In the matter of Foodland Associated Limited
[2005] FCA 1933
•9 NOVEMBER 2005
FEDERAL COURT OF AUSTRALIA
In the matter of Foodland Associated Limited
[2005] FCA 1933CORPORATIONS - Scheme of Arrangement - transfer scheme - demerger scheme - arrangement with members - conditioned proposals for the acquisition of shares - exemption from compliance with s 411(11) of the Corporations Act 2001 - proponents of scheme to draw Court's attention to potential problems - role of Court.
Corporations Act 2001 (Cth), ss 411(1), (4)(a)(ii), (6), (17)(a), 412(1)(a), Ch 6.
Re ACM Gold Ltd (1992) 34 FCR 530 referred to
Re Archaean Gold NL (1997) 23 ACSR 143 referred to
Statewest Credit Society Limited v Home Building Society Limited [2005] FCAFC 273 referred to
Re Sonodyne International Ltd (1995) 13 ACLC 221 referred to
Re NRMA Ltd (No 2) (2000) 34 ACSR 261 referred toIN THE MATTER OF Foodland Associated Limited
WAD 238 OF 2005LEE J
9 NOVEMBER 2005
PERTH
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAD238 OF 2005
IN THE MATTER OF Foodland Associated Limited (ABN 13 008 667 650)
FOODLAND ASSOCIATED LIMITED
(ABN 13 008 667 650)
PlaintiffJUDGE:
LEE J
DATE OF ORDER:
9 NOVEMBER 2005
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1.Pursuant to section 411(6) of the Corporations Act 2001 (Cth), the Transfer Scheme which is set out in Part 18.2 of Exhibit “C” to the fourth affidavit of Christopher Edward Bennett sworn 15 September 2005 be approved.
2.Pursuant to section 411(6) of the Corporations Act 2001 (Cth), the Demerger Scheme which is set out in Part 18.4 of Exhibit “C” to the fourth affidavit of Christopher Edward Bennett sworn 15 September 2005 be approved.
3.Pursuant to section 411(12) of the Corporations Act 2001 (Cth), the Plaintiff is exempted from compliance with section 411(11) of the Corporations Act 2001 (Cth) in relation to the Transfer Scheme and the Demerger Scheme.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAD238 OF 2005
IN THE MATTER OF Foodland Associated Limited (ABN 13 008 667 650)
FOODLAND ASSOCIATED LIMITED
(ABN 13 008 667 650)
PlaintiffJUDGE:
LEE J
DATE:
9 NOVEMBER 2005
PLACE:
PERTH
REASONS FOR JUDGMENT
This is an ‘ex parte’ application under s 411(6) of the Corporations Act 2001 (Cth) (“the Act”) for approval of a proposed arrangement between the plaintiff (“Foodland”) and its members.
On 16 September 2005 the Court (Siopis J) made an order under s 411(1) of the Act that meetings of the members of Foodland be convened to consider the proposed arrangement and that the explanatory statement proposed to be sent to members with the notices convening the meetings, as required by s 412(1)(a) of the Act, be approved.
The proposed arrangement to be put to members was complex in that it required members to consider various conditioned proposals for the acquisition of their shares that had potentially different financial consequences according to the form of consideration chosen and the domicile of the member.
By making the order that meetings of members of Foodland be convened to consider the proposed arrangement, the Court did no more than indicate that it was satisfied that the proposed arrangement outlined in the explanatory statement warranted consideration by members in the exercise of their commercial judgment, and that if the resolutions proposed to be put at the meetings were passed by the majorities prescribed by s 411(4)(a)(ii) of the Act the decisions of members at those meetings could support an order by the Court approving the arrangement. (See: Re ACM Gold Ltd (1992) 34 FCR 530 per O’Loughlin J at 535).
An ‘ex parte’ application made under s 411(1) of the Act obliges the plaintiff to draw to the Court’s attention any potential problems in the application. (See: Re Archaean Gold NL (1997) 23 ACSR 143 per Santow J at 148). On such an application it may be appropriate for the Court to conduct an inquisitorial proceeding to be satisfied that it is appropriate to make an order under s 411(1) of the Act. If there are objectors to the proposed arrangement who have been given leave by the Court to be heard on the application, the proceeding will become adversarial whether or not the objectors are joined as defendants. (See: Statewest Credit Society Limited v Home Building Society Limited [2005] FCAFC 273).
In considering an application under s 411(1) the Court must be satisfied that the proposed explanatory statement provides sufficient disclosure of matters relevant to the proposed arrangement and that acceptance of the arrangement could be regarded by reasonable business people to be a decision made for the benefit of members. (See: Re Sonodyne International Ltd (1995) 13 ACLC 221).
In the instant case the nub of the proposal sought to be put before meetings of members of Foodland for acceptance was that the whole of the shareholding in Foodland, and a subsidiary, be acquired by proposed purchasers without resort to the takeover provisions of Ch 6 of the Act.
Given that the proposal if approved would involve the compulsory acquisition of shares of dissentient members, the Court had to have regard to whether the explanatory statement provided sufficient detail of the benefits and detriments of the proposed arrangement for members to be sufficiently informed to be able to make a commercial judgment on whether the proposed arrangement was in their interests. A principal issue to be addressed, therefore, was whether the statement took due account of the potential worth of Foodland shares if those shares were subject to a competitive takeover bid on the market.
The arrangement put to members consisted of two connected but severable parts. The first part of the arrangement was a proposal to effect a “demerger” of Foodland’s operations in Australia and New Zealand (“the demerger scheme”) by transferring the New Zealand operation to another entity, Progressive Enterprises Holding Limited (“PEH”). Foodland shareholders would thereby become entitled to one share in PEH for each Foodland share held. Amounts otherwise distributable to shareholders from a reduction in the capital of Foodland and from the declaration of a special dividend, were to be applied to the acquisition of PEH shares on behalf of Foodland shareholders.
The second part of the arrangement (“the transfer scheme”) involved transfer of the foregoing entitlements of members to shares in PEH to Woolworths Ltd (“Woolworths”); the acquisition by Woolworths from Foodland of certain supermarket stores operated by Foodland in Australia, and the transfer of the shares in Foodland to Metcash Limited (“Metcash”).
The demerger scheme, if approved by members, would be implemented even if the transfer scheme were rejected.
The transfer scheme involved several options by which the consideration to be provided by Woolworths and Metcash to members for the transfer of their shares could be satisfied and was subject to a number of conditions, for example, approval by the Australian Competition and Consumer Commission of some of the elements of the transfer scheme and approval by the Court of the arrangement. His Honour was satisfied that the explanatory statement provided sufficient information to members to enable them to exercise their commercial judgment on whether the arrangement should be accepted or rejected. His Honour, therefore, approved the explanatory statement and directed that meetings of members be convened.
I am satisfied by the matters deposed to in the affidavits filed by Foodland that meetings of members were duly convened in accordance with the orders made by his Honour and that the resolutions passed at those meetings were carried with the requisite majorities prescribed by the Act. Pursuant to those resolutions the members approved both the demerger scheme and the transfer scheme. In excess of 62% of the shares in Foodland eligible to vote was represented in person or by proxy at the meetings of which 99.5% voted to approve the transfer scheme and 99.6% voted to approve the demerger scheme.
The Court has been informed that all conditions precedent to the implementation of the schemes have been satisfied.
As required by the Act the Australian Securities and Investment Commission was duly served with notice of the foregoing proposal including a copy of the explanatory statement. The Commission raised no objection to the arrangement and has not submitted that the arrangement should not be approved by the Court.
Having regard to the fact that the members of Foodland were sufficiently informed by the explanatory statement to be able to determine for themselves whether it was in their interests for Woolworths and Metcash to acquire their shares, or entitlement to shares, in Foodland and PEH and did so in overwhelming numbers, and having regard to the fact that all requirements of the Act have been met, I am satisfied that the Court should approve the arrangement pursuant to s 411(6) of the Act. (See: Re NRMA Ltd (No 2) (2000) 34 ACSR 261 per Santow J at 270). I am also satisfied that the complexity of the proposed arrangement made it evident that the arrangement had not been proposed for the purpose of avoiding the takeover provision of the Act. (See: s 411(17)(a)).
Accordingly the orders sought by Foodland will be made in the terms of the minute presented.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee. Associate:
Dated: 1 February 2006
Counsel for the Applicant: C L Zelestis QC, B D Luscombe Solicitors for the Applicant: Mallesons Stephen Jaques Date of Hearing: 9 November 2005 Date of Judgment: 9 November 2005
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