a) delivered to the Plaintiff at care of Computershare Investor Services Pty Limited by use of the reply paid envelope; (b) delivered to the Plaintiff at the Plaintiff's registered office at the Australian Barley Board, Level 1, Grain House, 123-130 South Terrace, Adelaide, SA, 5000; or (c) received by mail at: (i) the Plaintiff's registered office at the Australian Barley Board, Level 1, Grain House, 123-130 South Terrace, Adelaide, SA, 5000; or (ii) the Plaintiff at care of Computershare Investor Services Pty Limited, GPO Box 242, Melbourne, Victoria, 3001, Australia; or (d) successfully transmitted by facsimile to: (i) the Plaintiff's registered office; or (ii) the Plaintiff at care of Computershare Investor Services Pty Limited on 1800 783 447 (from within Australia) or +61 3 9473 2555 (from outside Australia); in each case provided the proxy is received not later than 11:00 am on 7 September 2009.

[10]

The proposed scheme 6 In this case the proposed scheme of arrangement was between ABB Grain and its ordinary shareholders on the register at a certain date. The scheme involved the proposed acquisition of all of the ordinary shares issued in ABB Grain by Viterra Australia Pty Ltd ("Viterra Australia"). Viterra Australia was a proprietary company registered under the law of Victoria. It was a wholly owned subsidiary of Viterra Inc ("Viterra") which was a company registered under Canadian law. If implemented the scheme would result in ABB Grain becoming a wholly owned subsidiary of Viterra Australia. 7 The proposed explanatory statement was part of a document called a scheme booklet which booklet consisted of two parts (Part A and Part B). Part B included five appendices. Appendix 1 was the Implementation Agreement between ABB Grain, Viterra and the company which became Viterra Australia. The Implementation Agreement was dated 19 May 2009. Appendix 2 was the Scheme of Arrangement involving ABB Grain and the registered holders of ABB Grain shares and it contained the terms and conditions of the proposed scheme of arrangement. Appendix 3 was a Deed Poll to be entered into by Viterra and Viterra Australia in favour of each holder of ABB Grain shares. The Deed Poll was executed three days before the first Court hearing. The shareholders are referred to as scheme shareholders. Appendix 4 was the Notice of the Scheme Meeting at which the scheme shareholders would be asked to consider and, if it were thought fit, to pass the following resolution. That pursuant to and in accordance with section 411 of the Corporations Act, the scheme of arrangement proposed to be entered into between ABB Grain and the ABB Grain Shareholders, as more particularly set out in the Scheme Booklet of which the notice of this meeting forms part, is agreed to (with or without modification as approved by the Court). 8 Appendix 5 was Notice of Constitutional Amendment Meeting. The purpose of the meeting which was the subject of that notice was to consider and, if it were thought fit, agree to amend the constitution of ABB Grain to remove the 15 per cent limit on the amount of issued share capital in ABB Grain that any one ABB Grain shareholder (together with their associates) could hold. That constitutional amendment was necessary if the scheme was to become effective. The constitutional amendment was to take effect if the scheme became effective and proceeded. 9 Under the scheme it was proposed that a shareholder of ABB Grain would receive, at their election, a cash payment of $8.70 per ABB Grain share ("maximum cash consideration") or 0.9062 common shares in the share capital of Viterra per ABB Grain share or 0.9062 CHESS Depository Interests ("CDIs") in respect of Viterra shares ("maximum script consideration") or a consideration of a cash payment of $4.35, and 0.4531 Viterra shares or 0.4531 Viterra CDIs per ABB Grain share ("standard consideration"). The ABB Grain shares were to be transferred to Viterra Australia. The Viterra shares were to be listed on the Toronto Stock Exchange and the Viterra CDIs were to be listed on the ASX. 10 The Implementation Agreement made special provision for persons identified as an "Ineligible Foreign ABB Grain Shareholder", being an ABB Grain Shareholder whose address as shown in the Register was a place outside Australia and its external territories, New Zealand and the United States of America (clause 1). Subject to a discretion in clause 3.4 of the Implementation Agreement, those persons were to have any Viterra script they would otherwise have received aggregated and sold on their behalf, using a Cash Out Facility established under clause 5.7 of the Scheme of Arrangement. (See Re Hills Motorway Ltd (2002) 43 ACSR 101 at 103-104 [9] per Barrett J.) 11 The total cash consideration and the total script consideration were limited under clause 5 of the Scheme of Arrangement. The total cash consideration was capped at $1.13 billion approximately. The standard consideration was to be paid first. If the available cash consideration after that payment was not sufficient to satisfy the shareholders who had elected to receive maximum cash consideration then those shareholders would be scaled back on a pro rata basis. The balance of that consideration would be in script or cash from the Cash Out Facility if they elected to use it (clauses 5.3 and 5.7). 12 The total script consideration was capped at approximately 78.3 million shares. The standard consideration was to be paid first. If the available script consideration was not sufficient to satisfy the shareholders who had elected to receive maximum script consideration then these shareholders would be scaled back on a pro rata basis. The balance of their consideration would consist of cash consideration. 13 The scheme included the Deed Poll whereby the obligations of Viterra and Viterra Australia were to be secured. Under the scheme no ABB Grain shares were to be transferred to Viterra Australia pursuant to the scheme until Viterra Australia had transferred the aggregate amount of the cash component of the scheme consideration into an Australian denominated trust account with an Australian bank operated by ABB Grain as trustee for the scheme shareholders and, in relation to script consideration, Viterra shares and Viterra CDIs had been issued to relevant scheme shareholders and the nominee and the relevant registers had been updated to record their issuance. 14 If the scheme were implemented, ABB Grain would pay a fully franked cash dividend of $0.41 per ABB Grain share payable to all scheme shareholders on the dividend record date regardless of which form of scheme consideration they elected to receive. 15 It was proposed that the meeting to consider the constitutional amendment, which would be an extraordinary general meeting, would take place immediately after the scheme meeting and that ABB Grain shareholders recorded on the ABB Grain share register on the Record Date as defined would be entitled to vote at the meeting. As I have said, the amendment to the constitution was to be conditional upon the scheme becoming effective. In the event the constitutional amendment was approved by the requisite majority but the scheme did not become effective, the ABB constitution would not change.

[11]

The issues under s 411(1) of the Act 16 The formal requirements in s 411(1) were established in this case. ABB Grain was a Part 5.1 body as defined in s 9 of the Act. 17 A scheme of arrangement designed to effect the acquisition of shares of one company by another is a "compromise or arrangement within the meaning of s 411(1) of the Act: Re Bank of Adelaide (1979) 22 SASR 481; Re Adelaide Bank Limited [2007] FCA 1582 ("Re Adelaide Bank Limited") at [14]. 18 ABB Grain applied, by way of Originating Process, for an order under s 411(1) of the Act. 19 The Originating Process and a copy of the draft scheme booklet (including attachments and annexures) were served on ASIC more than 14 days before the first hearing date and I was satisfied that ASIC had a reasonable opportunity to examine those documents and to make submissions to the Court in relation to the proposed scheme of arrangement and draft scheme booklet. 20 The discretion of the Court to make an order under s 411(1) was enlivened. 21 On the issue of the approach the Court should take to the exercise of the discretion, ABB Grain referred me to the following passage in the reasons for judgment of Barrett J in Re Westfield Holdings (2004) 49 ASCR 734 at 736 [4]: The court's role on a s 411 application of this kind has been described in a number of cases. According to the formulation adopted by Santow J in Re NRMA Insurance Ltd (2000) 156 FLR 349; 33 ACSR 523, the court must see, on the material placed before it, that the proposal fits within the statutory concept of arrangement or compromise, that there will be available to members all the main facts relevant to the exercise of their judgment, that ASIC has had a reasonable opportunity to examine the proposal and that the scheme is so conceived and presented as to that structure, purpose and effect that there is no apparent reason, so far as can be foreseen, why it should not, in due course, receive the court's approval if the necessary majority of members' votes is achieved. To substantially similar effect are observations of Austin J in Re GIO Building Society Ltd and ASIC (2001) 39 ACSR 77, French J in Re Foundation Healthcare Ltd (2002) 42 ACSR 252 and Parker J in Re Ranger Minerals Ltd (2002) 42 ACSR 582. Slightly different, but by no means conflicting are the criteria enunciated by Emmett J in Re Central Pacific Minerals NL [2002] FCA 239; BC200200768 and repeated in the following terms by Conti J in Re CSR Ltd (2003) 45 ACSR 34 at 37: (i) the likelihood or otherwise that the court will approve the scheme of arrangement, if the statutory majority of shareholders is achieved at the proposed scheme meeting; (ii) whether there has been compliance with such preliminary matters as are relevant to the holding of the meeting; (iii) where there will be sufficient disclosure, to those persons and entities who will be affected by the scheme of arrangement, of its detail and effects; and (iv) whether there has been reasonable opportunity for the commission to examine the terms of the scheme of arrangement. 22 The authorities make it clear that while the Court will consider these matters carefully, it will not substitute its commercial judgment for that of the class of member to which the scheme of arrangement is directed: see, for example, Re ACM Gold Ltd (1992) 7 ACSR 231 at 235-236; Re Adelaide Bank Limited at [24]. 23 I was satisfied that the scheme of arrangement was likely to be approved by the Court if the statutory majority of members as defined in s 411(4)(a)(ii) approved the scheme of arrangement. First, the directors of ABB Grain unanimously recommended to members that they approve the scheme. Secondly, an independent expert (KPMG Corporate Finance (Aust) Pty Ltd) had examined the proposed scheme and prepared a report. In the opinion of the independent expert, the offer to ABB shareholders was fair and reasonable and was in their best interests. As ABB Grain pointed out, the scheme consideration and the ABB Grain dividend for each ABB Grain share represented a premium of between 18 per cent and 82 per cent over the market price of ABB Grain shares based on the one-month weighted average prices of ABB Grain shares on and prior to 28 April 2009, being the period before the announcement of the proposed scheme. Thirdly, I was satisfied that ABB Grain members would receive sufficient information to assess the advantages and disadvantages of the proposed scheme. 24 I was satisfied that the scheme booklet disclosed the material which needed to be disclosed under the Corporations Act 2001 (Cth) ss 411 and 412, Corporations Regulations reg 5.1.01 and Schedule 8 Part 3. In its written submissions ABB Grain included a schedule in which it identified each matter which had to be disclosed and the place where each matter was disclosed in the scheme booklet. I considered the table and was satisfied that all appropriate disclosure requirements were met. 25 I was satisfied, having regard to the affidavits (including exhibits) of Mr John Keeves sworn on 27 July and 29 July 2010 respectively that ASIC had a reasonable opportunity to examine the terms of the proposed arrangement and the scheme booklet and to make submissions to the Court in relation to those matters. As it happened, ASIC did not appear either at the first Court hearing or the second Court hearing. 26 A number of particular matters have been considered by the Courts in previous cases. Those matters have included the approach which should be taken to the credit or performance risk under the scheme, to deemed warranties, to no shop and no talk provisions and to break fees. I considered those matters in this case.

[12]

The credit or performance risk 27 In previous cases the Courts have considered whether the shareholders may be left in a position where they have transferred their shares, but there is a delay in providing the scheme consideration and their only remedy is to sue on a Deed Poll. 28 Under the scheme, Viterra Australia will only receive the ABB Grain shares once: 1. Viterra Australia had paid the aggregate amount of the cash component of the scheme consideration to ABB Grain, to be held on trust for scheme shareholders (Scheme of Arrangement clauses 4.2(a) and (b)(ii)(A) and 5.8(a)(i)); and 2. Viterra, in relation to the scheme consideration comprised of Viterra shares, has procured that the name and address of each scheme shareholder entitled to receive Viterra shares is entered in the Register of Viterra shareholders (Scheme of Arrangement clause 4.2(a) and (b)(ii)(B), 5.8(b)(i)); and 3. Viterra, in relation to the scheme consideration comprised of Viterra CDIs, has (1) issued to CHESS Depository Nominees Pty Limited ("CDN") to be held on trust, that number of Viterra shares that will enable CDN to issue CDIs to each scheme shareholder electing to receive Viterra CDIs as scheme consideration; (2) procured that the name and address of CDN is entered in the Viterra Register; (3) procured that CDN issues to each relevant scheme shareholder the number of shares to which it is entitled; (4) procured that the name of each such scheme shareholder is entered in the records maintained by CDN as the holder of the CDIs issued to that scheme shareholder; (5) in relation to each relevant scheme shareholder who held ABB Grain shares on the CHESS sub-register, procured that the CDIs are held on the CHESS sub-register; and (6) in relation to each relevant scheme shareholder who held ABB Grain shares on the issuer sponsored subregister, procured that the CDIs are held on the issuer sponsored subregister. (Scheme of Arrangement clauses 4.2(a) and (b)(ii)(B) and 5.8(c).) 29 Under the Deed Poll, Viterra and Viterra Australia must provide the scheme consideration in accordance with the terms of the scheme (clause 4.1). 30 Under clause 4.2(c) of the Scheme of Arrangement, ABB Grain, Viterra and Viterra Australia are not required to procure the sending of cheques, share certificates, holding statements or allotment advices, and are not required to make any cash payments by electronic means in respect of the scheme consideration, prior to ABB Grain shares being transferred to Viterra Australia. The Scheme of Arrangement provides that all such steps must be taken within 10 business days after the Implementation Date. The requirements in relation to the Cash Out Facility are dealt with in clause 5.7 of the Scheme of Arrangement. 31 On 24 July 2009 the directors of ABB Grain resolved that, subject to the scheme proceeding, each ordinary shareholder of ABB Grain would be paid a fully franked special dividend of $0.41 per share. The resolution was amended by circular resolution in a way which is not presently material. 32 Clause 4.3 of the Scheme of Arrangement requires ABB Grain on or before the business day before the implementation date to deposit an amount equal to the total amount payable by ABB Grain in respect of the ABB Grain Special Dividend in cleared funds in an account in its name on trust for scheme shareholders. The Directors of ABB Grain determined that the payment of the ABB Grain Special Dividend was in the best interests of ABB Grain and ABB Grain shareholders and did not materially prejudice the company's ability to pay its creditors (Chapter 12 of Part B of the Scheme Booklet). 33 I was of the view that the above provisions meant scheme shareholders were adequately protected against any credit or performance risk (Re SFE Corp Ltd (2006) 59 ACSR 82; Re APN News and Media Ltd (2007) 62 ACSR 400 ("Re APN News and Media"); Re Investa Properties Ltd (2007) 25 ACLC 1186).

[13]

The deemed warranty 34 Clause 7.3 of the Scheme of Arrangement was in the following terms: Each Scheme Shareholder is deemed to have warranted to Viterra and Viterra Australia, and appointed and authorised ABB Grain as its attorney and agent to warrant to Viterra and Viterra Australia, that their Scheme Shares will, at the date of transfer of them to Viterra Australia, be fully paid and free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, including any restrictions on transfer, and that they have full power and capacity to sell and to transfer their Scheme Shares to Viterra Australia under the Scheme. ABB Grain undertakes that it will provide such warranty to Viterra and Viterra Australia as agent and attorney of each Scheme Shareholder. 35 This clause was in very similar, although not identical, terms to the deemed warranty considered by Lindgren J in Re APN News and Media at 412-413 [57]-[63]. His Honour described the purpose of the clause he was considering in the following way (at 412 [60]): What is important, in my view, is that the deemed warranty is no more than a device directed to ensuring that a scheme participant whose shares are subject to an encumbrance is not unfairly advantaged. The amount of the damages payable for breach of the warranty is the amount required to discharge the encumbrance. 36 Lindgren J rejected the criticism of such a clause by Fryberg J in Mincom Ltd v EAM Software Finance Pty Ltd (2007) 61 ACSR 266 ("Mincom"). His Honour said (at 413 [62]): In Mincom Ltd v EAM Software Finance Pty Ltd (2007) 61 ACSR 266, Fryberg J described (at [39]) a deemed warranty clause almost identical to the present one as: [39] … onerous, unreasonable and calculated to catapult unsuspecting shareholders who have not read the small print of the arrangement in the schedule to the explanatory statement into a state of breach of warranty. As will be clear from what I have said above, I respectfully disagree. At first blush the deemed warranty may appear to attract criticism along these lines, but I think the criticism disappears once it is appreciated that its purpose and effect are as I have described them. Perhaps a better way of framing the provision would have been to avoid the language of warranty, and, instead, to provide simply that if shares continue to be subject to encumbrances after transfer, the shareholder would, upon demand by INMAL, pay the amount required to discharge the encumbrance to the encumbrancee if the encumbrance remains outstanding, or to INMAL if INMAL had already discharged it. 37 The approach taken by Lindgren J in Re APN News and Media has been followed in subsequent cases. I refer by way of example to Re Adelaide Bank Limited at [33] and Re St George Bank Ltd [2009] 68 ACSR 480 at [11]. 38 It is important that the attention of shareholders be drawn to such a clause. I was satisfied that the scheme booklet did that (Part B, section 1.7, page 15). 39 The deemed warranty was not a reason to refuse to make an order under s 411(1) of the Act.

[14]

The no shop and no talk provisions 40 The Implementation Agreement, which, as I have said, was dated 19 May 2009, contained exclusivity provisions in clause 11.7. The exclusivity period was from 19 May 2009 to the earlier of one of: the termination of the agreement in accordance with its terms; the implementation date; one of 30 November 2009 or (in certain circumstances) 30 December 2009; or such later date as ABB Grain and Viterra agreed in writing. 41 During the exclusivity period there was a no shop obligation (clause 11.1) and no talk obligation (clause 11.2) on ABB Grain in relation to any competing proposal. There was a fiduciary carve out in relation to the no talk obligation which was in the following terms: (a) Nothing in clauses 2, 4, 7 or 11.2 prevents any action by or on behalf of ABB Grain to respond to any bona fide approach by a third party in respect of a Competing Proposal not solicited in breach of clause 11.1 if, after consultation with ABB Grain's financial advisers and receiving written legal advice from external legal advisers, the Board of ABB Grain believes in good faith and acting reasonably that: (i) the Competing Proposal is or is capable of becoming a Superior Proposal; and (ii) failure to take such action would involve, or would be likely to involve, a breach of the duties of the directors of ABB Grain. 42 There was also a clause under which ABB Grain was required to give Viterra an opportunity to match or surpass any superior proposal (as defined in clause 1) received from a third party (clause 11.5). 43 At the time of the first Court hearing, the exclusivity period could have been as short as 19 May 2009 to 11 September 2009 (that is, the date planned for the approval of the scheme by the Court) namely, a period of a little under four months or, assuming the parties did not agree to a later date, as long as 19 May 2009 to 31 December 2009, namely, a little over seven months. 44 In Re Arthur Yates & Co Ltd (2001) 36 ACSR 758, Santow J considered whether the Court should approve a scheme of arrangement which included no-shop provisions. His Honour considered that such provisions should satisfy the following requirements: 1. The no-shop provision should be for no more than a reasonable period which was capable of precise ascertainment; 2. Whether the provision deals with actively soliciting an alternative proposal or simply dealing with an unsolicited proposal, in either case the provision should be framed so that it is subject to an overriding obligation not to breach the directors' fiduciary duties or be otherwise unlawful; and 3. There should be adequate prominence given to the provision in the explanatory memorandum set to shareholders. 45 The effect of clause 11 is that ABB Grain must not solicit a competing proposal or involve itself in discussions about a competing proposal save that it may respond to a competing proposal if, after taking advice from its financial advisers, it reasonably believes the competing proposal is or is capable of becoming a superior proposal and, after taking written legal advice from external legal advisers, it reasonably believes that the failure to respond would involve or would be likely to involve a breach of the duties of the directors of ABB Grain. 46 The exclusivity period was capable of precise ascertainment and was for a reasonable period. If the scheme was approved, the period would be a little under four months. That was not an unreasonable period. The period could be as long as a little over seven months but that was not an unreasonable period having regard to the nature of the transaction (see Re Dyno Nobel Ltd [2008] VSC 154 at [26]-[27]). Any proposal by the directors of ABB Grain for an agreement as to a later date would be subject to their statutory and fiduciary duties. 47 In my opinion, the fiduciary carve out was appropriate in the circumstances. It is true that the no-shop obligation was not subject to the fiduciary carve out. However, I did not think that that was inappropriate. The Takeovers Panel Guidance Note 7: Lock-up Devices provides at [7.37]: That Panel generally does not require that a no-shop agreement be constrained by a fiduciary exception, because it considers that a no-shop agreement is materially less anti-competitive than a no-talk agreement: a no-talk agreement may diminish competition in the market for target shares by preventing an interested party from bidding, whereas a no-shop agreement only prevents the target from soliciting additional bidders or alternative transactions. 48 In my opinion, the exclusivity clauses were given adequate prominence in the information provided to scheme shareholders. The substance of the clause was summarised under the heading "Possibility of a superior proposal" in Part A of the Scheme Booklet under the heading "Other relevant considerations" and was outlined in more detail in section 1.8 of Part B under the heading "Exclusivity Arrangements".

[15]

The break fee 49 Clause 13.2 of the Implementation Agreement required ABB Grain to pay a break fee of $16 million (exclusive of GST) in certain prescribed circumstances. 50 In APN News and Media, Lindgren J said (at 408-409 [43]): Provisions for the payment of break fees are not uncommon in agreements for schemes of arrangements and in merger and takeover agreements, both in Australia and overseas. Such provisions have not been an obstacle to the making of orders under s 411(1) of the Act for the convening of meetings. In Re SFE Corporation Ltd at [6]-[7], Gyles J said that he would be dissuaded from making an order by a break fee only if the amount was of such magnitude that it could influence voting or if there were some other unusual circumstances. 51 I did not consider that the break fee in this case was of such magnitude that it could influence voting or that there were other unusual circumstances. 52 In this case, the break fee was not payable simply because the shareholders of ABB Grain did not approve the scheme of arrangement and therefore it could not influence the voting at the meeting (Re Bolnisi Gold NL (No 2) (2007) 165 FCR 45 at 46 [2]; Re Adelaide Bank Limited at [31] per Lander J). 53 The break fee in this case was 1 per cent of the equity value of ABB Grain as at 27 July 2009. The basis of that calculation was as follows:

There are 172,802,130 issued shares in ABB Grain.
172,802,130 x $8.88 (being the last recorded sale price of ABB Grain shares on 27 July 2009) = $1,520,658,744.
$16,000,000/$1,520,658,744 x 100 = 1 per cent. 54 The guideline of the Takeovers Panel was that a break fee of not more than 1 per cent of the equity value was unlikely to be either anti-competitive or coercive: Guidance Note 7: Lock-up Devices at [7.18]. Lindgren J had regard to this guideline in Re APN News and Media (at 409-411 [48]-[53]) (see also Re Macquarie Capital Alliance Ltd (2008) 67 ACSR 484 ("Re Macquarie Capital Alliance Ltd") at [46]; Re Hostworks Group Limited (2008) 26 ACLC 137 at [40] ff.; Re Coles Group Limited (2007) 25 ACLC 1380 at [74]; Re Macquarie Private Capital A Ltd (2008) 26 ACLC 366 ("Re Macquarie Private Capital A Ltd")at [21]-[22]; Re MBF Australia Ltd [2008] FCA 428 at [36]. 55 There was clear disclosure of the break fee in the scheme booklet (Part B Section 1 paragraph 1.9). 56 There was evidence before me in the form of an affidavit of Mr Keeves that the break fee was the result of arm's length commercial negotiation between ABB Grain on the one hand, and Viterra and Viterra Australia on the other, and that both parties were separately represented by solicitors and financial advisers. In addition, Mr Keeves expressed the opinion that the break fees were commercially reasonable in all the circumstances. 57 Clause 13.1 of the Implementation Agreement provided as follows: 13.1 Background (a) ABB Grain and Viterra believe the Scheme will provide significant benefits to ABB Grain, Viterra, Viterra Acquirer and their respective shareholders and acknowledge that they will incur significant costs in connection with performing their obligations under this Agreement and the Scheme. (b) In these circumstances, each party: (i) has requested that provision be made in this Agreement for the payments set out in clauses 13.2 and 13.3, without which they would not have entered into this Agreement; and (ii) believes that it is appropriate to agree to the payment which it agrees to make under this clause 13 in order to secure the participation of the other parties in the Scheme. (c) ABB Grain and Viterra each acknowledges that the amount it has agreed to pay under this clause 13 is an amount which is appropriate to compensate the other party or parties (as the case may be) for their reasonable external and internal costs and opportunity costs in connection with the Scheme. 58 In the circumstances, the provisions dealing with break fees did not amount to a reason to decline to make an order under s 411(1) of the Act.

[16]

Section 411(17) of the Act 59 The Act provides that the Court is not to approve a compromise or an arrangement under s 411(4) unless it is either satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Act or there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement. The Court need not approve a compromise or arrangement merely because ASIC has produced such a statement (s 411(17)). 60 The practice of ASIC is not to produce a written statement under s 411(17)(b) (if it produces one at all) until the time of the second court hearing, that is, after the meeting has been held (Regulatory Guide 60 Schemes of Arrangement - s 411(17) para 21). 61 The weight of authority is that the matters raised by s 411(17) are considered at the second court hearing when it will be known whether ASIC will produce a statement to the effect that it has no objection to the compromise or arrangement (Re Macquarie Private Capital A Limited at [27] and [31]; Re Macquarie Capital Alliance Ltd (2008) 67 ACSR 484 at [49]; Re Adelaide Bank Limited at [24]; Re APN News and Media Limited at [65]. 62 Notwithstanding the views of ASIC, the Court may consider whether the scheme of arrangement has been proposed for the purpose of enabling avoidance of the operation of any of the provisions of Chapter 6 of the Act: Re Foundation Healthcare Ltd (No 2) (2002) 43 ACSR 680; [2002] FCA 973. 63 I record the fact that there was evidence put before me from Mr Ashley Roff to the effect that he was directly involved in the negotiations which led to the Implementation Agreement and it was never suggested to him during the negotiations that the transaction should be structured as a scheme of arrangement in order to avoid the operation of any provisions of Chapter 6 of the Act and, as far as he was aware, it was not proposed for that purpose.

[23]

Approval of the scheme 75 The authorities suggest that in considering whether to make an order approving a scheme a Court should consider the following: 1. Whether the procedural matters relating to the meeting of shareholders convened to consider the Scheme have been complied with; 2. Whether the meeting of shareholders convened by the order of the Court has approved the Scheme with the required majority under s 411(4)(b); 3. Whether the Scheme is fair and reasonable; and 4. Whether the remaining requirements of the Act have been satisfied. (See Re Hostworks Group Limited (No 2) [2008] FCA 248 ("Hostworks Group Ltd (No 2)" at [10]-[23] per Mansfield J; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113 at [18]-[24] per Jacobson J; Re Permanent Trustee Co Limited [2002] 43 ACSR 601 at [8]-[10] per Barrett J; Re Central Pacific Minerals NL [2002] FCA 239 at [8]-[14] per Emmett J.) 76 As far as procedural matters were concerned, I was satisfied that, subject to one matter, there had been compliance with the orders made by the Court at the first Court hearing. 77 The fourth order made by the Court at the first Court hearing was in the following terms: On or before 3 August 2009 there be despatched by prepaid ordinary post (or in the case of overseas members, by airmail), to each ABB Grain shareholder appearing on the register of the Plaintiff's shareholders, a document substantially in the form or to the effect of the Scheme Booklet together with the voting forms, election forms, reply paid envelopes and fly sheets. 78 The evidence before me established that on 3 August 2009, 9797 packs containing the relevant information were lodged with Australia Post for posting on that day, and that on 4 August 2009 a further 10,978 packs were lodged for posting. Although not required to do so, ABB Grain caused packs to be mailed to any person newly registered as an ABB Grain shareholder in the period from 4 August to 4 September 2009. 79 At the second Court hearing, I made an order that the fourth order made at the first Court hearing be varied nunc pro tunc so that the date 4 August 2009 is substituted for 3 August 2009. A similar order was made by Mansfield J in Re Hostworks Group Ltd (No 2) (at [6]-[7]). 80 It seemed to me that it was appropriate to make such an order. The delay was only one day and it did not result in members being given less than 28 days notice of the meeting as required by s 249HA of the Act. There was no suggestion that the delay of one day had caused or may have caused any substantial injustice (s 1322(2) and see also s 1322(4)(d)). 81 As far as shareholder approval was concerned, at the meeting 60.45 per cent of Scheme shareholders, representing 83.57 per cent of ABB Grain's share capital, voted in favour of the Scheme. The requirements of s 411(4)(b)(ii) were satisfied. 82 As far as whether the scheme was fair and reasonable was concerned, I was satisfied that it was fair and reasonable. The scheme was supported by all the directors of ABB Grain. By reference to the volume weighted average price of ABB Grain shares up to and including 27 April 2009, being the period before the announcement of the proposed scheme, the implied valuation range of the aggregate of the scheme consideration together with the ABB Grain Dividend as at the announcement of the scheme on 19 May 2009 represented a premium of 47 per cent to 51 per cent. The independent expert expressed the opinion and continued to hold the opinion that the scheme was fair and reasonable and therefore in the best interests of shareholders in the absence of a superior proposal. 83 As far as satisfaction of other requirements of the Act was concerned, the scheme booklet, being the explanatory statement, was registered with ASIC as required by s 412(6) of the Act. ASIC stated that it has no objection to the Scheme (s 411(17)). 84 I made an order exempting ABB Grain from the requirement in s 411(11) as I considered it was appropriate to do so (s 411(12)). It was appropriate having regard to the nature of the scheme being an acquisition of shares and not involving, for example, a variation of rights. 85 I was satisfied that all other pre-conditions to the Court's approval were satisfied. 86 On the second hearing it was again brought to the Court's attention that the issuer intended to rely on the Court's approval for the exemption under s 3(a)(1) of the Securities Act 1933 of the United States.