Re Associated Advisory Practices Ltd (No 2)

Case [2013] FCA 979

FEDERAL COURT OF AUSTRALIA

Associated Advisory Practices Limited, in the matter of Associated Advisory Practices Limited (No 2) [2013] FCA 979

Citation: Associated Advisory Practices Limited, in the matter of Associated Advisory Practices Limited (No 2) [2013] FCA 979
Parties: ASSOCIATED ADVISORY PRACTICES LIMITED ACN 118 000 150
File number: NSD 1219 of 2013
Parties: ASSOCIATED ADVISORY PRACTICES (NO 2) LIMITED ACN 126 371 346
File number: NSD 1221 of 2013
Judge: FARRELL J
Date of judgment: 26 September 2013
Catchwords: CORPORATIONS – scheme of arrangement – meeting ordered pursuant to s 411(1) postponed by Court under s 1319 of the Corporations Act 2001 (Cth) – meeting reconvened pursuant to s 1319 – content of supplementary explanatory statement
Legislation: Corporations Act 2001 (Cth) ss 411(1), 411(4)(b), 1319
Federal Court (Corporations) Rules 2000 (Cth) r 3.2(2)
Cases cited: Anzon Energy Ltd (No 2) (2008) 66 ACSR 355
Associated Advisory Practices Limited, in the matter of Associated Advisory Practices Limited [2013] FCA 761
Bell Resources Ltd v Turnbridge Pty Ltd (1988) 13 ACLR 429
Centro Retail Limited and Centro MCS Manager Limited in its capacity as Responsible Entity of Centro Retail Trust [2011] NSWSC 1321
CMPS&F Pty Limited v Crooks Mitchell Limited (1997) 76 FCR 366
Coates Hire Limited No 2, in the matter of Coates Hire Limited [2007] FCA 2105
Colbern Nominees Pty Ltd v Prime Minerals Ltd (2009) 74 ACSR 236
In the matter of Lend Lease Primelife Ltd; In the Matter of Lend Lease Village Responsible Entity Ltd [2009] NSWSC 1340
McKerlie v Drillsearch Energy Ltd (2009) 74 NSWLR 673
McPherson v Mansell (1994) 16 ACSR 261
Re Australian Gas Light Company (2006) 57 ACSR 67
Re Cellestis Limited (No 2) [2011] VSC 329
Re Citec Corporation Ltd (2006) 225 ALR 137
Re Phosphate Resources Ltd (2005) 56 ACSR 169
Re Ross Human Directions Ltd (No 3) [2010] FCA 1400
Smith v Paringa Mines Limited [1906] 2 Ch 193
Date of hearing: 17 September 2013
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 32
Counsel for the plaintiffs in NSD 1219 and 1221 of 2013: Mr M Oakes SC
Solicitor for the plaintiffs in NSD 1219 and 1221 of 2013: McCullough Robertson Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1219 of 2013

IN THE MATTER OF ASSOCIATED ADVISORY PRACTICES LIMITED ACN 118 000 150

ASSOCIATED ADVISORY PRACTICES LIMITED ACN 118 000 150
Plaintiff

JUDGE:

FARRELL J

DATE OF ORDER:

17 SEPTEMBER 2013

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The Plaintiff hold the Scheme Meeting that was, on 15 July 2013, ordered to be convened and which was postponed by further order on 9 August 2013, on 1 October 2013 at Level 2, Fawkner Centre, 499 St. Kilda Road, Melbourne, Victoria, commencing at 10.00am.

2.The Supplementary Scheme Booklet, including the New Notice of Scheme Meeting and New Proxy Form, be approved for distribution to the redeemable preference shareholders of the Plaintiff.

3.The Supplementary Scheme Booklet to be dispatched to…

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AGLC
Associated Advisory Practices Limited, in the matter of Associated Advisory Practices Limited (No 2) [2013] FCA 979
Case
[2013] FCA 979
Decision Date

CaseChat Overview and Summary

The case involves Centrepoint Alliance Limited (CAF), which is proposing to acquire the remaining shares of Associated Advisory Practices Limited and Associated Advisory Practices (No 2) Limited (the Companies) through a scheme of arrangement. The dispute centres around the timing and content of the shareholder meetings required for the approval of the schemes. The court was tasked with deciding whether the postponement of the scheme meetings was appropriate, and if the supplementary explanatory material to be provided to shareholders met the necessary legal standards.

The legal issues primarily revolved around the appropriateness of postponing the scheme meetings under section 1319 of the Corporations Act 2001 (Cth) and ensuring that the supplementary explanatory material sent to shareholders was in compliance with court orders and legal requirements. The court considered whether the supplementary material provided sufficient and accurate information to the shareholders, particularly in light of a recent announcement by CAF regarding an increase in provisions for client claims.

The court's reasoning involved a careful examination of the circumstances leading to the postponement of the meetings and the necessity of providing updated information to shareholders. The court noted that once a meeting has been ordered by the court under section 411(1), only information approved by the court should be provided to shareholders. This principle was reinforced by previous cases which held that the court-approved "message" should not be unilaterally supplemented by the company. The court concluded that it was appropriate to postpone the meetings and approve the supplementary explanatory material to ensure that shareholders had sufficient time and accurate information to make informed decisions.

The outcome was that the court set a new date for the scheme meetings, approved the supplementary explanatory material to be sent to shareholders, and directed that notices of the hearing for the approval of the schemes be published. The court also stood the proceedings over to a later date to allow for the consideration of the approval of the schemes. The final orders included specific instructions for the dispatch of supplementary material, the date of the new scheme meetings, and the timing of the hearing for the approval of the schemes.

Orders

Orders of the court

1. The Plaintiff hold the Scheme Meeting that was, on 15 July 2013, ordered to be convened and which was postponed by further order on 9 August 2013, on 1 October 2013 at Level 2, Fawkner Centre, 499 St. Kilda Road, Melbourne, Victoria, commencing at 10.00am.

2. The Supplementary Scheme Booklet, including the New Notice of Scheme Meeting and New Proxy Form, be approved for distribution to the redeemable preference shareholders of the Plaintiff.

3. The Supplementary Scheme Booklet to be dispatched to redeemable preference shareholders of the Plaintiff be in the form, or to the effect of, that which is Exhibit 3, and may be sent by pre-paid post.

4. The Plaintiff publish a notice of hearing of any application to approve the scheme of arrangement on or before 24 September 2013, in The Australian newspaper by an advertisement substantially in the form of Annexure A to these Orders, and the Plaintiff shall otherwise be exempted from compliance with Rule 3.4(3)(b) of the Federal Court (Corporations) Rules 2000 (Cth).

5. The proceeding be stood over to 10.15am on Friday, 4 October 2013 before Farrell J for the hearing of any application to approve the scheme of arrangement.

6. Liberty to restore on two days notice.

7. These orders be entered forthwith.

THE COURT NOTES THAT:

8. Orders 5, 6, 7 and 8 made on 15 July 2013 remain in force.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

These are my reasons for making further orders on 17 September 2013 under s 1319 setting 1 October 2013 as the date on which the Scheme Meetings are to be held, approving Supplementary Scheme Booklets (including new Notices of Scheme Meeting and new Proxy Forms) for despatch to redeemable preference shareholders of the Companies, standing the proceedings over to 10:15 am on 4 October 2013 to hear the application to approve the Schemes under s 411(4)(b) and directing that the Companies publish notices of that hearing on or before 24 September 2013.BACKGROUND Under the proposed Schemes, Centrepoint Alliance Limited (CAF) will acquire all of the shares in the Companies which its wholly owned subsidiary does not already own. CAF, through its subsidiary, has interests in 55% of the shares of each of the Companies. The Scheme Consideration is shares to be issued by CAF. On 8 August 2013, CAF made an announcement to the Australian Securities Exchange (Announcement) that it had received a draft actuarial report indicating that one of its subsidiaries, Professional Investment Services Pty Limited (PIS), needed to increase provisions for client claims. The Announcement stated that the board of CAF believed that, once the actuarial report is finalised and audited, the increase in provisions for this liability would have an impact on reported profit and net assets by between $3 million and $5 million as at 30 June 2013. Solicitors for the Companies advised the Court of the Announcement on the same day. On 9 August 2013, I made orders pursuant to s 1319 postponing the Scheme Meetings to a date to be set by further order of the Court and vacating the hearing which had been set down for 16 August 2013 to approve the Schemes. As the Companies had advertised the date of the second court hearing as 16 August 2013, in terms which also referred to Scheme Meetings to be held on 12 August 2013, I accepted an undertaking from the Companies that they would undertake corrective advertising. I stood the proceedings over to 17 September 2013 for the purpose of considering supplementary material to be despatched to shareholders of the Companies. On 30 August 2013, CAF published its audited financial statements for the period to 30 June 2013. Those statements revealed an increase in provisions for client claims of approximately $4.5 million.RELEVANT LAW Section 1319 provides:Power of Court to give directions with respect to meetings ordered by the CourtWhere, under this Act, the Court orders a meeting to be convened, the Court may, subject to this Act, give such directions with respect to the convening, holding or conduct of the meeting, and such ancillary or consequential directions in relation to the meeting, as it thinks fit. The Court has exercised this power to postpone, adjourn or cancel shareholder meetings, and many of those cases have occurred in relation to meetings convened under s 411(1): see CMPS&F Pty Limited v Crooks Mitchell Limited (1997) 76 FCR 366; Re Australian Gas Light Company (2006) 57 ACSR 67; Re Anzon Energy Ltd (No 2) (2008) 66 ACSR 355; In the matter of Lend Lease Primelife Ltd; In the Matter of Lend Lease Village Responsible Entity Ltd [2009] NSWSC 1340; Re Cellestis Limited (No 2) [2011] VSC 329 and Re Ross Human Directions Ltd (No 3) [2010] FCA 1400. Successive cases have affirmed that only information approved by the Court for despatch to shareholders should be provided to members where the meeting has been convened under s 411(1): see Coates Hire Limited No 2, in the matter of Coates Hire Limited [2007] FCA 2105 per Emmett J at [6]; Centro Retail Limited and Centro MCS Manager Limited in its capacity as Responsible Entity of Centro Retail Trust [2011] NSWSC 1321 per Barrett J at [10]. In Centro, Barrett J said at [11]:This observation [of Emmett J in Coates] takes account of the function assigned to the court by s 411(1) in relation to the explanatory statement called for by s 412(1)(a) and, although concerned with initial despatch, applies with equal force to any proposal for later supplementation of the approved explanatory statement. Because the meeting is convened in accordance with an order of the court and the court has approved the explanatory statement, the court-approved "message" should not be interfered with by unilateral supplementation by the company. CONSIDERATION Share Consideration and Independent Expert’s Report

Evidence

Evidence Before The Court

I accept these submissions. Further, ASIC provided letters dated 16 September 2013 in which it advised that it had examined both the Scheme Booklets and the draft Supplementary Scheme Booklets and that it did not intend to appear at the hearing on 17 September 2013.Supporting evidence The Companies supplied updating affidavit evidence in relation to: continuing consent of Messrs Cutrupi and Smith to act as Chairman of the Scheme Meetings; verification of the factual information in the Supplementary Scheme Booklets; proof of the Revised Independent Expert’s Reports and notice to ASIC of the draft Supplementary Scheme Booklets. POSTPONEMENT OF SCHEME MEETINGS It is convenient to comment briefly on the reasons for the orders which I made under s 1319 on 9 August 2013 referred to at [5]. The orders were made after a brief hearing by telephone link with the solicitors for the Companies in Brisbane. On 8 August 2013, the same day on which CAF published the Announcement, the solicitors for the Companies advised the Court of the Announcement and sought orders in chambers vacating the date for the Court hearing which had been set down for 16 August 2013 to approve the Schemes. The solicitors advised that the Companies proposed the following: (1) The directors of the Companies would postpone the Scheme Meetings pursuant to rule 10.1(a) of their constitutions (which are in the same form in this regard); (2) CAF would release audited accounts on 30 August 2013; (3)A hearing to be held on 17 September 2013, before the directors of the Companies reconvene the Scheme Meetings. At the hearing the Court would be asked to make orders (among other things) approving despatch of supplementary explanatory material to shareholders of the Companies; (4) The Scheme Meetings would be held on 1 October 2013; shareholders would therefore have at least 10 days to consider the supplementary documentation consistent with ASIC Regulatory Guide 60.93; and (5) The applications for orders under s 411(4)(b) would be heard on 4 October 2013. In the absence of a power in the constitution, the directors have no power to postpone a meeting of members once it has been convened: Smith v Paringa Mines Limited [1906] 2 Ch 193 which has been consistently applied: Colbern Nominees Pty Ltd v Prime Minerals Ltd (2009) 74 ACSR 236; McKerlie v Drillsearch Energy Ltd (2009) 74 NSWLR 673; McPherson v Mansell (1994) 16 ACSR 261 and Bell Resources Ltd v Turnbridge Pty Ltd (1988) 13 ACLR 429. Rule 10.1(a) of the Companies’ constitutions provides as follows:General meetings of the Company may be called and held at the times and places and in the manner determined by the Board. Except as permitted by the Law, the shareholders may not convene a meeting of the Company. By resolution of the Board any general meeting (other than a general meeting which has been requisitioned or called by shareholders in accordance with the Law) may be cancelled or postponed prior to the date on which it is to be held. The solicitors for the Companies suggested that this power, together with r 3.3(2) of the Federal Court (Corporations) Rules 2000 (Cth), means that it is not necessary for the Court to use powers under s 1319 to authorise or to effect the postponement of the meetings even though they were convened by the Court under s 411(1). Rule 3.3(2) provides as follows:Unless the Court otherwise orders, a meeting of members ordered under section 411 of the Corporations Act must be convened, held and conducted in accordance with:(a)the provisions of Part 2G.2 of the Corporations Act that apply to the members of a company; and(b)the provisions of the plaintiff’s constitution that apply in relation to meetings of members and are not inconsistent with Part 2G.2 of the Corporations Act.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

On 15 July 2013, I made orders pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Corporations Act) to convene meetings of the plaintiffs Associated Advisory Practices Limited and Associated Advisory Practices (No 2) Limited (Companies) (Scheme Meetings) to be held on 12 August 2013: see Associated Advisory Practices Limited, in the matter of Associated Advisory Practices Limited [2013] FCA 761; the Scheme Meetings were postponed until further order of the Court on 9 August 2013 (see [5] below). Terms defined in those reasons bear the same meaning in these reasons and references to provisions of a statue are references to provisions of the Corporations Act unless otherwise indicated. These are my reasons for making further orders on 17 September 2013 under s 1319 setting 1 October 2013 as the date on which the Scheme Meetings are to be held, approving Supplementary Scheme Booklets (including new Notices of Scheme Meeting and new Proxy Forms) for despatch to redeemable preference shareholders of the Companies, standing the proceedings over to 10:15 am on 4 October 2013 to hear the application to approve the Schemes under s 411(4)(b) and directing that the Companies publish notices of that hearing on or before 24 September 2013.BACKGROUND Under the proposed Schemes, Centrepoint Alliance Limited (CAF) will acquire all of the shares in the Companies which its wholly owned subsidiary does not already own. CAF, through its subsidiary, has interests in 55% of the shares of each of the Companies. The Scheme Consideration is shares to be issued by CAF. On 8 August 2013, CAF made an announcement to the Australian Securities Exchange (Announcement) that it had received a draft actuarial report indicating that one of its subsidiaries, Professional Investment Services Pty Limited (PIS), needed to increase provisions for client claims. The Announcement stated that the board of CAF believed that, once the actuarial report is finalised and audited, the increase in provisions for this liability would have an impact on reported profit and net assets by between $3 million and $5 million as at 30 June 2013. Solicitors for the Companies advised the Court of the Announcement on the same day. On 9 August 2013, I made orders pursuant to s 1319 postponing the Scheme Meetings to a date to be set by further order of the Court and vacating the hearing which had been set down for 16 August 2013 to approve the Schemes. As the Companies had advertised the date of the second court hearing as 16 August 2013, in terms which also referred to Scheme Meetings to be held on 12 August 2013, I accepted an undertaking from the Companies that they would undertake corrective advertising. I stood the proceedings over to 17 September 2013 for the purpose of considering supplementary material to be despatched to shareholders of the Companies. On 30 August 2013, CAF published its audited financial statements for the period to 30 June 2013. Those statements revealed an increase in provisions for client claims of approximately $4.5 million.RELEVANT LAW