[8] It is not the function of the Court on an application for a order convening a meeting to consider the business or commercial efficacy of the proposed scheme, as that is a matter for the shareholders nor is it the Court's role to express a view on whether the proposed scheme should be approved, if the requisite majority of votes is obtained: Re Sonodyne International Limited (1994) 15 ACSR 494, 497. An order of the Court that the meeting be convened is not an indication that the Court has a view as to the merits of the scheme or as to how shareholders should vote."
14 In the present case, no issue arose in relation to items (a) and (b) of Davies J's formulation. As to (c), which derives directly from s 411(2) of the Corporations Act, a letter from ASIC tendered by the plaintiffs made it clear that ASIC had had the relevant opportunity. It is in relation to item (d) that comment is warranted. The matters concerning cash consideration to which I have referred raised two questions that might ultimately need to be canvassed in the context of any application for approval of the Part 5.1 scheme.
15 The first is whether there are, because of differentiation, distinct classes of holders of stapled securities and therefore, for Part 5.1 purposes, distinct classes of members, with the result that, in Part 5.1 terms, the scheme is, in reality, in part a scheme between the company and one class of members, in part a scheme between the company and another class of members and so forth. If that is the true characterisation, the situation may, at the time of any application under s 411(4)(a) for the court's approval, turn out to be one in which the court has no power to grant that approval.
16 In accordance with normal practice, the application - a combination of an application under s 411(1) and an application for judicial advice regarding progress to the meeting stage - was brought by the plaintiffs ex parte, although with an appearance, by leave, also by counsel representing BIP. In the absence of a contradictor, the court has not received full argument on the class question.
17 It follows from item (d) in Davies J's list above that, if the court sees, at the s 411(1) stage, that a scheme proposed as one between the company and a single class of its members is in reality one between the company and each of several distinct classes of members, the s 411(1) order will not be made. The class question is thus one that needs to be considered at the s 411(1) stage, albeit on the basis of the evidence provided to the court at that point and without the views of any contradictor.
18 It was submitted on behalf of the plaintiffs that no class differentiation emerges in this case. I was sufficiently persuaded that that proposition is correct to view the class possibility as something that need not prevent the proposal going to members for their consideration.
19 The key, I think, is that, as I have said, the cash element, whether for a foreign holder or for a holder who elects to participate under the Scheme Liquidity Facility, will be dictated by market prices of BIP partnership interests. The provisions are complex and, according to circumstances, market prices at slightly different times may apply to different aspects of the calculation as it relates to different people. But the important point is that the cash elements will be market based and in that way will represent a true reflection of the value of the partnership interests comprising the primary entitlement of a holder and which would have been received had it not been supplanted by cash.
20 In relation to the test for recognising classes, I would venture to repeat here what I said in Re Hills Motorway Ltd [2002] NSWSC 897; (2002) 43 ACSR 101 at [12]:
"The test is thus not one of identical treatment. It is one of community of interest. The court must ask itself whether the rights and entitlements of the different groups, viewed in the totality of the scheme's context, are so dissimilar as to make it impossible for them to consult together with a view to their common interest. The focus is not on the fact of differentiation but on its effects. The extent and nature of the differentiation must be measured in terms of the effect on the ability to consult together in a common interest or, in other words, the ability to come together in a single meeting and to debate the question of what is good or bad for the constituency as a whole and where the common good lies. Only if the differentiation destroys that ability - the word used by Bowen LJ is "impossible" - does class distinction come to prevail."
21 Given the fact that market prices will determine the cash elements receivable by all holders who do not receive the basic consideration consisting fully of partnership interests, it seemed to me that the answer, if the class question came to be debated in full, would very likely be that there was, within the body of security holders as a whole, an ability to consult together with a view to their common good. On that footing, the class possibility was not something that dissuaded the court from making the s 411(1) order.
22 The second matter arising from the pricing provisions and the cash election mechanism is another that will be relevant, if at all, when any subsequent application for s 411(4)(a) approval comes before the court. At that point, attention will necessarily be given to s 411(17):
"The Court must not approve a compromise or arrangement under this section unless:
(a) it is 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; or
(b) there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement;
but the Court need not approve a compromise or arrangement merely because a statement by ASIC stating that ASIC has no objection to the compromise or arrangement has been produced to the Court as mentioned in paragraph (b)."
23 For reasons explained in earlier cases, it is premature for the court to seek to come to any conclusion on that matter at this stage: Re Orion Telecommunications Ltd [2007] FCA 1389; Re Macquarie Private Capital A Ltd [2008] NSWSC 323; (2008) 26 ACLC 366; Re Macquarie Capital Alliance Ltd [2008] NSWSC 745; (2008) 67 ACSR 484; compare Mincom Ltd v EAM Software Finance Pty Ltd [2007] QSC 37; (2007) 61 ASR 266.
24 It must be said, however, that, as things now stand, the impression I have is, first, that the proposal as a whole could have been approached simply through a takeover scheme under Chapter 6 of the Corporations Act (or perhaps more accurately, three inter-conditional takeover schemes) and, second, that, under the Chapter 6 method it would not have been permissible for the consideration structure involving the Scheme Liquidity Facility to have been adopted since, on the face of things, it is inconsistent with s 619 which is one of the provisions implementing the purpose stated in s 602(c) which, in turn, reflects one of the fundamental Eggleston principles on which our takeover laws have been based for almost forty years.
25 If that impression is valid, there may be scope for a debate upon any s 411(4)(a) hearing as to whether the court is precluded by s 411(17) from approving the scheme. Any such debate will, of course, be forestalled if a s 411(17)(b) statement by ASIC is produced to the court. The other possibility is that ASIC does not furnish such a statement and submissions are made by some interested person against the making of an approval order. If the question whether the court should be satisfied in terms of s 411(17)(a) were to become contentious at that point, there would no doubt be a number of factors to consider and a need for evidence from relevant decision-makers within the company. The question would be whether, on an overall view and taking into account all relevant matters, the avoidance purpose with which s 411(17)(a) is concerned was at work.
26 ASIC, in accordance with its usual practice, has not, at this stage, expressed an opinion on the general issue raised by s 411(17) or on the question whether it will make a s 411(17)(b) statement. It has indicated that it will, in the ordinary course, address the matter if and when a s 411(4) application is made.
27 The court likewise is not called upon to express a view at this point. The need for it to do so will arise, if at all, only in relation to any s 411(4)(a) application.
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