FEDERAL COURT OF AUSTRALIA
Australian Pharmaceutical Industries Limited, in the matter of Australian Pharmaceutical Industries Limited [2022] FCA 103
File number(s): VID 708 of 2021 Judgment of: BEACH J Date of judgment: 14 February 2022 Date of publication of reasons: 15 February 2022 Catchwords: CORPORATIONS – members’ scheme of arrangement – first court hearing – orders sought under ss 411(1) and 1319 of the Corporations Act 2001 (Cth) – cash consideration – special dividend – performance rights and directors’ benefits – exercise of discretion – orders made for convening of meeting Legislation: Corporations Act 2001 (Cth) ss 254T, 260A(1)(a), 411(1), 411(2)(b)(i), 411(17)(b), 412(1), 1319 Cases cited: Re Amcor Limited [2019] FCA 346
Re Citadel Group Limited [2020] FCA 1580
Re DWS Limited [2020] FCA 1590
Re Healthscope Ltd (2019) 139 ACSR 608
Re RXP Services Limited [2021] FCA 38
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 63 Date of hearing: 14 February 2022 Counsel for the Plaintiff: Mr M Borsky QC and Mr B Holmes Solicitor for the Plaintiff: Ashurst Counsel for the Interested Party: Ms P Neskovcin QC and Dr E Boros Solicitor for the Interested Party: Herbert Smith Freehills ORDERS
VID 708 of 2021 IN THE MATTER OF AUSTRALIAN PHARMACEUTICAL INDUSTRIES LIMITED
AUSTRALIAN PHARMACEUTICAL INDUSTRIES LIMITED (ACN 000 004 320)
Plaintiff
ORDER MADE BY:
BEACH J
DATE OF ORDER:
14 FEBRUARY 2022
OTHER MATTERS:
A.The Court notes that the Australian Securities and Investments Commission (ASIC) was provided with at least 14 days' notice of the hearing of this application.
B.The Court is satisfied that ASIC has had a reasonable opportunity to:
(i)examine the terms of the proposed scheme of arrangement to which the application relates and a draft explanatory statement relating to that arrangement; and
(ii)make submissions to the Court in relation to the proposed scheme of arrangement and the draft explanatory statement.
C.The Court notes the letter from ASIC to the directors of the plaintiff, Australian Pharmaceutical Industries (API) dated 11 February 2022 produced at the hearing.
THE COURT ORDERS THAT:
1.Pursuant to subsection 411(1) and section 1319 of the Corporations Act 2001 (Cth) (Act), API convene and hold a meeting of its shareholders (Scheme Meeting):
(a)for the purpose of considering and, if thought fit, agreeing (with or without modification) to the scheme of arrangement (Scheme) proposed to be made between API and its shareholders other than the “Excluded Shareholders” as defined in the Scheme of Arrangement (API Shareholders), the terms of which are set out in Annexure A to these orders; and
(b)to be held on Monday 17 March 2022 at 2.00 pm (AEDT) and to be conducted electronically through an online platform (which is to be accessed in accordance with the instructions included in the Notice of Meeting to be sent to shareholders in accordance with order 2(a) below).
2.Pursuant to subsection 411(1) and section 1319 of the Act, the Scheme…
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- Case
- [2022] FCA 103
- Decision Date
CaseChat Overview and Summary
The court was required to determine if the scheme was fair and reasonable to the shareholders and whether it complied with statutory requirements. Additionally, the court needed to assess the adequacy of the information provided to the shareholders about the scheme. The exercise of discretion under sections 411(1) and 1319 of the Corporations Act 2001 (Cth) was central to the decision, focusing on whether the scheme was likely to be approved if it achieved the required statutory majorities.
The court concluded that the scheme was straightforward, presented with clear and detailed information to the shareholders, and met statutory requirements. The scheme provided for a cash consideration of $1.55 per share, less any dividends declared by API. The scheme was not so unfair or inappropriate as to warrant immediate disapproval. The court found that the scheme, if approved by the shareholders and the court, would likely be approved. Consequently, the court exercised its discretion to order the convening of a shareholders' meeting to consider the scheme. The court did not formally approve the explanatory statement in the scheme booklet, leaving that to ASIC's registration process.
The court made orders convening a meeting of API's shareholders to consider the scheme, specifying the date, time, and manner of the meeting, as well as the process for shareholder communication and voting. The orders also included provisions for notice to shareholders and the handling of proxies and adjournments. The further hearing for the approval of the scheme was adjourned to a later date.
Orders
Orders of the court
1. Pursuant to subsection 411(1) and section 1319 of the Corporations Act 2001 (Cth) (Act), API convene and hold a meeting of its shareholders (Scheme Meeting):
(a) for the purpose of considering and, if thought fit, agreeing (with or without modification) to the scheme of arrangement (Scheme) proposed to be made between API and its shareholders other than the “Excluded Shareholders” as defined in the Scheme of Arrangement (API Shareholders), the terms of which are set out in Annexure A to these orders; and
(b) to be held on Monday 17 March 2022 at 2.00 pm (AEDT) and to be conducted electronically through an online platform (which is to be accessed in accordance with the instructions included in the Notice of Meeting to be sent to shareholders in accordance with order 2(a) below).
2. Pursuant to subsection 411(1) and section 1319 of the Act, the Scheme Meeting be convened by sending on or before 16 February 2022:
(a) an email to each API Shareholder who has nominated an electronic address for the purpose of receiving notices from API (Email Shareholder) (or, in the case of joint holders, to the holder whose name appears first in API’s register), such email to be substantially in the form which appears in Annexure “AEMM-1” to the affidavit of Anne Elizabeth Mayhew Mustow sworn on 11 February 2022 (Mustow Affidavit), and which contains hyperlinks to:
(i) an electronic copy of a document substantially in the form of the document which is Annexure “CWAK-7” to the affidavit of Chang Wan Andrew Kim sworn on 11 February 2022 (Scheme Booklet) (which contains, among other things, the proposed Scheme of Arrangement and Notice of Scheme Meeting);
(ii) an online portal or website that is accessible by the Email Shareholder and which enables the Email Shareholder to lodge proxy voting instructions for the Scheme Meeting online; and
(iii) an online portal or website that is accessible by the Email Shareholder to view, listen to and participate in the Scheme Meeting online;
(b) to each API Shareholder who is not an Email Shareholder (or, in the case of joint holders, to the holder whose name appears first in the plaintiff’s register) (Postal Shareholder):
(i) a letter substantially in the form substantially which appears in Annexure “AEMM-1” to the Mustow Affidavit (Letter) setting out a URL which provides access to a website from which the Postal Shareholder:
A. can download an electronic copy of the Scheme Booklet; and
B. is directed to an online portal or website that is accessible by the Postal Shareholder to view, listen to and participate in the Scheme Meeting online; and
(ii) a hard copy proxy form substantially in the form of the proxy form which appears in Annexure “AEMM-1” to the Mustow Affidavit (Proxy Form) and a reply-paid envelope for the Postal Shareholder to lodge their Proxy Form and voting instructions for the Scheme Meeting.
3. The documents referred to in order 2(b) be sent:
(a) in the case of Postal Shareholders whose registered address is within Australia, by prepaid ordinary post addressed to the relevant addresses recorded in API’s register; and
(b) in the case of Postal Shareholders whose registered address is outside Australia, by airmail or international courier service addressed to the relevant addresses recorded in API’s register.
4. Compliance with r 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules) be dispensed with, except in so far as that rule applies rule 75-15(2) of the Insolvency Practice Rules (Corporations) 2016 (Cth).
5. Voting on the resolution to agree to the Scheme is to be conducted by way of a poll.
6. A proxy in respect of the Scheme Meeting will be valid and effective if, and only if, it is completed and delivered in accordance with its terms or a proxy is lodged online in accordance with the instructions on the online portal or website referred to in order 2(a)(ii) and received by API by 2.00 pm on 15 March 2022
7. Kenneth William Gunderson-Briggs or, failing him, Lee Ausburn, be chairperson of the Scheme Meeting.
8. The chairperson of the Scheme Meeting has the power to adjourn the Scheme Meeting to such time, date and at such place (including electronically) as the chairperson considers appropriate.
9. API publish a notice of hearing in The Australian newspaper, in substantially the form that appears at Annexure B to these orders, not later than 5 days prior to the date fixed for the hearing of any application to approve the Scheme, and API be relieved from compliance with Rule 3.4 and Form 6 of the Rules to the extent necessary.
10. The further hearing of the originating process is adjourned to the Honourable Justice Beach at 10.15 am (Melbourne time) on 21 March 2022 or as soon thereafter as the business of the Court allows.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ANNEXURE A
Scheme of Arrangement
[The order entered is available on the Commonwealth Courts Portal, which attaches the Scheme]
ANNEXURE B
Notice of hearing to approve scheme of arrangement
TO all the members of Australian Pharmaceutical Industries Limited (ACN 000 004 320) (API):
TAKE NOTICE that at 10:15am on 21 March 2022, the Federal Court of Australia will hear an application by API seeking the approval of a scheme of arrangement between API and its members (the Scheme) if agreed to by a resolution to be considered and, if thought fit, passed by the members of API at the meeting to be held on 17 March 2022.
If you wish to oppose the approval of the compromise or arrangement, you must file and serve on API a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on API at its address for service at least 1 day before the date fixed for the hearing of the application.
The address for service of API is c/- Ashurst Australia, Level 16, 80 Collins Street, South Tower, Melbourne VIC 3000 (Attention: James Clarke (Email: james.clarke@ashurst.com).
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
As I have said, on 8 November 2021, API, Wesfarmers and WFM entered into the SID, whereby WFM agreed to acquire all of the Scheme shares by means of a scheme of arrangement. The SID provides that API is to propose and implement the Scheme, and that WFM will assist API to propose and implement the Scheme on the terms of the SID.Scheme consideration The Scheme provides that the Scheme consideration payable by WFM to each Scheme shareholder is $1.55 cash per Scheme share, as adjusted in accordance with the SID. The SID provides that the Scheme consideration will be reduced by the cash amount of any “Permitted Dividend”, defined as a final dividend in respect of the financial year ended 31 August 2021 (ordinary dividend), and any other dividend (special dividend), in each case such dividend being declared by API and paid to API shareholders on or before the implementation date of the Scheme, and provided that the maximum aggregate amount payable per API share in respect of all such dividends is $0.05 per share. On 28 October 2021, the API board announced that it had decided to pay an ordinary dividend, being a fully franked final dividend of $0.02 per API share in relation to the financial year ended 31 August 2021. The ordinary dividend was paid on 15 December 2021 to those API shareholders on the register on 12 November 2021. The ordinary dividend was not conditional on the Scheme and was paid irrespective of whether the Scheme proceeds. Accordingly, the Scheme consideration per Scheme share payable by WFM to Scheme shareholders will be $1.53 per Scheme share, less the amount of any special dividend declared and paid before the implementation date. The API board intends to pay a fully franked special dividend of $0.03 per API share prior to the implementation of the Scheme, if the Scheme is approved by API shareholders and the Court. The final decision will depend upon a number of factors, including the availability of franking credits, the requirements of the Act and API having obtained a draft class ruling from the ATO in relation to the tax implications of the Scheme. The decision of the API directors in relation to a special dividend will be communicated to API shareholders by way of an ASX announcement before the second court hearing. If the Scheme becomes effective, those Scheme shareholders who received the ordinary dividend, any special dividend that the API Board decides to pay and the Scheme consideration will, in aggregate, receive $1.55 per Scheme share. The Scheme provides that by no later than the business day before the implementation date, WFM is to deposit an amount equal to the aggregate amount of the Scheme consideration into the relevant trust account. Now WFM is not a party to the Scheme, and so its obligations cannot be directly enforced against it by API shareholders. But under the SID, WFM agreed that, subject to the Scheme becoming effective, it will provide or procure the provision of the Scheme consideration in accordance with the Scheme and a deed poll. WFM has now executed a deed poll in the required form in which it has undertaken in favour of each Scheme shareholder to deposit, or procure the deposit, of an amount equal to the aggregate amount of the Scheme consideration payable to all Scheme shareholders into a trust account operated by API by no later than the business day before the implementation date. So, in summary, there is no performance risk.