Cranswick Premium Wines Limited

[2002] FCA 1624

FEDERAL COURT OF AUSTRALIA

Cranswick Premium Wines Limited  [2002] FCA 1624

CORPORATIONS – contemporaneous interdependent solvent schemes of arrangement for shareholders optionholders and noteholders of publicly listed company – operation of schemes to effect merger with another publicly listed company – deed poll executed by latter publicly listed company in favour of shareholders optionholders and noteholders of former publicly listed company to secure its performance of the schemes of arrangement – meetings of shareholders optionholders and noteholders ordered.

Corporations Act 2001 (Cth) ss 200G, 411 and Chapter 6

Re Stockbridge Ltd (1992-1993) 9 ACSR 637 cited
Permanent Trustee Company Limited [2002] NSWSC 1177 cited
Re Glendale Land Development Ltd (in Liq) (1982) 7 ACLR 171 cited
Re Buka Minerals NL (1983) 8 ACLR 507 cited
Re Foundation Healthcare (2002) 42 ACSR 252 cited

IN THE MATTER OF CRANSWICK PREMIUM WINES LIMITED  (ACN 000 024 304)

N 3078 of 2002

CONTI J
24 DECEMBER 2002
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 3078 OF 2002

IN THE MATTER OF CRANSWICK PREMIUM WINES LIMITED (ACN 000 024 304)

BETWEEN: CRANSWICK PREMIUM WINES LIMITED (ACN 000 024 304)
APPLICANT

JUDGE:	CONTI J
DATE OF ORDER:	23 DECEMBER 2002
PLACE:	SYDNEY

THE COURT ORDERS THAT:

1.Pursuant to section 411(1) of the Corporations Act 2001 (Cth) the plaintiff convene:

1.1.1a meeting of Shareholders of the plaintiff ('Cranswick');

1.1.2a meeting of the Optionholders of Cranswick; and

1.1.3a meeting of the Noteholders of Cranswick,

for the purpose of considering and if thought fit, agreeing (with or without modification) to a scheme of arrangement proposed to be made between Cranswick and its:

1.1.4Shareholders;

1.1.5Optionholders; and

1.1.6Noteholders,

a copy of which forms part of a document tendered in the proceedings as Exhibit 'A8' ('Cranswick Schemes').

2.The meeting referred to in subparagraph 1(a) ('Meeting of Shareholders') be convened on Monday 17 February 2003 at Exchange Square Auditorium, Exchange Square, 18 Bridge Street, Sydney NSW at 9.00am.

3.The meeting referred to in subparagraph 1(b) ('Meeting of Optionholders') be convened on Monday 17 February 2003 at Exchange Square Auditorium, Exchange Square, 18 Bridge Street, Sydney NSW at 12.00 noon.

4.The meeting referred to in subparagraph 1(c) ('Meeting of Noteholders') be convened on Monday 17 February 2003 at Exchange Square Auditorium, Exchange Square, 18 Bridge Street, Sydney NSW at 2.30pm.

5.Ian Mackley or failing him, Christopher Chapman be chairperson of:

1.1.7the Meeting of Shareholders;

1.1.8the Meeting of Optionholders; and

1.1.9the Meeting of Noteholders,

convened pursuant to Order 1.

6.On or before 13 January 2003 there be:

1.1.10personally served on; or

1.1.11despatched by pre-paid ordinary post (or in the case of overseas members, by airmail) to,

each Shareholder of Cranswick whose names appear in the Cranswick register of Shareholders as at 5.00pm on 6 January 2003 ('Register Time'):

1.1.12a document substantially in the form of the Explanatory Statement and Notices of Meetings, copies of which form part of a document tendered in these proceedings as Exhibit 'A8' ('Explanatory Statement'); 

1.1.13a personalised letter, confirmation of details form; and

1.1.14proxy form, an unpersonalised copy of which forms part of a document tendered in these proceedings as Exhibit 'GCS7', being the Notice of Shareholders Meeting. 

7.On or before 13 January 2003 there be:

1.1.15personally served on; or

1.1.16despatched by pre-paid ordinary post (or in the case of overseas members, by airmail) to,

each Optionholder of Cranswick whose names appear in the Cranswick register of Optionholders as at 5.00pm on 6 January 2003 ('Register Time'):

1.1.17a document substantially in the form of the Explanatory Statement and Notices of Meetings, copies of which form part of a document tendered in these proceedings as Exhibit 'A8'; 

1.1.18a personalised letter, confirmation of details form; and

1.1.19proxy form, an unpersonalised copy of which forms part of a document tendered in these proceedings as Exhibit 'GCS7' being the Notice of Optionholders Meeting.

8.On or before 13 January 2003 there be:

1.1.20personally served on; or

1.1.21despatched by pre-paid ordinary post (or in the case of overseas members, by airmail) to,

each Noteholder of Cranswick whose names appear in the Cranswick register of Noteholders as at 5.00pm on 6 January 2003 ('Register Time'):

1.1.22a document substantially in the form to the effect of the Explanatory Statement and Notices of Meetings, copies of which form part of a document tendered in these proceedings as Exhibit 'A8'; 

1.1.23a personalised letter, confirmation of details form; and

proxy form, an unpersonalised copy of which forms part of a document tendered in these proceedings as Exhibit 'GCS7' being the Notice of Noteholders Meeting.

9.Proxy forms for the Meeting of Members, Optionholders and Noteholders must be lodged:

1.1.24at the offices of Cranswick Premium Wines Limited, c/ Computershare Investor Services Pty Ltd, Level 3, 60 Carrington Street, Sydney 2000;

1.1.25by post at Cranswick Premium Wines Limited, c/ Computershare Investor Services Pty Ltd, GPO Box 7045, Sydney 1115; or

1.1.26by facsimile to c/ Computershare Investor Services Pty Ltd, [phone];

at least 48 hours before the time specified for holding the relevant meeting but may be delivered at the address specified in paragraph (a) above, or sent by facsimile to the number specified in paragraph (c) above, prior to the time specified for holding the meeting.

10.The Court approves the Explanatory Statement which is Exhibit A8 tendered in the proceedings.

11.The plaintiff will advertise the notice of the Meeting of Members in the form of the attached document marked Annexure 'A' in a national Australian newspaper. 

12.The application be stood over to 27 February 2003 before Justice Conti with the liberty to restore on 3 days’ notice.

13.There be separate counting of votes at the Meeting of Noteholders by persons who also hold Cranswick shares.

14.These Orders be entered forthwith.

AND THE COURT NOTES THAT:

15.Evans and Tate by its solicitors Deacons undertakes to the Court that in the event that the schemes are approved it will perform all obligations on its part required to render the schemes effective.

ANNEXURE A

NOTICE OF MEETING

NOTICE TO SHAREHOLDERS, OPTIONHOLDERS AND NOTEHOLDERS
OF CRANSWICK PREMIUM WINES LIMITED ACN 000 024 304

PROPOSED SCHEMES OF ARRANGEMENT

Shareholders, Optionholders and Noteholders of Cranswick Premium Wines Limited are advised that a meeting of:

1.1.27Shareholders has been convened to take place at 9.00am;

1.1.28Optionholders has been convened to take place at 12.00 noon; and

1.1.29Noteholders has been convened to take place at 2.30pm,

on Monday 17 February 2003 at Exchange Square Auditorium, Exchange Square, 18 Bridge Street, Sydney NSW for the purpose of considering proposed schemes of arrangement between Cranswick and its Shareholders, Optionholders and Noteholders respectively.

The Explanatory Statement and other documents relating to the proposed Schemes of Arrangement have been sent to Shareholders, Optionholders and Noteholders of Cranswick Premium Wines Limited.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 3078 OF 2002

IN THE MATTER OF CRANSWICK PREMIUM WINES LIMITED

BETWEEN: CRANSWICK PREMIUM WINES LIMITED  (ACN 000 024 304)
  APPLICANT

JUDGE:	CONTI J
DATE:	24 DECEMBER 2002
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. This application is made by Cranswick Premium Wines Limited (“Cranswick”) under s 411 (1) of the Corporations Act 2001 (Cth) (“the Act”) for orders for Cranswick’s shareholders, optionholders and noteholders to consider their respective proposed schemes of arrangement for a merger between Cranswick and Evans & Tate Limited (“Evans & Tate”). Each of the companies is engaged in the production, marketing and distribution of wines in Australia and is listed on the Australian Stock Exchange (“ASX”). The merger would result in Cranswick becoming a wholly owned subsidiary of Evans & Tate, the two companies having together a portfolio of brands of wine on an operational scale which are anticipated to compete more effectively against other producers in domestic and international markets.

2. The present issued capital structure of Cranswick consists of the following:

   (i)46,432,071 fully paid ordinary shares listed on the ASX.

   (ii)19,984,419 secured c

   (iii)onvertible notes maturing on 29 October 2004, which are also listed on the ASX.

   (iv)932,900 unlisted options issued pursuant to the Cranswick employee option plan; and

   (v)150,000 unlisted options issued to one of its directors (Mr Mackley).

3. In the event that the merger is approved and the schemes of arrangement take effect:

   (i)Cranswick shareholders will receive 2 fully paid ordinary shares in Evans & Tate, and a payment of $2.50 in cash, for every 5 fully paid shares held in Cranswick, and will be eligible to receive a fully franked interim dividend from Cranswick of 2 cents per share for the 6 months to 31 December 2002 (though not any interim dividend paid by Evans & Tate in respect of the same period which may be declared in April 2003).  The shareholders scheme would purportedly bind all Cranswick members to become members of Evans & Tate.

   (ii)Cranswick optionholders would be offered the choice of one of the following:

   ·    the primary offer whereby upon the exercise of each option issued under the Cranswick Employee Option Plan, 1 ordinary share in Evans & Tate would be issued to the holder of the option instead of 1 ordinary share in Cranswick; otherwise the terms of the Cranswick option will be unaltered, including the exercise price; or

   ·    the cash offer whereby in consideration of the cancellation of their Cranswick options, optionholders will receive payment for each option series equal to the consideration as detailed in section 3.4.1 of the explanatory statement, which will  not be less than a payment of $100 in total for each option series.

   (Optionholders who do not elect either the primary offer or the cash offer will be deemed to have elected the primary offer).

   The effect of the optionholders scheme therefore is that each optionholder would at his or her election either receive cash, or after amendment of the Cranswick Employee Option Plan, and upon exercise of the options, receive shares in Evans & Tate instead of in Cranswick.

   (iii)Cranswick noteholders would receive 1 Evans & Tate option for every 5 Cranswick convertible notes, thereby entitling the holder to acquire 1 fully paid ordinary share in Evans & Tate at an exercise price of $1.50 – the options would expire on 29 October 2007 (Evans & Tate would seek to have those options listed on the ASX).  The structure of the noteholders’ schemes is that all noteholders would agree that the trust deed be amended so that the obligations in favour of noteholders in relation to the notes would be novated from Cranswick to Evans & Tate.

4. It is proposed that there would be 3 separate general meetings convened to approve the 3 schemes, namely a shareholders meeting, an optionholders meeting and a noteholders meeting, each to be held successively on 17 February 2003.  Each of the schemes would be conditional upon:

   (i)the approval of all three schemes by the required majority of shareholders, optionholders and noteholders present in person or by proxy at the respective meetings.

   (ii)the chairperson of each meeting being Cranswick’s chairperson Mr Mackley or his alternate Christopher Chapman, Cranswick’s present secretary.

   (iii)the obtaining of a letter from Australian Securities and Investment Commission (“ASIC”) to the effect that it has no objection to each of the schemes (as later appears, a tentative approval in principle has already been furnished).

   (iv)the lodgment with ASIC of an office copy of the court order approving each of the schemes.

5. Prior to the promotion of the schemes of arrangement, there had taken place negotiations between Cranswick and Evans & Tate for the merger of the two companies upon the basis of a takeover by Evans & Tate of Cranswick. However, the structure of a take-over pursuant to Chapter 6 of the Act was ultimately considered to be inappropriate, at least because the Cranswick employee options to be issued pursuant to the Cranswick Employee Option Plan would be unlisted, and because Evans & Tate was not willing to acquire the convertible notes by purchase on the ASX. Moreover it has been judicially observed that it is more appropriate to treat optionholders as creditors rather than shareholders (Re Stockbridge Ltd (1992-1993) 9 ACSR 637 at 648). I am satisfied, pursuant to s 411(17)(a) of the Act, that the arrangements the subject of each scheme have not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6.

6. The most recent audited financial accounts of Cranswick relate to the financial year ended 30 June 2002.  The managing director of Cranswick (Mr Cranswick-Smith) has asserted by affidavit that there has been no material change in the financial position of Cranswick since 30 June 2002, either of a positive or negative nature, and he has verified the profit forecast contained in the report of BDO Corporate Finance Pty Limited (“BDO”) to Cranswick’s shareholders to be later summarised.

7. Mr Cranswick-Smith has disclosed by affidavit that he holds 8,109,600 fully ordinary shares and 35,500 unsecured convertible notes in Cranswick, and has entered into a deferred sale deed and proxy deed with Mr Tate, a director of Evans & Tate, pursuant to which:

   (i)Mr Tate would obtain a relevant interest in the Evans & Tate shares to be issued to Mr Cranswick-Smith under the shareholders’ scheme.

   (ii)Mr Tate would purchase those shares from Mr Cranswick-Smith at predetermined prices over a period of time up to 30 June 2007.

   Also Mr Cranswick-Smith is to receive $560,000 in connection with his retirement from the board of directors of Cranswick on 31 March 2003, he has been an executive director of Cranswick since 1991, and that sum does not exceed the amount permitted pursuant to s 200G of the Act.

8. The arrangements the subject of the deferred sale deed and proxy deed, which have been entered into in the context of the scheme of arrangement, are explained by the following passages appearing in par 3.10 of the explanatory statement:

   INTEREST OF EVANS & TATE DIRECTOR

   Franklin Tate, the Chairman and Chief Executive of Evans & Tate has been a driving force in the growth and success of Evans & Tate and the Merged Group will benefit from his ongoing involvement.  In the 15 years that he has been associated with the company, the business has grown from annual case sales of 6,000 to the equivalent of 452,000 cases.

   Mr Tate has entered into a Deferred Sale Deed and a Proxy Deed with Mr Graham Cranswick-Smith, director, CEO and the largest shareholder of Cranswick, to the effect that Mr Tate shall acquire the Evans & Tate Scheme Shares which will be issued to Mr Cranswick-Smith pursuant to the merger.  The Evans & Tate Scheme shares to be issued to Mr Cranswick-Smith under the Shareholders Scheme represent approximately 4.6% of the enlarged fully paid ordinary shares on issue in Evans & Tate immediately upon completion of the Shareholders Scheme.

   Mr Tate currently has a relevant interest in 40.6% of the issued fully paid ordinary shares in Evans & Tate.  As a consequence of the Merger Proposal, Mr Tate’s relevant interest in the fully paid ordinary shares of Evans & Tate will be reduced to 29.8%.  Further, on a fully diluted basis Mr Tate’s relevant interest will be significantly reduced to 22.6% of the issued capital of Evans & Tate.  The Deferred Sale Deed and the Proxy Deed provide Mr Tate with a relevant interest in the shares to be issued to Mr Cranswick-Smith under the Merger Proposal and as such Mr Tate will be deemed to have a relevant interest in 34.4% of the fully paid ordinary shares in Evans & Tate.  All of the above changes to entitlements to issued capital occur simultaneously.

   These agreements are important to Mr Tate in order to ensure he continues to have a significant interest and involvement in the business.  As well, it provides the Merged Group with stability to the share register.

   In relation to those arrangements, Cranswick acknowledged from the outset its duty as applicant to bring to the Court’s attention matters such as the terms of the deferred sale deed and proxy deed, given that such matters could be considered relevant to the exercise of the court’s discretion (see in that regard Permanent Trustee Company Limited [2002] NSWSC 1177 at [7]). Cranswick pointed out in any event that Part 6.1 of the Act was not contravened by the intended operation of the deferred sale deed and proxy deed, since there would be a reduction of Mr Tate’s relevant interest in Evans & Tate, and not an increase, as appears from the foregoing extract from the explanatory statement.

9. The following further information in relation to the establishment of the schemes of arrangement was provided as follows:

   (i)The merger of Cranswick with Evans & Tate was initially announced to ASX on 13 June 2002, and a revised merger proposal was announced on 27 September 2002.

   (ii)Fulfilment of the following conditions precedent to the efficacy of the merger proposal had delayed the making of the present application to the court, namely the resolution of certain earlier court proceedings, completion of due diligence on the part of Evans & Tate, finalisation (in November 2002) of negotiations with grape growers in Mildura to vary the terms of their existing agreements with Cranswick, and completion of Cranswick’s acquisition of 51% ownership in its United Kingdom agent (Australian Wineries UK).

   (iii)The present chairperson at each of the three scheme meetings (Mr Mackley) holds 100,000 share options in Cranswick, the latter being exercisable at the price of $3 and expiring in 2004; those options do not form part of the optionholders scheme of arrangement, but Mr Mackley proposes to enter into a deed of novation with Evans & Tate whereby upon the exercise of the options, the resulting issue of the shares in his favour will be in Evans & Tate in lieu of Cranswick.

   (iv)If the merger takes place, Mr Mackley will be retained as a consultant to Evans & Tate for one year at a remuneration equal to that paid to non-executive directors of Evans & Tate.

   (v)The alternative chairperson proposed for the scheme meetings is Mr Chapman, the company secretary of Cranswick; he presently holds 1000 shares and 5000 convertible notes in Cranswick.

   (vi)The following percentages of Cranswick security holders reside in New South Wales, namely 37% of shareholders, 35% of noteholders and 51% of optionholders; hence the reason why Sydney was chosen as the venue for the scheme meetings.

10. Irrespective of what appears in [4(iii)] above, there has been tendered in evidence a letter from ASIC dated 20 December 2002, which referred to draft explanatory statements which ASIC had received in relation to the shareholders’, optionholders’ and noteholders’ schemes, and continued as follows:

    “The Australian Securities and Investments Commission (“ASIC”) wishes to advise you that its policy in relation to statements under paragraph 411(17)(b) of the Corporations Act 2001 (“Act”) is that it will not provide such a statement until the second, or confirmation, court hearing in relation to a scheme of arrangement.  This is because ASIC will not be in a position to advise the court properly until it has had an opportunity to observe the entire scheme process. It is also consistent with the wording of the section which relates the statement to the court’s approval of the scheme.

    However, ASIC recognises that proponents of a scheme may reasonably wish for an indication of ASIC’s views before committing to the expense of calling a meeting and printing the scheme documentation.

    Therefore ASIC confirms that it has had a reasonable opportunity to examine the terms of the Proposed Schemes of Arrangement and the draft explanatory statement and that ASIC does not currently propose to appear to make submissions, or intervene to oppose the Proposed Schemes of Arrangement, at the first hearing, which it understands is to take place on 20 December 2002.

    This current intention is based on the information provided by the applicant to date in relation to whether the schemes has been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Act. ASIC’s position is liable to be changed if ASIC considers it appropriate.

    For a further explanation of ASIC’s policy in relation to Schemes of arrangement, see ASIC Policy Statements 60 and 131.”

1. Independent Expert’s Reports made by BDO were tendered in evidence in relation to each of the shareholders’, optionholders’ and noteholders’ schemes of arrangement, those reports having been completed in December 2002.  The BDO reports are to be included in the Scheme Booklet to be sent to the shareholders optionholders and noteholders to assist them in deciding whether to accept or reject the schemes applicable to them.  Each BDO Report supported the assertion of Cranswick’s directors that the scheme which it addressed was fair and reasonable, and in the best interests of the Cranswick shareholders, optionholders or noteholders (as the case may be), and further that the directors would be justified in recommending that the Cranswick shareholders, optionholders and noteholders (as the case may be) vote in favour of the respective schemes.

2. Specifically as to the shareholders’ scheme, BDO  determined that the scheme consideration compared favourably to the value of Cranswick, and that the position of shareholders, if the shareholders’ scheme was to proceed, was more advantageous than the position if the scheme did not proceed, especially with regard to “the proposed expansion and fit of the combined business”.  The advantages and disadvantages of the shareholders’ scheme were summarised and discussed in detail, and the “Value of the Scheme Consideration” was demonstrated to exceed the value of Cranswick shares.  In the context of that BDO determination, and the forecast earnings of Cranswick therein contained, ASIC furnished on 19 December 2002 the following consent:

   “Under clause 8305 of Part 3 of Schedule 8 of the Corporations Regulations 2001, the Australian Securities and Investments Commission (“ASIC”) consents to the expert’s report containing a forecast of the adjusted earnings for the year ended 30 June 2003 of Cranswick Premium Wines Limited (“Cranswick”) as stated in the expert’s report for Cranswick shareholders titled “Independent Expert’s Report – Cranswick Premium Wines Limited” dated 5 December 2002 which was provided to ASIC on 19 December 2002.”

3. As to the optionholders’ scheme, BDO formed the view that “…[w]e have concluded that the primary offer is fair and reasonable to Optionholders, and whilst we have concluded that the alternative cash offer is not fair but reasonable to Optionholders, they can choose to participate in the primary offer, and therefore, the Scheme is fair and reasonable” (see again [3(ii)] above).

4. As to the noteholders’ scheme, BDO determined that the value of the Evans & Tate convertible note and option to be provided as consideration for the scheme compared favourably to the value of the Cranswick convertible note.

5. In relation to the optionholders’ and noteholders’ schemes, ASIC has provided in favour of Cranswick the following dispensations:

   “Under subregulation 5.1.01(1) of the Corporations Regulations 2001 (“Regulations”), the Australian Securities and Investment Commission (“ASIC”) allows Cranswick to send an explanatory statement under subsection 412(1) of the Corporations Act 2001 (“Act”) which does not comply with Schedule 8 of the Regulations only with respect to the matters described below.

   1.The explanatory statement does not state the matters set out in paragraphs 8201(a), 8201(b), 8201(d) and 8201(e) of Part 2 of Schedule 8 to the Regulations, nor does it contain or have annexed to it the reports and copies of documents referred to in paragraphs 8203(a) and 8203(b) of Part 2 of Schedule 8 to the Regulations.

   ASIC allows this on the basis that the explanatory statement sent to optionholders and noteholders of Cranswick is substantially in the form given to ASIC on 19 December 2002.

   2.The explanatory statement does not state the matters set out in paragraph 8201(c) of Part 2 of Schedule 8 to the Regulations.

   ASIC allows this on the basis that the explanatory statement sent to optionholders and noteholders of Cranswick is substantially in the form given to ASIC on or about 19 December 2002 and sets out the rights of optionholders and noteholders under section 170 and section 173 of the Act.”

6. Tendered in evidence was a proposed Deed Poll expressed to be made by Evans & Tate in favour of Cranswick shareholders, optionholders and noteholders, pursuant to an Implementation Deed entered into between Cranswick and Evans & Tate on 19 November 2002.  An appropriate Deed Poll on the part of Evans & Tate was necessary because Evans & Tate would be only a third party to the Cranswick schemes of arrangement, and the effect of the orders approving the schemes would be to bind only Cranswick and its respective shareholders, optionholders and noteholders thereto: see Re Glendale Land Development Ltd (in Liq) (1982) 7 ACLR 171 at 173 and Re Buka Minerals NL (1983) 8 ACLR 507 at 509-510. Clauses 2 to 6 and 10 are reproduced below:

   “2.       DEED POLL

   Evans & Tate acknowledges that this Deed Poll may be relied upon and enforced by any Cranswick Shareholder, Optionholder or Noteholder in accordance with its terms even though the latter are not a party to this Deed.

   3.         CONDITIONS PRECEDENT

   Evans & Tate’s obligations under this Deed Poll are subject to all Approvals being obtained or waived in accordance with the terms of the Implementation Deed.

   4.        ISSUE OF EVANS & TATE SCHEME SHARES

   Evans & Tate agrees to:

   (a)comply with and perform its obligations under the Shareholders Scheme, and without limitation, acquire the Cranswick Shares under the Shareholders Scheme, issue the Evans & Tate shares and make the payment to Cranswick Shareholders as required by the terms of the Shareholders Scheme;

   (b)be bound by the terms of the amending Option Deed in relation to the Options and to comply with and perform its obligations under the Optionholders Scheme; and

   (c)be bound by the terms of the Trust Deed in relation to the Notes and comply with and perform its obligations under the Noteholders Scheme, including, issuing the Evans & Tate Scheme Options as required by the Noteholders Scheme.

   5.      WARRANTIES

   Evans & Tate represents and warrants that:

   (a)it is a corporation validly existing under the laws of its place of incorporation;

   (b)it has the corporate power to enter into and perform its obligations under this Deed Poll and to carry out the transactions contemplated by this Deed Poll;

   (c)it has taken all necessary corporate action to authorise its entry into this Deed Poll and has taken or will take all necessary corporate action to authorise the performance of this Deed Poll and to carry out the transactions contemplated by this Deed Poll; and

   (d)this Deed Poll is valid and binding on it.

   6.      CONTINUING OBLIGATIONS

   This Deed Poll is irrevocable and remains in full force and effect until Evans & Tate has completely performed its obligations under this Deed Poll.  In the event the Implementation Deed is terminated, the terms of this Deed Poll shall no longer be enforceable.

   …

   10.     CUMULATIVE RIGHTS

   The rights, powers and remedies of Evans & Tate and the Shareholders, Optionholders and Noteholders under this Deed Poll are cumulative with the rights, powers or remedies provided by law independently of this Deed Poll.”

   The solicitor for Evans & Tate was able to inform the court that the Deed Poll had just been executed by his client under seal.  In my opinion, the Deed Poll would be enforceable by any shareholder, optionholder or noteholder, in accordance with its terms.

7. There was also tendered in evidence expert reports prepared by Ernst & Young concerning the implications of taxation upon the shareholders, optionholders and noteholders of Cranswick arising out of the schemes of arrangement taking effect.  I need not record the content of those reports in any detail, which are unsurprising in what they disclose. They referred for instance to the incidence of income tax and capital gains tax upon dispositions involved, and the availability of roll-over relief in certain circumstances.

8. Also produced at the hearing of the proceedings was certain correspondence addressed to Cranswick and its solicitors from Mr Robert J C Catto.  Mr Catto had initially contended that there should be two noteholders’ meetings, one meeting for those who were also shareholders, and another for those who were not shareholders.  Subsequently Mr Catto indicated in writing that the concerns which had lead to that contention on his part had been resolved.

9. Finally I should observe that it is a condition of implementation of each of the 3 schemes that all of the following approvals be obtained:

   “Approvals means:

   (a)approval of the Shareholders Scheme by Cranswick’s Shareholders passing a resolution to the effect of the resolution in the draft Notice of Meeting forming Schedule 1 to the Implementation Deed at a meeting convened by the Court under section 411 of the Corporations Act 2001;

   (b)approval of the Optionholders Scheme by Cranswick’s Optionholders passing a resolution to the effect of the resolution in the draft Notice of Meeting forming Schedule 2 to the Implementation Deed at meetings convened by the Court under section 411 of the Corporations Act 2001;

   (c)approval of the Noteholders Scheme by Cranswick’s Noteholders passing a resolution to the effect of the resolution in the draft Notice of Meeting forming Schedule 3 to the implementation Deed at meetings convened by the Court under section 411 of the Corporations Act 2001;

   (d)the agreement to the cancellation of those options in Cranswick which are not the subject of the Optionholders Scheme by all relevant holders;

   (e)approval of the Shareholders Scheme, Optionholders Scheme and Noteholders Scheme by the Court and no objection from ASIC under section 411 of the Corporations Act 2001;

   (f)by Cranswick shareholders passing a special resolution to approve an amendment to the Cranswick Employee Option Plan, to the effect of the resolution as set out in the draft Notice of Meeting forming Schedule 1 to the Implementation Deed;

   (g)approval by Cranswick Noteholders passing a resolution to approve an amendment to the trust deed, pursuant to which convertible notes were issued by Cranswick; and

   (h)any approval which Evans & Tate seeks from its shareholders under section 208(1)of the Corporations Act 2001 (Cth) which is relevant, in the opinion of Evans & Tate or its advisers, to any of the matters referred to in the Scheme Booklets.”

   The categories of approvals so involved are each appropriate and justifiable in the particular circumstances of the case.

10. My finding is that Cranswick should be at liberty to convene the scheme meetings for shareholders, optionholders and noteholders in terms of the orders which have been proposed on Cranswick’s behalf.  The arrangements the subject of the schemes have the potential to yield benefits to the shareholders, optionholders and noteholders of Cranswick, and there is no class of shareholders, optionholders or noteholders which at this stage appears to be materially disadvantaged by those respective schemes.  The arrangements the subject of the three schemes are therefore fit for consideration.  They constitute or involve commercial propositions likely to attract the court’s subsequent approval, if passed by the necessary majorities (ReFoundation Health Care (2000) 42 ACSR 252 at 263).

I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti .

Associate:

Dated:             24 December 2002

Counsel for the applicant:	J Gleeson SC; R Dick
Solicitor for the applicant:	Minter Ellison
Date of Hearing:	20 December 2002
Date of Judgment:	24 December 2002