Ross Human Directions Limited, in the matter of Ross Human Directions Limited (No 2) [2010] FCA 1175

REASONS FOR JUDGMENT 1 This is a notice of motion seeking an order pursuant to s 411(1) of the Corporations Act 2001 (Cth) that a supplementary explanatory statement for the scheme (as that term is defined in the affidavit of David Clee, sworn 27 October 2010) be approved and the proceeding be stood over to 15 November 2010 for the hearing of any application to approve the scheme. 2 The notice of motion is supported by three affidavits which have been read in support. They are the second affidavits of David Clee, Craig Edwards and Martin Hall, all sworn 27 October 2010. 3 On 1 October 2010 (subject to an amendment on 8 October 2010) Jacobson J made orders including an order pursuant to s 411(1) of the Act for the convening of a meeting and approving the explanatory statement for the scheme. Jacobson J's reasons in relation to those orders were given on 1 October 2010 (Ross Human Directions Limited, in the matter of Ross Human Directions Limited [2010] FCA 1089). 4 As explained by Mr Bathurst QC and as set out in the short written submissions (filed in support of the application on 27 October 2010) the present application has been made necessary by the fact that on 24 October 2010 Lonergan Edwards & Associates Limited (LEA), the independent experts appointed by the board of Ross Human Directions (RHD) to opine on the scheme, issued a supplementary report. This supplementary report followed the release by RHD of a trading update on 19 October 2010. In the supplementary report, LEA increased its value ranges for RHD from between $0.65 and $0.74 per share to between $0.72 and $0.83 cents per share. As a result LEA changed its conclusion in relation to the fairness of the scheme, expressing the opinion that the scheme is not fair; however, LEA continued to be of the view that the scheme is reasonable and in the best interests of RHD shareholders, in the absence of a superior proposal. 5 On 25 October, RHD released a copy of this supplementary report to the Australian Securities Exchange and publicly announced LEA's change of conclusion in relation to the fairness of the scheme and that the RHD board of directors continued to unanimously recommend that its shareholders vote in favour of the scheme, in the absence of a superior proposal. 6 As set out in the second affidavit of Mr Clee, other steps have been taken in relation to the supplementary report. By email dated 27 October 2010 the solicitors for RHD, Gilbert + Tobin, sent to the Australian Securities and Investment Commission (ASIC) a letter attaching a revised draft of the supplementary scheme booklet. On the same day, ASIC confirmed to Gilbert + Tobin that it did not have any further comments on the supplementary scheme booklet and did not currently propose to make submissions to the court in relation to the scheme. Also on 27 October 2010, Mr Clee provided Atanaskovic Hartnell, the solicitors acting for Corom Pty Ltd (a substantial shareholder of RHD shares), with written notice by email of the hearing scheduled for this morning. Corom has not appeared today. 7 Mr Clee's affidavit also sets out details of the verification and due diligence process undertaken in relation to the supplementary scheme booklet. This included verification by the RHD executives, the RHD Board and Gilbert + Tobin. 8 The second affidavits of Mr Edwards and Mr Hall, who are the authors of the supplementary report, set out the background to the formation of their opinions as expressed in that report. 9 Mr Bathurst QC has drawn my attention also to ASIC's Regulatory Guide 60 - Schemes of Arrangement (December 2009). Regulation 60.91 is relevant to the present circumstances, it says: If a scheme company proposes to amend the terms of a scheme, or otherwise provide supplementary information to its members, after the explanatory statement is dispatched, that supplementary information will need to be given to ASIC for review prior to being given to the court for approval. We will apply the same principles in reviewing supplementary information as we do when reviewing explanatory statements … 10 As set out in the affidavit of Mr Clee, to which I referred, there has been compliance with this regulation. 11 My attention has also been drawn to regs 60.92 and 60.93 which provide: 60.92 If a scheme company proposes to amend the terms of a scheme, or otherwise provide supplementary information to its members, after the dispatch of the explanatory statement, it is important that all members who are required to vote on a scheme have adequate time to consider that supplementary information before they decide to accept or reject the scheme. 60.93 It will generally be appropriate for scheme participants, including those voting by proxy, to be given at least 10 days to consider any supplementary documentation distributed before being required to vote on the scheme. 12 It is the intention of RHD that the supplementary information, including the supplementary report, will be distributed to shareholders by tomorrow (that is, Friday 29 October 2010) or at the latest midnight on Sunday 31 October 2010. That of course, leaves the possibility that some shareholders may not receive the supplementary documentation before the vote at the meeting which is scheduled to be held at 11.00am on 11 November 2010, in accordance with order 1(b) of Jacobson J's orders. Be that as it may, as has been pointed out to me, the supplementary report of LEA was publicly announced and provided to the Australian Securities Exchange on 25 October 2010. 13 In these circumstances, it seems to me that the orders which are sought need to be made and any issue arising from the timing of receipt would be dealt with at the next hearing. 14 For these reasons, I am satisfied that I should make orders in accordance with the short minutes of order which have been handed to me. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.