It is not for this Court to determine whether the matters to which I have referred to will satisfy the appropriate regulators in relation to the exemption sought under the Securities Act (supra), but these reasons will be available to any regulator who might wish to rely upon them if any application is made."
14 In general, I agree with and adopt what was said by both Emmett J and Lander J, although with this qualification or note of explanation, namely, that Lander J's comments under items 1 to 5 of paragraph 23 of his judgment were, of course, dictated by the particular circumstances of that case and that, when his Honour refers at item 4 to a court exercising the s.411 approval jurisdiction having an obligation to consider the fairness and reasonableness of the proposed scheme of arrangement, he is not, I think, in any sense suggesting that the court in some way actively enters into matters of valuation or embarks upon an examination of the question whether a particular price or consideration is or is not a fair and reasonable quid pro quo. The court does not act as a valuer.
15 That said, however, the court will, in making its decision, derive considerable assistance in a case such as the present from the existence of the report called for by clause 8303 of Schedule 8 to the Corporations Regulations 2001 (Cth), coupled with the knowledge that, in light of s.411(2) of the Act, ASIC will have had an opportunity to examine the report before the application to the court for orders for the convening of the scheme meeting. The central feature of the report is a statement of opinion by an unaligned expert whether the scheme is "in the best interest of the members". In ASIC's view, as stated in its Policy Statement 75, the inquiry whether a scheme is "in the best interest of the members" is in essence the equivalent of an inquiry whether it is "fair and reasonable". Although that view of equivalence between the two concepts has been the subject of critical comment by at least one commentator (see S E K Hulme QC, "Section 640 of the Corporations Law: Independent Experts' Reports and the RTZ Ltd Takeover of Comalco Ltd" (2001) 19 C&SLJ 134 at 143-4), it is a view to which an expert may pay attention.
16 In this case, the report included in compliance with clause 8308 of Schedule 8 is a report of Lonergan Edwards & Associates Ltd. I quote paragraphs 8 to 13 of that report under the heading "Summary of opinion" (omitting footnotes):
"8 In LEA's opinion the proposed Merger between Permanent and Trust Co is in the best interests of Permanent shareholders.
9 Based on our valuation of the shares in Permanent and Trust Co on a standalone basis the Merger terms are fair and reasonable to Permanent shareholders. This is because Permanent shareholders receive approximately 50% of the shares in the merged company and contribute approximately 49% of the value of the merged group.
10 Based on the share market values of each company (adjusted to take into account the dividends payable on completion of the Merger) the Merger terms are consistent with the relative values being contributed, as is evidence from the table below:
Permanent Trust Co
% %
Share of Merged company 50 59
Relative market capitalisation
One day prior to announcement
of the Merger 52 48
One month prior to announcement
of the Merger 50 50
Three months prior to
announcement of the Merger 49 51
Six months prior to
announcement of the Merger 51 49
One year prior to
announcement of the Merger 57 43
11 In our opinion, the Merger is also in the best interest of Permanent shareholders because the Merger is expected to create significant value due to the significant costs savings likely to be generated. Such benefits, if achieved, are likely to have a value of some $35 million, or $1.08 per share on a merged basis.
12 There is also potential for re-rating of the shares in the Merged company and other benefits, such as greater market liquidity and balance sheet strength etc, are likely to arise.
13 LEA believes that Permanent shareholders are likely to be significantly better off if the Merger proceeds. Accordingly, LEA has concluded that the Merger is in the best interests of Permanent shareholders."
17 Each of Mr Lonergan and Mr Edwards, the principals of Lonergan Edwards & Associates Ltd, has sworn an affidavit, read on the present application, confirming that he holds the opinions stated in the report. Those opinions must be understood in the context of the approach adopted in the preparation of the report as described in the report itself. After referring to the "best interest" criterion in clause 8303 of Schedule 8 and the interpretation of it in ASIC's Policy Statement 75, Lonergan Edwards & Associates describe in explicit terms the way in which they have approached that criterion:
"In our opinion, the meaning of 'in the best interests [sic]' involves a judgment as to the overall commercial effect of the transaction. The expert must weigh up the advantages and disadvantages of the proposal and form an overall view as to whether the shareholders are likely to be better off if the proposal is implemented than if it is not.
In LEA's opinion, the most appropriate basis upon which to evaluate the Merger is to assess its overall impact on the shareholders of Permanent and to form a judgment as to whether the expected benefits to Permanent shareholders outweigh the disadvantages and risks that might result."
18 It is in the light of that statement as to the approach or basis they have adopted that the opinions expressed by Lonergan Edwards & Associates are to be interpreted. It is made clear that the report is concerned with the scheme as a whole so that, for example, the positive views expressed in it as to the "best interest" of members of the company take into account the special dividend of $1 per share that the company itself will pay to its members, as well as the Trust Company shares that will be issued to them in return for their shares in the company at the exchange ratio of 1.1856 to one.
19 The existence and content of the Lonergan Edwards & Associates report (viewed in the context of the requirement of clause 8303 of Schedule 8), the sworn evidence of Mr Lonergan and Mr Edwards which confirms and underwrites the report itself, the fact that the report was put into the hands of shareholders as part of material sent to them in accordance with the orders previously made by the court and that shareholders, having received it, voted by such overwhelming majorities to approve the scheme and the fact that no member has sought to advance before the court today any view contrary to those expressed in the report are compelling factors relevant to the court's decision whether it should give its approval under s.411(4)(b). I should add, in relation to this last aspect, that it is by no means unknown for members to appear before the court to argue that a report of this kind is in some way unreliable or defective: see, for example, Re Arnotts Ltd (1997) 16 ACLC 423. There has been no such move by any member in this case.
20 As was made clear by both Emmett J the Central Pacific Minerals case and Lander J in Simeon Wines, it is not for the court considering a s.411(4)(b) application to express any view as to whether the procedures and processes under the Corporations Act 2001 (Cth) are sufficient to satisfy the requirements for exemption laid down by the United States legislation. Some of the questions arising under that legislation will, no doubt, be readily answered merely by reference to the terms of the scheme. Relevant to others will be the matters concerning notice of this hearing to which I have earlier referred and the fact, which I formally record, that Mr Oakes SC, who has appeared for the company on the application, has informed me that any approving order the court makes in relation to the scheme will be relied upon in seeking an exemption under the United States legislation. The observations I have made as to the approach taken by the court at the approval stage and the role played by the report of Lonergan Edwards & Associates (which has not been the subject of any objection or dissent) may further assist.
21 The evidence shows that, in the circumstances of this case, it is appropriate that the court grant, in relation to the scheme of arrangement between the company and its members, the approval envisaged by s.411(4)(b) of the Corporations Act. There is, however, one final matter. The form of scheme in respect of which approval is sought differs in certain respects from the form sent to members in accordance with the orders previously made by the court. It is clear, however, that the changes or differences are of a minor and technical kind and that their effect is to improve the smooth working of the scheme. They in no way impinge upon or affect the spirit and intendment of the scheme as a whole or detract from the rights and entitlements of the members. They are peripheral only, so far as matters of substance are concerned and are therefore appropriate to be dealt with under s.411(6): Re Adelaide Air Conditioning & Domestic Engineering Ltd (1972) 6 SASR 603. The form of scheme that was before members contemplated the possibility of modification at this stage, subject to the consent of Trust Company (which Mr Oakes confirms has been given) and, of course, the approval of the court. ASIC has been informed of the matter and, by the letter dated 5 December to which I have already referred, says that it has noted the departures which, while they may raise statutory compliance issues, are not seen by ASIC as of such a quality as to cause it to oppose the grant of approval by the court.
22 I make orders in accordance with the short minutes of order which I initial and date. I direct that the orders may be taken out forthwith.