Re ABB Grain Ltd

Case [2010] FCA 1309

FEDERAL COURT OF AUSTRALIA

ABB Grain Ltd, in the matter of ABB Grain Ltd [2010] FCA 1309

Citation: ABB Grain Ltd, in the matter of ABB Grain Ltd [2010] FCA 1309
Party: ABB GRAIN LTD
File number: SAD 105 of 2009
Judge: BESANKO J
Date of judgment: 26 November 2010   
Catchwords:

CORPORATIONS — application under s 411(1) of the Corporations Act 2001 (Cth) by a company for an order that a meeting of its members be convened to consider a scheme of arrangement between company and its members involving company becoming wholly owned subsidiary of another company — application for approval of explanatory statement to accompany notice of meeting — where shareholders of company passed resolution approving the scheme — subsequent application for approval of scheme of arrangement under s 411(4) of the Corporations Act 2001 (Cth).

HELD: Application granted and initial orders made to convene meeting of shareholders and to approve explanatory statement. An order was later made approving the scheme.

Legislation: Corporations Act 2001 (Cth) s 411, s 412
Securities Act 1933 (US) s 3(a)(1)
Federal Court (Corporations) Rules 2000 (Cth) rr 2.15, 3.4
Corporations Regulations 2001 (Cth) reg 5.1.01, Sch 8 Pt 3
Cases cited: Mincom Ltd v EAM Software Finance Pty Ltd (2007) 61 ACSR 266, disapproved
Re ACM Gold Ltd (1992) 7 ACSR 231, cited
Re Adelaide Bank Ltd [2007] FCA 1582, cited
Re APN News & Media Ltd (2007) 62 ACSR 400, followed
Re Arthur Yates & Co Ltd (2001) 36 ACSR 758, cited
Re Bank of Adelaide (1979) 22 SASR 481, cited
Re Bolnisi Gold NL (No 2) (2007) 165 FCR 45, cited
Re Coles Group Ltd (2007) 25 ACLC 1380, cited
Re Dyno Nobel Ltd [2008] VSC 154, cited
Re Foundation Healthcare Ltd (No 2) (2002) 43 ACSR 680, cited
Re Hills Motorway Ltd (2002) 43 ACSR 101, cited
Re Hostworks Group Ltd (2008) 26 ACLC 137, cited
Re Hostworks Group Ltd (No 2) [2008] FCA 248, cited
Re Investa Properties Ltd (2007) 25 ACLC 1186, cited
Re Macquarie Capital Alliance Ltd (2008) 67 ACSR 484, cited
Re Macquarie Private Capital A Ltd (2008) 26 ACLC 366, cited
Re MBF Australia Ltd [2008] FCA 428, cited
Re SFE Corp Ltd (2006) 59 ACSR 82, cited
Re St George Bank Ltd [2009] 68 ACSR 480, cited
Re Westfield Holdings (2004) 49 ASCR 734, cited
Dates of hearing: 30 July, 10 September 2009
Dates of orders: 30 July, 10 September 2009
Place: Adelaide
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 88
Counsel for the Plaintiff: Mr T F Bathurst QC with Ms K H Barrett
Solicitor for the Plaintiff: Johnson Winter & Slattery

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION

SAD 105 of 2009

ABB GRAIN LTD, IN THE MATTER OF ABB GRAIN LTD

ABB GRAIN LTD
Plaintiff

JUDGE:

BESANKO J

DATE OF ORDER:

30 JULY 2009

WHERE MADE:

ADELAIDE

THE COURT ORDERS…

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AGLC
Re ABB Grain Ltd [2010] FCA 1309
Case
[2010] FCA 1309
Decision Date

CaseChat Overview and Summary

The case of Re ABB Grain Ltd involved an application by ABB Grain Ltd for an order convening a meeting of its members to consider a proposed scheme of arrangement under section 411(1) of the Corporations Act 2001 (Cth). The scheme involved ABB Grain becoming a wholly owned subsidiary of Viterra. The primary legal issues before the court were whether the procedural requirements were met, whether the scheme was fair and reasonable, and whether the scheme was proposed for an improper purpose, such as to avoid the provisions of Chapter 6 of the Corporations Act. The shareholders had already approved the scheme, and the court was asked to approve it under section 411(4) of the Act.

The court considered the evidence and submissions regarding the scheme's fairness and reasonableness, as well as the procedural compliance. It noted that the scheme involved significant costs and benefits to the parties involved and that there was no evidence suggesting that the scheme was proposed for the improper purpose of avoiding the operation of any provisions of Chapter 6 of the Act. The independent expert, KPMG Corporate Finance (Aust) Pty Ltd, opined that the scheme was fair and reasonable. The court also considered the impact of the revised earnings guidance by ABB Grain, which did not affect the fairness of the scheme.

The court concluded that all procedural matters were complied with, the scheme was approved by the required majority, and it was fair and reasonable. The court granted the application, approved the scheme, and made related orders to convene the meeting of shareholders and approve the explanatory statement. Subsequent orders approved the scheme, exempted ABB Grain from certain compliance requirements, and noted the intention to rely on an exemption under the Securities Act 1933 of the United States of America.

Orders

Orders of the court

1. Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (Act), there be convened a meeting (Scheme Meeting) of all holders of fully paid ordinary shares of the Plaintiff for the purpose of considering and, if thought fit, agreeing, with or without modification, to a scheme of arrangement between them and the Plaintiff in the form of the draft Scheme of Arrangement a copy of which is in Exhibit A (“Scheme”).

2. The Scheme Meeting be held at 11:00 am on 9 September 2009 at the Holiday Inn Adelaide, 65 Hindley Street, Adelaide, South Australia.

3. The draft:

(a) explanatory statement for the Scheme, a copy of which forms part of the documents comprising the Scheme Booklet which is Exhibit A;

(b) voting forms for the resolutions to be passed at the Scheme Meeting copies of which are in Annexure ‘JSK9’ to the affidavit of John Storrie Keeves sworn on 27 July 2009,

be and are hereby approved.

4. On or before 3 August 2009 there be despatched by prepaid ordinary post (or in the case of overseas members, by airmail), to each ABB Grain Shareholder appearing in the register of the Plaintiff’s shareholders, a document substantially in the form or to the effect of the Scheme Booklet together with the voting forms, election forms, reply paid envelopes and fly sheets.

5. The meeting convened pursuant to paragraph 1 will be conducted in accordance with the Constitution of the Plaintiff and Part 2G.2 of the Act, except to the extent provided otherwise by these orders.

6. ABB Grain Shareholders who are recorded in the share register of the Plaintiff at 6:30 pm (Adelaide time) on 7 September 2009 shall be eligible to vote at the Scheme Meeting.

7. A form of proxy in respect of the Scheme Meeting will be valid and effective if:

(a) delivered to the Plaintiff at care of Computershare Investor Services Pty Limited by use of the reply paid envelope;

(b) delivered to the Plaintiff at the Plaintiff’s registered office at the Australian Barley Board, Level 1, Grain House, 123-130 South Terrace, Adelaide, SA, 5000; or

(c) received by mail at:

(i) the Plaintiff’s registered office at the Australian Barley Board, Level 1, Grain House, 123-130 South Terrace, Adelaide, SA, 5000; or

(ii) the Plaintiff at care of Computershare Investor Services Pty Limited, GPO Box 242, Melbourne, Victoria, 3001, Australia; or

(d) successfully transmitted by facsimile to:

(i) the Plaintiff’s registered office; or

(ii) the Plaintiff at care of Computershare Investor Services Pty Limited on 1800 783 447 (from within Australia) or +61 3 9473 2555 (from outside Australia);

in each case provided the proxy is received not later than 11:00 am on 7 September 2009.

8. The Chairperson of the Scheme Meeting be Mr Perry Gunner and, in his absence, Mr Max Venning.

9. The Chairperson appointed to the Scheme Meeting, and in his absence the alternative Chairperson, has the power to adjourn the meeting in his absolute discretion.

10. All voting at the Scheme Meeting be by poll as declared by the Chairperson.

11. The Plaintiff advertise the Scheme Meeting once, substantially in the form of the document attached* and marked ‘A’, in The Australian newspaper and The Advertiser newspaper no later than 11 August 2009.

12. The Plaintiff publish once substantially in the form of the document attached* and marked ‘B’, in The Weekend Australian newspaper and The Advertiser newspaper a notice of hearing of any application to approve the Scheme under section 411(4) of the Act on or before Saturday, 5 September 2009, and the Plaintiff shall otherwise be exempted from compliance with the requirement to publish such notices at least 5 days before the date fixed for the hearing of the application pursuant to Rule 3.4(3)(b) of the Federal Court (Corporations) Rules 2000 (Cth).

13. The Plaintiff be excused from complying with Rule 2.15 of the Federal Court (Corporations) Rules, except in so far as that rule applies Regulation 5.6.13 of the Corporations Regulations 2001 to the meetings.

14. The proceedings be stood over to 10 September 2009 at 11:30 am before Justice Besanko for the hearing of any application to approve the Scheme.

15. Liberty to restore on two days’ notice.

16. These Orders to be entered forthwith.

* The documents marked “A” and “B” may be inspected by examining the Court file.

Note:

1 Pursuant to section 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between ABB Grain Ltd (ACN 084 962 130) (ABB Grain) and its fully paid ordinary shareholders, in the form annexed hereto*, be approved.

2 Pursuant to section 411(12) of the Act, ABB Grain be exempted from compliance with section 411(11) of the Act in respect of the scheme of arrangement referred to in order 1.

3 These Orders to be entered forthwith.

4 Order 4 of the orders made on 30 July 2009 be varied nunc pro tunc so that the date 4 August 2009 is substituted for 3 August 2009.

THE COURT records, to facilitate the event occurring, that the plaintiff proposes to rely upon section 3(a)(10) of the Securities Act of 1933 (US) for exemption from the registration requirements of that Act.

* The Annexure may be inspected by examining the Court file.

Note:

Background

Background to the litigation

Clause 13.1 of the Implementation Agreement provided as follows:13.1 Background(a)ABB Grain and Viterra believe the Scheme will provide significant benefits to ABB Grain, Viterra, Viterra Acquirer and their respective shareholders and acknowledge that they will incur significant costs in connection with performing their obligations under this Agreement and the Scheme.(b)In these circumstances, each party:(i)has requested that provision be made in this Agreement for the payments set out in clauses 13.2 and 13.3, without which they would not have entered into this Agreement; and(ii)believes that it is appropriate to agree to the payment which it agrees to make under this clause 13 in order to secure the participation of the other parties in the Scheme.(c)ABB Grain and Viterra each acknowledges that the amount it has agreed to pay under this clause 13 is an amount which is appropriate to compensate the other party or parties (as the case may be) for their reasonable external and internal costs and opportunity costs in connection with the Scheme. In the circumstances, the provisions dealing with break fees did not amount to a reason to decline to make an order under s 411(1) of the Act.Section 411(17) of the Act The Act provides that the Court is not to approve a compromise or an arrangement under s 411(4) unless it is either satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Act or there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement. The Court need not approve a compromise or arrangement merely because ASIC has produced such a statement (s 411(17)). The practice of ASIC is not to produce a written statement under s 411(17)(b) (if it produces one at all) until the time of the second court hearing, that is, after the meeting has been held (Regulatory Guide 60 Schemes of Arrangement – s 411(17) para 21). The weight of authority is that the matters raised by s 411(17) are considered at the second court hearing when it will be known whether ASIC will produce a statement to the effect that it has no objection to the compromise or arrangement (Re Macquarie Private Capital A Limited at [27] and [31]; Re Macquarie Capital Alliance Ltd (2008) 67 ACSR 484 at [49]; Re Adelaide Bank Limited at [24]; Re APN News and Media Limited at [65]. Notwithstanding the views of ASIC, the Court may consider whether the scheme of arrangement has been proposed for the purpose of enabling avoidance of the operation of any of the provisions of Chapter 6 of the Act: Re Foundation Healthcare Ltd (No 2) (2002) 43 ACSR 680; [2002] FCA 973. I record the fact that there was evidence put before me from Mr Ashley Roff to the effect that he was directly involved in the negotiations which led to the Implementation Agreement and it was never suggested to him during the negotiations that the transaction should be structured as a scheme of arrangement in order to avoid the operation of any provisions of Chapter 6 of the Act and, as far as he was aware, it was not proposed for that purpose.Securities Act 1933 of the United States of America

Evidence

Evidence Before The Court

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Decision

Reasons for decision

One of the conditions of the exemption is that the Court be informed, before any hearing at which the scheme is approved, that the issuer intends to rely on the Court’s approval for the exemption in the event that the scheme is in fact approved. Conclusion It was for these reasons that I made an order convening a meeting of ABB Grain members to consider and, if thought fit, agree to a scheme of arrangement between them and ABB Grain. I also approved the explanatory statement and made related orders.APPLICATION FOR ORDER UNDER S 411(4) OF THE CORPORATIONS ACT 2001 (CTH)Introduction The details of the proposed Scheme of Arrangement are set out earlier in these reasons. I will not repeat them. At the meeting of the shareholders of ABB Grain a resolution approving the scheme was passed by the required majority under s 411(4)(b) of the Act. The Court was asked to make an order approving the scheme. No party appeared to oppose the approval of the Scheme of Arrangement. I made an order approving the scheme and these are my reasons for doing so.Revision of 2009 earnings guidance There was one material new development between the first and second Court hearings. That development was the announcement by ABB Grain of a revised earnings guidance in the following terms:ABB’s revised 2009 earnings guidance is underlying NPAT of $33 million to $43 million (excluding previously announced one-off expenses of approximately $8 million after tax and subject to market conditions and commodity price movements over the remainder of the year) compared to the previous NPAT guidance of $43 million to $53 million. ABB Grain shareholders were advised of this revision by letter from the chairman of ABB Grain, by publication on the ASX website page for ABB Grain and by publication on ABB Grain’s website. The letter from the chairman of ABB Grain provided in part as follows:The revised earnings outlook has no impact on the Directors’ unanimous recommendation in favour of the Scheme of Arrangement with Viterra. The letter also advised shareholders that they were entitled to change their voting form and/or Scheme consideration if they wanted to do so. The independent expert, KPMG Corporate Finance (Aust) Pty Ltd, considered the impact of the revised earnings guidance. The independent expert considered that the revised earnings guidance did not affect their opinion that the Scheme is fair and reasonable and in the best interests of ABB scheme shareholders.Conditions precedent I was satisfied on the evidence put before the Court that the conditions precedent to the effectiveness of the Scheme have been either satisfied or waived. The resolution in favour of the constitutional amendment was passed (see [8] above).Approval of the scheme The authorities suggest that in considering whether to make an order approving a scheme a Court should consider the following:1.Whether the procedural matters relating to the meeting of shareholders convened to consider the Scheme have been complied with;2.Whether the meeting of shareholders convened by the order of the Court has approved the Scheme with the required majority under s 411(4)(b);3.Whether the Scheme is fair and reasonable; and4.Whether the remaining requirements of the Act have been satisfied.(See Re Hostworks Group Limited (No 2) [2008] FCA 248 (“Hostworks Group Ltd (No 2)” at [10]-[23] per Mansfield J; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113 at [18]-[24] per Jacobson J; Re Permanent Trustee Co Limited [2002] 43 ACSR 601 at [8]-[10] per Barrett J; Re Central Pacific Minerals NL [2002] FCA 239 at [8]-[14] per Emmett J.)

Ratio Decidendi

Legal Principle Established

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