Ross Human Directions Limited, in the matter of Ross Human Directions Limited [2010] FCA 1089

Pursuant to section 411(1) of the Corporations Act 2001 (Cth) ("the Act"): a) Ross Human Directions Limited ("RHD") (ACN 003 758 709) convene a meeting of all holders of shares in RHD ("RHDScheme Meeting") for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement ("the Scheme"), being the Scheme substantially in the form of the draft document, a copy of which is at Attachment B to Exhibit DC-1 to the affidavit of David Clee sworn 30 September 2010; b) The RHD Scheme Meeting be held at 11am on 11 November 2010 at the Oak Room, Swissotel, 68 Market Street, Sydney, New South Wales; and c) The explanatory statement for the Scheme, in a form substantially equivalent to the form that is Exhibit DC-1 to the Affidavit of David Clee sworn 30 September 2010, is approved.
Pursuant to section 1319 of the Act: a) RHD may determine that, for the purposes of the RHD Scheme Meeting, all the shares in RHD be taken to be held by the person, persons or bodies corporate who held them as at 7pm on 9 November 2010, in accordance with the register held and maintained by Computershare Investor Services Pty Limited (ACN 078 279 277) ("Computershare"); b) RHD may determine that only the proxy forms in relation to the RHD Scheme Meeting received by RHD or Computershare by no later than 11am on 9 November 2019 are valid; c) The Chairman of the RHD Scheme Meeting be Fergus Allan McDonald or, in his absence, Timothy Neale Trumper; d) RHD place an advertisement in The Australian newspaper, in a form substantially equivalent to the form of advertisement that appears at Exhibit DC-18 to the affidavit of David Clee sworn 30 September 2010 not later than 5 days prior to the date fixed for the hearing of any application to approve the Scheme.

REASONS FOR JUDGMENT 1 This is the first Court hearing of an application to approve a scheme of arrangement ("Scheme"). On today's application the plaintiff seeks an order pursuant to s 411(1) of the Corporations Act 2001 (Cth) ("the Act") that it convene a meeting of its shareholders to consider the Scheme; and an order pursuant to s 412(1)(a) of the Act that the explanatory statement accompanying the notice convening the Scheme meeting be approved. 2 The background to the Scheme commenced in July 2010. On 19 July 2010, the board of Ross Human Directions Limited ("RHD") announced that it had entered into a Scheme Implementation Agreement with Peoplebank Holdings Pty Limited ("Peoplebank") in relation to a proposed offer by Peoplebank to acquire the entire issued share capital of RHD. 3 The initial Peoplebank offer under the proposal was $0.615 per RHD share. The Scheme consideration was later increased on 13 September 2010 when the RHD board announced that Peoplebank had formally agreed to increase its offer to 70 cents per RHD share. 4 The Peoplebank offer of 70 cents per RHD share represents a significant premium to recent trading prices of RHD shares. There is a premium in the order of 82% to the last closing price of RHD shares on 19 July 2010 which is the date on which the proposal was announced to the ASX. 5 The Scheme contains a number of "deal protection measures" including a no-shop restriction, a no-talk restriction and a no-due diligence restriction. It also provides for a break fee of $500,000. All of these matters have been dealt with in the Scheme in accordance with the approach stated in a number of decisions of this Court. In this case, I have more than the usual level of comfort as to the basis upon which the provisions were negotiated because the matter has been the subject of a decision of the Takeovers Panel in the matter of Ross Human Directions Limited [2010] ATP 8. 6 The application to the Takeovers Panel ("the Panel")was filed on 24 August 2010 by Corom Pty Limited, which is a substantial shareholder in RHD. Corom applied to the Panel for a declaration of unacceptable circumstances in relation to a number of features of the Scheme. The Panel declined to exercise jurisdiction in relation to some of the issues raised by Corom, but it did exercise jurisdiction in relation to the deal protection measures. 7 The Panel declined to make a declaration of unacceptable circumstances in relation to these measures after RHD and Peoplebank offered undertakings to amend the Scheme Implementation Agreement to address the Panel's concerns. 8 I need not set out the details of the concerns expressed by the Panel. Its reasons are sufficiently contained in the statement of reasons to which I have referred. The decision of the Panel was dated 8 September 2010, although the reasons were not published until 17 September 2010. 9 On 13 September 2010, that is to say after the decision of the Panel but before the reasons were published, the RHD board announced that Peoplebank had formally agreed to increase its offer to 70 cents per RHD share. The effect of this was to reduce the break fee of $500,000 from approximately 1% of the consideration for the proposal, to a figure of 0.9%. That falls within the guideline which is discussed in Guidance Note 7 - Lock-Up Devices which has been published by the Takeovers Panel. It is also consistent with the matters considered in relation to break fees by Lindgren J in Re APN News & Media Limited (2007) 62 ACSR 400 ("Re APN News"). 10 I have evidence before me that the various deal protection clauses were the subject of robust negotiations, although the form of the evidence is not in accordance with the approach discussed by Lindgren J in Re APN News at [55]. 11 I can be confident in the present case that there have been appropriate negotiations in the light of what is said in the reasons of the Takeovers Panel. Corom submitted a further review application to the Panel on 10 September 2010, however, following the further amendments to the Scheme Implementation Agreement, which was altered to reflect undertakings given to the panel, Corom withdrew its review application. It did so on 16 September 2010. 12 Corom is represented by solicitors who, prior to today's hearing, advised that Corom did not propose to appear at the hearing, and there was no appearance by Corom on today's application. 13 The exclusivity provisions in general are consistent with the matters raised by the Court in relation to such clauses in various decisions; see for example Re Arthur Yates & Co Ltd (2001) 36 ACSR 758 at [9]; Re APN News at [29]. 14 There is provision in the Scheme Implementation Agreement for the payment of the full amount of the Scheme consideration to be deposited into a trust account before 11 am on the date of the implementation of the Scheme. 15 I was taken this morning by Mr T.F. Bathurst QC to the details of the Scheme Implementation Agreement and the Scheme booklet, which include the details of Peoplebank's funding arrangements. 16 However, in light of the provision which requires the Scheme consideration to be deposited into the trust account, I do not need to say anything further about this issue. That is because the question of performance risk which might otherwise arise is dealt with in the Scheme in accordance with decisions of the Court; see for example Re Kaz Group Limited [2004] FCA 738 at [4] - [6], and Re APN News at [17]. 17 The proposed Scheme booklet will contain an independent expert report prepared by Lonergan Edwards & Associates. The opinion which has been expressed by the author of the report is that the Scheme is in the best interests of, and fair and reasonable to, RHD shareholders in the absence of a superior offer. 18 The independent expert report values the RHD shares at a range of 65 cents to 74 cents so that the consideration of 70 cents falls within that range. The methodology by which the independent expert arrived at the valuation is fully exposed in the report. 19 I was provided with an outline of written submissions for the first Court hearing which I will mark as MFI1. 20 The outline deals with the principal features, and Mr Bathurst expanded upon the reasons this morning when he took me fully through the Scheme booklet, and the evidence. 21 I have also been taken to the letter from the Australian Securities and Investments Commission ("ASIC") which is dated 30 September 2010. ASIC has stated in the letter that it has had 14 days' notice of the hearing of the application to convene a meeting of RHD's members in accordance with s 411(2)(a) of the Corporations Act 2001 (Cth), and that it has had a reasonable opportunity to examine the terms of the Scheme and the draft explanatory statement, which it has done in accordance with ASIC Regulatory Guide 60, Schemes of Arrangement. The letter is in the usual form. It states that ASIC does not currently propose to appear to make submissions or intervene to oppose the Scheme at the first hearing. 22 I am satisfied, for the reasons set out in the outline of submissions and in what Mr Bathurst said to me this morning, that I ought to make orders in accordance with the short minutes of order which were handed up, and I will initial and date the orders and place them with the Court papers. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.

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