FEDERAL COURT OF AUSTRALIA
Hall v Slater & Gordon Limited [2018] FCA 2071
File numbers: VID 1213 of 2016
VID 1146 of 2017Judge: MIDDLETON J Date of judgment: 21 December 2018 Catchwords: CORPORATIONS – scheme of arrangement – application for approval of schemes of arrangement under s 411 of the Corporations Act 2001 (Cth) – interconnection with approval of settlement of representative proceedings under s 33V of the Federal Court of Australia Act 1976 (Cth) – whether in the circumstances the schemes are fair and reasonable so that an intelligent and honest shareholder, properly informed and acting alone, might approve it – whether the difference in shareholders’ interests was such as to create separate classes – schemes of arrangement approved
PRACTICE AND PROCEDURE – representative proceedings – application pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) seeking approval of proposed settlement interconnection with approval of schemes of arrangement under s 411 of the Corporations Act 2001 (Cth) – whether the proposed settlement is fair and reasonable and in the interests of group members – settlement approved
Legislation: Corporations Act 2001 (Cth) s 411
Federal Court of Australia Act 1976 (Cth) ss 33V, 33ZF
Securities Act of 1933 (US)
Cases cited: Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited (No 4) (2015) 107 ACSR 341; [2015] FCA 720
Blairgowrie Trading Ltd v Allco Finance Group Ltd (Receivers & Managers Appointed) (in Liq) (No 3) (2017) 118 ACSR 614; [2017] FCA 330
David Jones Limited, in the matter of David Jones Limited (No 3) (2014) ACLC 14-037; [2014] FCA 753
Dillon v RBS Group (Australia) Pty Ltd (No 2) [2018] FCA 395
Earglow Pty Ltd v Newcrest Mining [2016] FCA 1433
Independent Practitioner Network Ltd, in the matter of Independent Practitioner Network Ltd (No 2) (2008) 26 ACLC 1,249; [2008] FCA 1593
Kelly v Willmott Forests Ltd (in liquidation) (No 4) (2016) 112 ACSR 584; [2016] FCA 323
Lopez v Star World Enterprises Pty Ltd [1999] FCA 104
Mitic v OZ Minerals Limited (No 2) [2017] FCA 40
Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Limited (2016) 245 FCR 191
Peak Coal Limited, in the matter of Peak Coal Limited (No 2) [2010] FCA 45
Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213
Re Hills Motorway Limited (2002) 43 ACSR 101; [2002] NSWSC 897
Re NRMA Limited (2000) 33 ACSR 595; [2000] NSWSC 82
Re Opes Prime Stockbroking Ltd (No 2) (2009) 73 ACSR 411; [2009] FCA 864
Re Permanent Trustee Co Ltd (2002) 43 ACSR 601; [2002] NSWSC 1177
Seven Network Limited, in the matter of Seven Network Limited (No 3) (2010) 267 ACSR 701; [2010] FCA 400
Sovereign Life Assurance Co v Dodd [1892] 2 QB 573
Williams v FAI Home Security Pty…
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- Case
- [2018] FCA 2071
- Decision Date
CaseChat Overview and Summary
The Court meticulously examined the fairness and reasonableness of the settlement by considering five interrelated aspects. These included the quantum of the settlement sum, the efficacy of releasing Slater & Gordon from the claims of the Other Shareholder Claimants, the inclusion of the Other Shareholder Claimants in the settlement fund, the quantum of the payment to Maurice Blackburn, and the quantum of the payment to ILP. The Court assessed the reasonableness of the proposed funder’s fee and legal costs based on the provided affidavits and submissions. The Court concluded that the settlement was fair and reasonable, taking into account Slater & Gordon’s dire financial situation and the preconditions for recapitalisation via the Senior Lender Scheme.
The Court approved both the schemes of arrangement and the settlement, finding them to be fair and reasonable. It also made specific amendments to the Shareholder Claimant Scheme and granted exemptions for the Scheme Company under the Corporations Act. The approval of these schemes and the settlement allows for the recapitalisation of Slater & Gordon, ensuring its continued operation and the preservation of shareholder interests.
Finally, the Court noted that the approval of the Senior Lender Scheme is essential for the Scheme Company and its subsidiaries to qualify for exemption from the registration requirements of the U.S. Securities Act of 1933. The Court's orders were entered forthwith, with specific attention to the procedural requirements under Rule 39.32 of the Federal Court Rules 2011.
Orders
Orders of the court
1. Pursuant to subsection 411(4)(b) of the Corporations Act:
(a) the Senior Lender Scheme, as amended or modified by the Court, be approved; and
(b) the Shareholder Creditor Scheme, as amended or modified by the Court, be approved.
2. Pursuant to subsection 411(12) of the Corporations Act, the Scheme Company be exempted from compliance with subsection 411(11) of the Corporations Act.
3. Pursuant to s 411(6) of the Corporations Act, an amendment to clause 14.2(a) of the Shareholder Claimant Scheme as follows:
"lf a Shareholder Claimant pursues commences a Permitted Claim, the
Shareholder Claimant must proffer an undertaking…”
4. These orders be entered forthwith.
THE COURT NOTES THAT
5. The Scheme Company and its subsidiaries will rely on the Court’s approval of the Senior Lender Scheme for the purposes of qualifying for exemption from the registration requirements of the U.S. Securities Act of 1933, provided for by section 3(a)(10) of that Act, in connection with the implementation of, and the provision of consideration under, the Senior Lender Scheme.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
Mr Delaney also made certain objections as an interested party. But it is convenient to deal with Mr Delaney’s objections later in these reasons.Consideration of settlement In light of the nature and background of the settlement, and the objections to it, I considered it convenient to assess whether it was “fair and reasonable” by reference to five (albeit interrelated) aspects. These were: (1)the quantum of the settlement sum, particularly in view of the quantum of the claim in the Hall proceeding;(2)the efficacy of releasing Slater & Gordon from the claims of the Other Shareholder Claimants and the associated Shareholder Claimant Scheme;(3)the inclusion of the Other Shareholder Claimants in the fund being created by the settlement;(4)the quantum of the payment to Maurice Blackburn; and(5)the quantum of the payment to ILP. I address each of these aspects in turn. The Court had before it affidavit material indicating the basis of the settlement, and a justification for the global settlement sum. I need not in the unusual circumstances of the Hall proceeding rehearse this material in relation to the global settlement sum, as that sum was effectively pre-determined once the Schemes were approved. A number of affidavits and submissions had been submitted to the Court in order to establish that the settlement was fair and reasonable and in the interests of the Hall Group Members. Although directed toward the approval of the settlement, these documents also necessarily addressed the reasonableness of the proposed funder’s fee of $8 million for ILP and legal costs in respect of the Hall proceeding. In particular, reference was made to the following:(1)the Sixth Affidavit of Andrew John Watson sworn 13 November 2017 (NonConfidential in support of settlement approval), in particular paragraphs [7][44], [51]-[73], and [98]-[120];(2)the Seventh Affidavit of Andrew John Watson sworn 13 November 2017 (Confidential in support of settlement approval), in particular Confidential Annexure ‘AJW-66’, being the opinion of counsel dated 13 November 2016 at paragraphs [2.25]-[2.33];(3)the Applicant’s Submissions in support of Settlement Approval hearing dated 15 November 2017, in particular paragraphs [15]-[16];(4)the Confidential Affidavit of Paul Lindholm sworn 11 December 2017; (5)the Applicant’s Submissions in support for further Settlement Approval hearing dated 14 December 2017, in particular paragraphs [13]-[22];(6)the Affidavit of Andrew John Watson sworn 21 June 2018; and(7)the Affidavit of Paul Lindholm sworn 21 June 2018. In respect of the quantum of the settlement sum, the reasonableness of the settlement contributions had to be informed by recoverability issues alone. This was due to Slater & Gordon’s dire financial situation, whereby Slater & Gordon would become insolvent if the recapitalisation did not proceed via the Senior Lender Scheme. As the settlement was a precondition to the recapitalisation, if it did not proceed, Slater & Gordon would enter involuntary administration, whereupon the claims of shareholders would be subordinated to all other claims. Against this backdrop, the fact that the sum of $36.5 million was a small portion of the aggregate value of the Hall Group Members’ claims should not be understood to mean the settlement was unfair or unreasonable.