Rural Press Limited, in the matter of Rural Press Limited (No 2) [2007] FCA 686

Two orders made between the first and final court hearings 4 I made two other orders between those of 26 February 2007 and those of 23 April 2007. 5 First, very soon after the making of the orders on 26 February 2007, Deacons, the solicitors for Rural Press, discovered some very minor errors in Exhibits P1, P2, P3 and P4 that were admitted into evidence on the first court hearing. The nature of the errors was fully explained in correspondence between Deacons and my Associate, and marked up versions of those exhibits identifying the errors and the corrections desired to be made to them were supplied to her. I was satisfied that the errors were very minor and did not warrant a relisting of the proceeding. Accordingly, on 28 February 2007 I made in chambers the following orders: 1. The documents presently constituting Exhibits P1, P2, P3 and P4 be returned to the plaintiff's solicitors and the documents supplied to the Associate to Lindgren J today, 28 February 2007, be substituted for the documents so returned. 2. Order 1 above have effect nunc pro tunc so that references in the orders made on 26 February 2007 be taken to refer, and always to have referred, to Exhibits P1, P2, P3 and P4 as reconstituted. 6 Second, the proceeding was relisted on the application of Rural Press on 2 April 2007 when I heard an application for an order approving of a proposed announcement by Rural Press to the ASX. I made the order sought. The announcement reflected two announcements that Fairfax had made to the ASX. On 26 March 2007, Fairfax made an announcement to the ASX regarding an ongoing defamation action against it commenced by National Telecoms Group Limited in 2002. On 2 April 2007 Fairfax made an announcement to the ASX in relation to proposed undertakings to be offered by it to the Australian Competition and Consumer Commission to divest The Newcastle and Lake Macquarie Post and The Hunter Post, if the Schemes should be implemented. There was affidavit evidence before the Court on 2 April 2007 that the events the subject of the two announcements did not change Deloitte's opinion that the Schemes proposed were fair and reasonable and in the best interests of the shareholders of Rural Press in the absence of a superior proposal. The final Court hearing 7 On the final court hearing on 23 April 2007, there was affidavit evidence before the Court to the effect described below.

Approval percentages at Preferred Scheme meeting 8 At the Preferred Scheme meeting held on 5 April 2007, the Preferred Shareholders overwhelmingly agreed to the Preferred Scheme. The report of the result of the voting at the Preferred Scheme meeting is shown in the following table: Total votes cast Number of Votes Percentage of Votes Number of Preferred Shareholders Percentage of Preferred Shareholders For 61,928,320 99.79% 1139 97.68% Against 127,953 0.21% 27 2.32% Abstain 17,127 5

9 The number of Preferred Shareholders who had addresses recorded on the Register as at 1 March 2007 as either unknown or in respect of which Computershare Investor Services Pty Ltd ("Computershare") had previously received return mail, was 65, holding 136,149 Preferred Shares. According to the plaintiff's submissions, this represented 0.17 percent of Preferred Shares on issue at 3 April 2007 which in turn represented 0.22 percent of the total number of votes cast at the Preferred Scheme meeting.

Approval percentages at Ordinary Scheme meeting 10 At the Ordinary Scheme meeting held on 19 April 2007, the Ordinary Shareholders similarly overwhelmingly agreed to the Ordinary Scheme. The report of the result of the voting at the Ordinary Scheme meeting is shown in the following table: Total votes cast Number of Votes Percentage of Votes Number of Ordinary Shareholders Percentage of Ordinary Shareholders For 95,743,132 99.62% 2868 96.47% Against 367,731 0.38% 105 3.53% Abstain 75,162 28

11 The number of Ordinary Shareholders who had addresses recorded on the Register as at 1 March 2007 as either unknown or in respect of which Computershare had previously received returned mail, was 350, holding 293,268 Ordinary Shares. According to the plaintiff's submissions, this represented 0.25 percent of the Ordinary Shares on issue as at 17 April 2007 which in turn represented 0.30 percent of the total number of votes cast at the Ordinary Scheme meeting.

Registration of Explanatory Statement with ASIC 12 Section 412(6) of the Act requires that a company must not send out an explanatory statement in relation to a proposed scheme of arrangement unless a copy of the statement has been registered by ASIC. 13 The Explanatory Statement (in the form of the Scheme Booklet) as registered with ASIC on 28 February 2007 contained two minor cross-referencing errors. They were correct in the Scheme Booklet as sent to shareholders on 5 March 2007, which was in the form of Exhibit P1 as tendered on the first hearing. 14 On 8 March 2007, Rural Press lodged a Form 492 with ASIC correcting the form of the Explanatory Statement as registered with ASIC. Strictly, there was a very minor failure to comply with s 412(6) of the Act, in that the correct Explanatory Statement was not registered with ASIC before it was sent to shareholders. The correct Explanatory Statement was registered with ASIC three days late. 15 The error or omission is a "procedural irregularity" within s 1322(2) of the Act. Under that provision, the proceeding to which the irregularity relates is not invalid "unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid". I am certainly not of the opinion mentioned and will not declare the proceeding invalid. There is no occasion for the making of a valid order: see SGIC Insurance Ltd v Insurance Australia Ltd (2004) 51 ACSR 593 at [12]-[15].

Postage of Scheme Booklet to shareholders 16 On 5 March 2007, the Scheme Booklet (including Notices of the Scheme Meetings) together with proxy forms, a consideration election form, and envelope addressed to Computershare were dispatched to Preferred and Ordinary Shareholders by Ms Potbury of Computershare acting on behalf of Mr Stofberg, the convenor of the Scheme meetings. 17 A copy of the Scheme Booklet was also sent to the auditor of Rural Press, KPMG, on 5 March 2007, as required by s 249K of the Act.

Advertising of Scheme approval application 18 On 16 April 2007, Rural Press published a notice of the Court hearing for approval of the Schemes in The Sydney Morning Herald. 19 That publication complied with r 2.11 of the Federal Court (Corporations) Rules 2000 because The Sydney Morning Herald is "a daily newspaper circulating generally in the State or Territory where [Rural Press] has its principal, or last known, place of business". That place is North Richmond in New South Wales.

Conduct of Scheme meetings 20 There is affidavit evidence as to the procedures followed in relation to the receipt of proxy forms, the collation of proxies, the preparation of proxy reports and registration, voting and poll procedures at the Preferred and Ordinary Scheme meetings.

Section 411(17) letter received from ASIC 21 ASIC has confirmed that it has no objection to the Schemes and has provided a letter to that effect under s 411(17)(b) of the Act.

No notice of intention to appear at Court hearing 22 No notice of appearance has been served on Deacons, the solicitors of Rural Press, by ASIC or by any other person wishing to oppose approval of the Scheme.

Satisfaction of conditions precedent 23 All conditions precedent to the Scheme (save for Court approval itself under s 411(4) of the Act), have been satisfied as required by cl 3(a)(1) of each Scheme and cl 3.1 of the Merger Implementation Deed.

Deeds Poll 24 Executed Deeds Poll in favour of Ordinary and Preferred Shareholders were signed on behalf of Fairfax on 26 February 2007. 25 There is no "performance risk" under the Schemes, as Fairfax is required to provide the cash component of each Scheme consideration to Rural Press on the business day prior to the Implementation Date, and the money is to be held on trust by Rural Press for its shareholders, and then paid out by it to them in accordance with clause 5.3 of each Scheme. 26 There is affidavit evidence confirming the sources and availability of the cash component of each Scheme consideration and of the intention and wherewithal of Fairfax to repay the Rural Press Debt Facility. It should be noted that Fairfax proposes to fund the cash consideration from a facility different from that contemplated when the Scheme Booklet was prepared, but the possibility of using different finance facilities was expressly foreshadowed in the Scheme Booklet.

Discretion 27 As to the Court's discretion to approve the Schemes under s 411(4), it may be observed that:

(a) the Preferred and Ordinary Shareholders who voted at the respective Scheme meetings represented a very high percentage of the Preferred and Ordinary Shares on issue (a little above 75 percent in each case); (b) the disclosure in the Scheme Booklet to shareholders, including the Independent Expert Report, was essentially the same as that which would have occurred for a takeover; (c) ASIC has raised no objection to the Schemes.

Conclusion 28 Rural Press has made out its case for Court approval of the two Schemes pursuant to s 411(4)(b) of the Act. I will also make the order sought under s 411(12) exempting Rural Press from compliance with s 411(11). That provision would require that the Court order approving the Scheme be annexed to every copy of the constitution of Rural Press issued after the making of the approval order. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Counsel for the Plaintiff: Mr F Gleeson SC and Mr RA Dick

Counsel for Fairfax Media Limited: Mr MJ Leeming SC

Date of Hearing: 23 April 2007

Date of Judgment: 23 April 2007