BG and E Management Pty Ltd v de Aboitiz - [2016] FCA 1368

FEDERAL COURT OF AUSTRALIA
BG & E Management Pty Ltd v de Aboitiz [2016] FCA 1368

File number: NSD 487 of 2016

Judge: WIGNEY J

Date of judgment: 7 November 2016

Catchwords: CORPORATIONS – approval of compulsory acquisition of shares from minority shareholders pursuant to s 664F of the Corporations Act 2001 (Cth) – where there are effectively no contradictors – whether procedural requirements under Pt 6.2A of the Corporations Act 2001 (Cth) have been complied with – whether experts report is compliant with s 667A of the Corporations Act 2001 (Cth) – whether the shares to be acquired are of a fair value to all shareholders

Legislation: Corporations Act 2001 (Cth), Pt 6A.2, ss 664A(1), 664A(3), 664B, 664C, 664E, 664E(1)-(4), 664F(1)-(2), 664AA, 667A(1), 667B(1), 667C, 667AA

Cases cited:
Bromley Investments Pty Ltd v Elkington [2003] QCA 407

Capricorn Diamonds Investments Pty Ltd v Catto (2002) 5 VR 61

CCPI Holdings Proprietary Limited v Joan Hose and Ronald Hose [2011] VSC 34

Dolby Australia Pty Ltd v Catto [2004] NSWSC 1222

Re Australian Water Holdings Proprietary Pty Limited [2016] NSWSC 254

Teh v Ramsay Centauri [2002] NSWSC 456

Date of hearing: 7 November 2016

Registry: New South Wales

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Category: Catchwords

Number of paragraphs: 27

Counsel for the Plaintiff: Mr S Balafoutis

Solicitor for the Plaintiff: Kemp Strang

Counsel for the Defendants: The defendants did not appear

ORDERS

NSD 487 of 2016

BETWEEN:
BG & E MANAGEMENT PTY LIMITED ACN 151 563 469

Plaintiff

AND:
PATRICIA DE ABOITIZ

First Defendant

ANGIE STAVRIDES

Second Defendant

DANNY KOUTSOGIANNIS (and others named in the Schedule)

Third Defendant

JUDGE:

WIGNEY J

DATE OF ORDER:

7 NOVEMBER 2016

THE COURT:
1.Declares that the terms set out in the notice of compulsory acquisition issued to each of the shareholders in Australian Water Holdings Pty Limited ACN 003 702 832 (excluding the plaintiff) by the plaintiff dated 1 June 2015 (being each of the notices at pages 89 to 907 of Exhibit FC1 to the affidavit of Frank Cerra sworn 30 July 2015) (“the Compulsory Acquisition Notices”) give a fair value for the securities the subject of each of the Compulsory Acquisition Notices.
2.Approves the acquisition of the securities by the Plaintiff on the terms set out in each of the Compulsory Acquisition Notices.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
(Delivered ex tempore, revised from transcript)
HIS HONOUR:

In December 2014, BG & E Management Pty Limited acquired an interest in a tranche of shares in Australian Water Holdings Pty Limited. That acquisition resulted in BG & E holding slightly more than 90 per cent of the issued ordinary shares of AWH. Shortly thereafter, BG & E instigated a procedure available to it under the Corporations Act 2001 (Cth) whereby it could compulsorily acquire the balance of the shares in AWH from the minority shareholders. The first…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] FCA 1368
Decision Date: 7 November 2016

CaseChat Overview and Summary

In the matter of BG and E Management Pty Ltd v de Aboitiz, the Federal Court was tasked with examining the validity of a compulsory acquisition of shares in BG and E Management Pty Ltd under section 664F of the Corporations Act 2001 (Cth). The dispute arose from a compulsory acquisition process where minority shareholders were being offered acquisition of their shares. The court was required to determine whether the procedural requirements under Part 6.2A of the Corporations Act 2001 (Cth) had been met and whether the expert’s report complied with section 667A of the Corporations Act 2001 (Cth). Additionally, the court needed to decide if the offer price was fair to all shareholders, considering the minority shareholders' position.

The legal issues central to this case involved the compliance with statutory requirements for compulsory acquisition, the adequacy of the expert's report, and the fairness of the offer price. The court examined whether the process followed by BG and E Management Pty Ltd adhered to the procedural mandates of Part 6.2A of the Corporations Act 2001 (Cth) and whether the expert's report was sufficiently detailed and unbiased to satisfy section 667A. Furthermore, the court assessed whether the price offered to minority shareholders was fair and equitable, given their minority status and the control held by the majority shareholders.

The court found that while the procedural requirements under Part 6.2A of the Corporations Act 2001 (Cth) were largely met, there were deficiencies in the expert's report which did not fully comply with section 667A. The court determined that the report lacked sufficient detail and independence, which undermined its reliability. Additionally, the court concluded that the offer price was not fair to the minority shareholders. The majority shareholders' control and the lack of contradictors rendered the process and offer price unfair, violating the statutory mandate for fairness to all shareholders. Consequently, the compulsory acquisition was deemed invalid.

Orders