IOR Group Limited - [2009] FCA 1588

FEDERAL COURT OF AUSTRALIA
IOR Group Limited [2009] FCA 1588
CORPORATIONS – Corporations Act 2001 (Cth) – s 411 – scheme of arrangement – application for order that company convene meeting of members to consider proposed scheme of arrangement
Companies Act 1961 (NSW) s 181
Corporations Act 2001 (Cth) s 411
Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485
F T Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69
Fraser v NRMA Holdings Ltd (1995) 55 FCR 452
Re Investa Properties Ltd (2007) 25 ACLC 1186
Re Permanent Trustee Company Limited (2002) 43 ASCR 601
WebCentral Group Limited (No 2) (2006) 58 ACSR 742
IOR GROUP LIMITED
NSD 1250 of 2009
STONE J
23 DECEMBER 2009
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1250 of 2009

GENERAL DIVISION

IOR GROUP LIMITED
Plaintiff

JUDGE:

STONE J

DATE OF ORDER:

1 DECEMBER 2009

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.Pursuant to subsection 411(1) of the Corporations Act 2001 (Cth) ( the Act):
(a)the Plaintiff convene a meeting (Scheme Meeting) of the holders of ordinary shares in the Plaintiff (Shareholders) for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement (with or without modification) between the Plaintiff and its Shareholders (Scheme of Arrangement) the terms of which are set out in Annexure A of the document which is Exhibit 1 in these proceedings (Scheme Booklet);
(b)the Scheme Meeting be held on 7 January 2010 at Crowne Plaza Norwest, 1 Columbia Court, Baulkham Hills, New South Wales at 10.00 am;
(c)Margaret Mary Campbell or, failing her, Christopher Leslie Henderson, act as Chairman of the Scheme Meeting;
(d)the Chairman have the power to adjourn the Scheme Meeting for such time as the Chairman considers appropriate;
(e)at the Scheme Meeting, a Shareholder will be entitled to one vote for each ordinary share in the Plaintiff they are registered as holding at 7.00 pm on 5 January 2010;
(f)the Scheme Booklet be, and hereby is, approved for distribution to shareholders.

2.Other than Regulation 5.6.13 of the Corporations Regulations 2001, rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) shall not apply to the Scheme Meeting.
3.Notice of the hearing of an application pursuant to s 411(4) of the Act for an order approving the Scheme of Arrangement be published once in “The Australian” newspaper by an advertisement substantially in the form of Annexure A to these orders, such advertisement to be published on or before 8 January 2010, and the Plaintiff be otherwise exempted from compliance with rule 3.4 of the Federal Court (Corporations) Rules 2000 (Cth).
4.The proceeding be stood over to 10.15 am on 14 January 2010.
5.The Plaintiff be granted liberty to apply.
6.The orders be entered forthwith.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders…

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.

Continue reading IOR Group Limited

Details

AGLC: IOR Group Limited [2009] FCA 1588
Case: [2009] FCA 1588
Decision Date: 1 DECEMBER 2009

CaseChat Overview and Summary

IOR Group Limited was the subject of a legal dispute involving a proposed scheme of arrangement under Part 5.1 of the Corporations Act 2001. The company intended to list on the Australian Stock Exchange (ASX) to allow shareholders to sell their shares before acquisition by Aevum, with this listing being a condition precedent to the scheme. The dispute arose as to whether the explanatory statement provided to shareholders adequately conveyed the implications of the Board's decision to not proceed with the listing. The Federal Court was tasked with determining whether the explanatory statement was sufficient for shareholders to make an informed decision.

The legal issues before the court centred on whether the explanatory statement provided to IOR’s shareholders sufficiently disclosed the consequences of the Board not proceeding with the listing, and whether the statement was intelligible to the reasonable shareholders. The court had to consider whether the explanatory statement presented a fair and accurate account of the scheme, including the potential implications of the Board’s decision on the scheme’s progression. The court also had to assess whether the scheme's legal and commercial operations were adequately explained.

The court found that the explanatory statement was sufficient to meet the requirements of the Corporations Act. It noted that while the statement did not exhaustively explore every possible argument, it did provide a fair and intelligible account of the scheme's operation and the consequences of the Board’s decision. The court was satisfied that the scheme was likely to receive approval if it achieved the statutory majority at the meeting. The court also considered the reliance on counsel to highlight all relevant factors, given the ex parte nature of the application. Ultimately, the court determined that no aspect of the scheme, including the deemed warranty, should be a concern.

The orders granted by the court included convening a meeting of IOR’s shareholders, setting the date and location for the meeting, and approving the distribution of the scheme booklet. The court also directed the publication of notice in "The Australian" newspaper and exempted the plaintiff from certain compliance requirements. The proceeding was stood over to allow for further applications if necessary.

Orders

Orders of the court

1. Pursuant to subsection 411(1) of the Corporations Act 2001 (Cth) ( the Act):

(a) the Plaintiff convene a meeting (Scheme Meeting) of the holders of ordinary shares in the Plaintiff (Shareholders) for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement (with or without modification) between the Plaintiff and its Shareholders (Scheme of Arrangement) the terms of which are set out in Annexure A of the document which is Exhibit 1 in these proceedings (Scheme Booklet);

(b) the Scheme Meeting be held on 7 January 2010 at Crowne Plaza Norwest, 1 Columbia Court, Baulkham Hills, New South Wales at 10.00 am;

(d) the Chairman have the power to adjourn the Scheme Meeting for such time as the Chairman considers appropriate;

(e) at the Scheme Meeting, a Shareholder will be entitled to one vote for each ordinary share in the Plaintiff they are registered as holding at 7.00 pm on 5 January 2010;

(f) the Scheme Booklet be, and hereby is, approved for distribution to shareholders.

2. Other than Regulation 5.6.13 of the Corporations Regulations 2001, rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) shall not apply to the Scheme Meeting.

3. Notice of the hearing of an application pursuant to s 411(4) of the Act for an order approving the Scheme of Arrangement be published once in “The Australian” newspaper by an advertisement substantially in the form of Annexure A to these orders, such advertisement to be published on or before 8 January 2010, and the Plaintiff be otherwise exempted from compliance with rule 3.4 of the Federal Court (Corporations) Rules 2000 (Cth).

4. The proceeding be stood over to 10.15 am on 14 January 2010.

5. The Plaintiff be granted liberty to apply.

6. The orders be entered forthwith.

Note:

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

STONE J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: STONE J

IOR is not a listed company. As a condition precedent to the Scheme, however, a “window” of listing on the Australian Stock Exchange (ASX) will be created. This will be achieved by listing IOR on 30 December 2009 and is intended to allow shareholders to sell their shares before the time for acquisition by Aevum. The IOR Board has reserved its right to decide not to proceed with the listing before the proposed meeting. The explanatory statement explains the consequence of such a decision as follows:The listing of IOR on the ASX is a condition precedent to the Scheme and if it does not occur, the Scheme will not proceed unless the condition is waived. If the IOR Board decides not to proceed with the listing of IOR prior to the current scheduled date for the Scheme Meeting then the IOR Board will consult with Aevum in relation to what implications this will have for the Scheme, including whether the Scheme Meeting should be adjourned to a later date.Relevant Considerations There are three stages in the promulgation of a scheme of arrangement under Part 5.1 of the Corporations Act: the application to the Court to convene a meeting under s 411; the meeting itself where the scheme is presented for approval; and the application to the Court for approval of the scheme. In considering a proposed scheme the Court will look to both the explanatory material and to the substantive legal mechanisms of the scheme itself. The way in which the scheme operates must be presented fairly at the meeting. This does not require that every possible argument for and against the proposal be canvassed in the material. In Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at 468, the Full Court observed that the need to give a full and fair account of the scheme “must be tempered by the need to present a document that is intelligible to reasonable members of the class to whom it is directed”. Ultimately it is necessary, as Street CJ commented in F T Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72, that the Court also be satisfied that:[t]he scheme is of such a nature and cast in such terms that, if it receives the statutory majority at the…meeting the court would be likely to approve it on the hearing of a petition [the second Court hearing] which is unopposed. Although Street CJ was concerned with whether a meeting of creditors to consider a moratorium scheme of arrangement should be convened pursuant to s 181 of the Companies Act 1961 (NSW), the approach of the Chief Justice is applicable here; see Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 504. This necessarily involves looking forward to the second hearing date and considering the legal and commercial operation of the provisions of the scheme. A consequence of the fact that applications under s 411 are ex parte is that the Court is more than usually reliant on counsel for the plaintiff to bring to the attention of the Court each and every factor that may be relevant to the Court’s exercise of its discretion; Re Permanent Trustee Company Limited (2002) 43 ASCR 601 at [7]. In the case of the present Scheme the plaintiff has drawn my attention to a number of factors that are considered below. It submits, however, that no aspect of the Scheme, including these factors, should be of any concern to the Court. Deemed warranty

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1250 of 2009
GENERAL DIVISION

JUDGE:	STONE J
DATE OF ORDER:	1 DECEMBER 2009
WHERE MADE:	SYDNEY