NRMA Limited (Application of); NRMA Insurance Limited (Application of) [2000] NSWSC 49

1 The observations which follow are interim reasons, expressed in summary form for the orders I have earlier made under s411(1) of the Corporations Law. These are to convene scheme meetings in various classes in relation to NRMA Limited ("Association") and NRMA Insurance Limited ("Insurance") and to approve the explanatory statement to be sent to members, incorporated in the Information Memorandum. The fuller judgment to follow will identify and deal with all of the substantive issues so far raised in relation to these proposals. 2 This is one of the most complex of schemes, dealing as it does with demutualisation and the other interdependent steps that make up the proposals to be put to members. Two objectors have appeared, Mr Parker appearing for himself and Mr Talbot represented by Mr Camilleri. There have in addition been other objectors who, though not appearing, made written submissions. Their names are noted in the orders I have earlier made, convening the scheme meetings in various classes for Association and Insurance. 3 All those objectors have assisted the Court by testing various aspects of the scheme documents and the overall arrangements. I express my appreciation to them firstly in producing written submissions on short notice so their concerns could be properly articulated and secondly in allowing the oral debate on them to proceed within reasonable limits compatible with the need to have sufficient time to understand and test any issues properly raised. Necessarily that has inhibited lengthy exegesis, but not at the cost of a proper process to ensure that any threshold concerns regarding the schemes and their documentation have been fairly considered. It must be borne in mind that applications for the orders I have made are under s411(1) of the Corporations Law to be made "in a summary way". The scheme approval stage (see 7 below) follows later and can allow exploration in greater depth if the case to do so is made out. 4 These present schemes, unusually, have taken as long as three weeks from first filing and several hearings to reach the point where I have been satisfied to make these orders. That reflects the scrutiny they have received not only from the Court but also ASIC. This is in circumstances where individual members of the NRMA Group have strong feelings and concerns about what amounts to a major restructure of Australia's leading motoring association NRMA Limited and leading general insurer NRMA Insurance Limited, each long constituted as mutuals (and as companies limited by guarantee). That restructure has as its intended end point the demutualisation of Insurance but not Association, and the allocation of shares in the new parent of Insurance ("NIGL") in return for extinction of all existing membership rights in Insurance. These new shares are to go to the now members of Insurance plus to the current members of Association who under the schemes become members of Insurance. They are allocated in predetermined proportions; ten per cent of the shares also goes to Association (to be sold down to two per cent). Association and Insurance will operate for the future under business relationship agreements sharing the NRMA name after severing their existing constitutional links. It is intended to list the shares in NIGL but that cannot be guaranteed. 5 What are the requirements to be satisfied before scheme meetings can be convened? Firstly, the scheme documents, so far as can be practicably achieved from the review process that the Court undertakes, must fairly present the proposals to be considered by the members. The Court's task is not to inhibit the schemes' commercial consideration by members. Once the schemes have been fairly put to them with nothing misleading or deceptive and with all necessary disclosure including any expert opinion, members become the decision-makers in an act of corporate democracy. Ultimately the proponents of the scheme document must take legal responsibility for any failure in disclosure, as there are limits upon how far the Court can probe, even assisted by ASIC. 6 This is perhaps the first case that the scheme documents now contain not only a contents section and a general set of headings to direct the reader but also a comprehensive index. The dilemma for the proponents of schemes such as this is not only to give members the wood for the trees but to make sure that there is nothing deceptive or misleading. Where, as here, the nature of what is to be presented is inherently complex, that task is especially difficult. It has been assisted by these features and by there being an opening summary outline of the proposal. I am satisfied that those involved in the preparation of these scheme documents and the Information Memorandum have done all that they could reasonably do to produce documents which are accessible to the reader, who should not have to be a skilled company lawyer or accountant to understand at least their substance. 7 The second requirement is that the documentation and the schemes embodied in them must be such as, if approved by the members by the necessary majorities, should ordinarily be expected to be approved by the Court. That involves identifying any threshold legal impediments. The Court is not however precluded from reaching a different view at the approval stage of the scheme after the relevant votes have occurred, in contrast to the more limited task imposed on the Court at this meeting convening stage. If therefore it be the case that there be some potential illegality that presents itself as a threshold issue at this juncture, it is necessary to consider that issue as thoroughly as can be done in the time available. I am confident that in the present case that has occurred and that particular issues raised either by myself or objectors have been adequately considered for the purposes of the orders I have now made. 8 I raised the issue of the length of time members would have to consider the documents. I believe that has been sufficiently accommodated by the time period which exceeds the twenty-one days required by the Corporations Law by some seven days or so depending on when the last tranche of documents could be posted and received. It must not be forgotten that the NRMA membership numbers, in the case of the Association 1.8 million and in the case of Insurance 1.2 million so the logistical task is a very considerable one. The orders I have made accommodate a staggered mailing in March to achieve this. 9 I have stated that I will be handing down a more comprehensive judgment which elaborates more fully on these reasons. In particular it will deal with the threshold legal issues so far raised. That judgment and these interim reasons will be available for inspection by any member, whose attention will be drawn to it in the Information Memorandum. It will also be available on the Supreme Court website (www.lawlink.nsw.gov.au/sc). I hope to include in the final judgment a plain English summary of conclusions reached, to assist members. At this point no legal impediment has so far been made out as would prevent the schemes, and their associated steps, being put to members for their approval. I include in that any legal impediment based on the mutual character of Association and Insurance. Nor to date has any basis been made out for attributing legally improper motives to the directors in promulgating these proposals and setting in hand their implementation, including the earlier imposed cut-off date for membership. In that regard, I have emphasised to the proponents of these proposals the need for strict neutrality in dealing with queries concerning these proposals and in publicity generally, so that the scheme documents speak for themselves. Finally, I should emphasise that the conclusions I have reached are based on the material presently before me. 10 It remains for me to acknowledge all those involved in the long hours and intense work associated with this scheme and then in preparing the submissions that I have requested including many of the young solicitors who have worked round the clock; also those at the Bar table and those instructing them in meeting urgent deadlines.

At a glance

Court

Decision date

Before

Source

Judgment (8 paragraphs)