Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd

REASONS FOR JUDGMENT 1 On 4 December 2009 I made orders for the plaintiff to convene meetings of its shareholders and optionholders for the purpose of considering and, if thought fit, agreeing (with or without modification) to the schemes of arrangement proposed between the plaintiff and its shareholders and optionholders respectively (individually and collectively the Scheme). I also made ancillary orders including orders for the conduct of those meetings. My reasons ("earlier reasons") for those orders will be found at [2010] FCA 3. 2 On 14 January 2010 the plaintiff sought approval of the Scheme on the basis that the statutory preconditions had all been met including that the required percentage of votes in favour of the Scheme were cast at each meeting. I made the orders sought by the plaintiff and these are my reasons for those orders. These reasons should be read in conjunction with my earlier reasons. 3 Evidence was given by Jeffrey Noel Carter, a director and company secretary of the plaintiff, who gave evidence at the first hearing. Mr Carter testified as to the registration of the Information Memorandum with the Australian Securities and Investments Commission (ASIC) and the printing and dispatch of the memorandum to the members and optionholders of the plaintiff. Mr Carter stated that the information memorandum which was initially intended to be dispatched on 10 December 2009 was not actually sent until 11 December 2009. The delay was caused by problems in printing, "including a requirement to change printers half way through the process", and delivery of the Information Memorandum to Computershare Investor Services Pty Ltd. 4 Article 34.3(b) of the plaintiff's Constitution provides that a notice sent by mail is regarded as received on the business day after it was posted. In this case the notice would be deemed to have been received on Monday, 14 December 2009. That is 25 days before the meetings on 8 January 2010. Section 249HA of the Corporations Act 2001 (Cth) requires 28 days notice of a meeting in the case of a listed company such as the plaintiff. 5 On the basis that a scheme meeting is a proceeding that the company members wish to carry out in order to achieve a particular legal consequence, a scheme meeting is a proceeding under s 1322(1)(a) of the Corporations Act; Re Broadway Motors Holdings Pty Ltd (in Liq) (1886) 6 NSWLR 45 at 56, Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd (2001) 40 ACSR 221 at [65] per Giles JA, with whom Beazley JA agreed. The fact that the information memorandum was dispatched late is a procedural irregularity within s 1322(1)(b)(ii), being "a defect, irregularity or deficiency of notice or time". Such a procedural irregularity does not invalidate a proceeding "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"; s 1322(2). In my view the irregularity has not caused "substantial injustice". Moreover I see no reason to believe that the delay resulted in members or optionholders not being appropriately notified. In view of the healthy percentage of votes cast in support of the Scheme the fact that no notice was received of any intention to appear at the second hearing suggests that it is not necessary to take the matter further. 6 Evidence as to the conduct of the meetings was given by Slavko Bosnjak who chaired both meetings. Mr Bosnjak testified that the votes cast in favour of the Scheme by the shareholders and optionholders present and voting (in person and by proxy) at the respective meetings were as follows: Meeting of Shareholders · number of votes cast in favour of the Scheme -- 99.01% · number of shareholders voting in favour of the Scheme -- 92.01% Meeting of Optionholders · number of votes cast in favour of the Scheme -- 100% · number of optionholders voting in favour of the Scheme -- 100% 7 Computershare Investor Services Pty Limited maintains the register of shareholders and optionholders on behalf of the plaintiff. The company was retained by the plaintiff to calculate the results of the polls taken at the Scheme meetings. In his affidavit sworn on 13 January 2010 Barry David Azzopardi, a relationship manager employed by Computershare, testified as to the receipt and recording of proxies for both meetings, the registration of the voters and the poll reports. Although there were some invalid proxy forms for both meetings it is clear from Mr Azzopardi's evidence that they could not have affected the outcome of either meeting. On the evidence of Mr Bosnjak and Mr Azzopardi I am satisfied that the Scheme Meetings were properly carried out in accordance with the orders of the Court. 8 On 11 January 2010 the plaintiff announced the results of the Scheme meetings on the website of the Australian Securities Exchange. 9 The necessary letter from ASIC to the effect that under s 411(17)(b) of the Corporations Act it had no objection to the Scheme was put in evidence as an exhibit to the affidavit of Catherine Louise Merity, solicitor for the plaintiff. Ms Merity also exhibited a copy of a deed dated 8 January 2010 (Nominee Deed) appointing YBRS Securities Pty Limited as nominee to sell CDIs to which Ineligible Overseas Shareholders would otherwise be entitled under the Scheme. As stated in [3] of my earlier reasons there are 12 Ineligible Overseas Shareholders who together have a total of 261,988 shares representing 0.09% of the issued share capital of the Company. The Scheme provides for the nominee to sell the relevant CDIs as soon as reasonably practicable and pay the net proceeds received to the Ineligible Overseas Shareholders. 10 Finally, in his affidavit sworn on 14 January 2010 Scott Anthony McDonald, the plaintiff's solicitor on the record, testified as to the publication in The Australian newspaper on 8 January 2010 of an advertisement regarding these proceedings. That advertisement was in accordance with the orders made on 4 December 2009. Mr McDonald stated that he was not notified by any person of an intention to appear in this matter when it was listed on 4 December 2009 or 18 December 2009 nor did he receive any communication to the effect that any person intended to appear on those occasions. Mr McDonald further testified that he had not received any such indication of intention to appear at the hearing on 14 January 2010. Immediately prior to the commencement of that hearing the matter was called outside the Court without response. 11 In my earlier reasons at [1], I noted that under the Scheme "all the issued capital of the plaintiff will be transferred to Unilife Corporation (UC), a company incorporated in Delaware, USA". The consideration received by Unilife shareholders and optionholders will be in the form of shares and options in UC. UC intends to issue these securities in reliance on the exemption from registration requirements provided in s 3(a)(10) of the United States Securities Act of 1933 which is as follows: Except with respect to a security exchanged in a case under title 11 of the United States Code, any security which is issued in exchange for one or more bona fide outstanding securities, claims or property interests, or partly in such exchange and partly for cash, where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court, or by any official or agency of the United States, or by any State or Territorial banking or insurance commission or other governmental authority expressly authorized by law to grant such approval. [emphasis added] 12 The plaintiff tendered the United States Securities and Exchange Commission, Division of Corporation Finance: Revised Staff Legal Bulletin, No 3 (CF). The bulletin states that in the Division's view, "any court" in s 3(a)(10) "may include a foreign court". The issues raised by the exemption were considered in Central Pacific Minerals NL [2002] FCA 239 by Emmett J, who at [28]-[30], discussed in some detail the criteria for exemption. His Honour further commented at [31]: It is not for this Court to express any view as to whether the procedures or processes of the Court are sufficient to satisfy the requirements of the exemption in s 3(a)(10). However, it is clear that, on the hearing of an application for an order approving an arrangement under s 411(4)(b) of the Corporations Act, any security holder is entitled to be heard. The application for approval takes place in open court after formal notification and advertisement in daily newspapers circulating in Australia. Applications for approval may be opposed and indeed, there are instances of approval being refused in the light of opposition and submissions advanced at a hearing at the third stage to which I have referred. 13 In Re Simeon Wines Ltd (2002) 42 ACSR 454Lander J, in approving a merger that would affect persons who were residents in the United States, noted that Brian McGuigan Wines Ltd sought to bring within the above exemption its offer to issue shares to scheme shareholders who were United States citizens or residents. His Honour observed (a) that the Court had been fully informed of the proposed reliance on the exemption; and (b) that the information in the explanatory statement had fully informed the Court of "the valuation placed upon the securities to be surrendered, and the expected valuation to be placed on those to be issued in the proposed transaction". His Honour further noted that pursuant to s 411(6) of the Corporations Act there had been a hearing before the court to consider the fairness and reasonableness of the proposed scheme, and that the hearing had been open to everyone to whom the securities would be issued in the proposed exchange and that the notice of the hearing in appropriate terms had been provided in a timely manner. 14 In Permanent Trustee Company (2002) 43 ACSR 601 Barrett J also had occasion to consider a scheme that proposed to rely on the exemption. His Honour agreed with, and adopted, the respective comments of both Emmett J and Lander J, noting however at [14], that Lander J's comments: … 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 examination of the question whether a particular price or consideration is or is not a fair and reasonable quid pro quo. 15 As Barrett J recognised, while the court "does not act as a valuer" in considering (1) whether to make the orders sought at the first hearing in relation to a proposed scheme; and (2) whether to approve a scheme at the second hearing, the court derives considerable assistance from the report of an independent expert as to whether the scheme is "in the best interests of the members". 16 As discussed in my earlier reasons at [8] the Independent Expert Report expresses the conclusion that the shareholders and optionholders are likely to be better off if the Scheme is implemented than if it is not. The detailed information contained in the Scheme Booklet, including the Investigating Accountant's Report, enables them to be fully informed as to the advantages and disadvantages of the Scheme. In my view Lander J's comments, referred to in [13] above, apply equally to this Scheme. It is also relevant that there has been no appearance at either hearing by a shareholder or optionholder seeking to oppose the Scheme. 17 For the reasons given above and also those given in my earlier reasons, I made orders approving the Scheme. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.