JUDGE:	FERGUSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	7 October 2010
DATE OF JUDGMENT:	7 October 2010
CASE MAY BE CITED AS:	Re AWB Ltd
MEDIUM NEUTRAL CITATION:	[2010] VSC 456

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CORPORATIONS – Scheme of Arrangement – Orders convening first meeting – deemed warranty clause – exclusivity provisions – break fee – performance risk – merits of proposed scheme matter for shareholders – supervisory role of the Court – s 411 Corporations Act 2001 (Cth)

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Beach QC with Mr B Quinn	Freehills
For Agrium Inc	Mr P Crutchfield SC	Clayton Utz

HER HONOUR:

Introduction and outline of proposed scheme

AWB Limited is a publicly listed company and operates an agribusiness. Agrium Inc proposes to acquire all of the issued capital of AWB. Agrium is a global producer and supplier of agricultural products and services. It is a public company incorporated in Canada and listed on the Toronto and New York Stock Exchanges.

The acquisition is to be achieved by way of a scheme of arrangement between AWB and its members under s 411 of the Corporations Act2001 (Cth). If the scheme is approved and implemented, for each share that they hold in AWB, shareholders will receive a cash payment of $1.50 (less the cash amount of any special dividend paid by AWB before the scheme is implemented). Under the proposed scheme, AWB shares will be transferred to a wholly owned subsidiary of Agrium. The effect will be that AWB will also become a wholly owned subsidiary of Agrium. AWB will then be de-listed from the ASX.

There is a Scheme Implementation Deed between AWB and Agrium. One of Agrium’s obligations under the deed is to arrange the money to pay the AWB shareholders for their shares under the proposed scheme.

Schemes similar to that proposed by AWB have been approved on many occasions and the proposed scheme is clearly an “arrangement” within the meaning of s 411 of the Corporations Act.[1] The proposed scheme is subject to a number of pre‑conditions including AWB shareholders voting in favour of the proposed scheme under the Corporations Act and court approval under s 411 of the Act.
[1]See for example Re Cytopia Limited (No. 2) [2010] VSC 4; Re Healthscope Limited [2010] VSC 367; Re Mitchell Communications Group [2010] VSC 423.

The AWB directors unanimously recommend, in the absence of a superior proposal, that the shareholders vote in favour of the scheme and they intend to vote in favour of the scheme resolution for all shares they hold or control. The directors have unanimously formed the view that the scheme is in the best interests of AWB shareholders. An independent expert, Lonergan Edwards and Associates…

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 Re AWB Ltd

Details

AGLC: Re AWB Ltd [2010] VSC 456
Case: [2010] VSC 456
Decision Date: 7 October 2010

CaseChat Overview and Summary

The case before the Court was an application by AWB Limited for orders convening a first meeting of the company’s members to approve a proposed scheme of arrangement. The application was contested by a minority shareholder, who argued that the Court should not approve the convening of the meeting without first resolving certain issues related to the scheme. The Court was required to determine whether it should exercise its discretion under section 411 of the Corporations Act 2001 to convene the meeting, despite the existence of these unresolved issues.

The Court held that it had a supervisory role in relation to the convening of meetings to approve schemes of arrangement, and that it could decline to make the orders if it considered it appropriate to do so. However, the Court also held that the merits of the proposed scheme were a matter for the shareholders to decide, and that the Court should not substitute its own view for that of the majority of shareholders. The Court further held that the existence of a deemed warranty clause, exclusivity provisions, and a break fee did not necessarily mean that the scheme was unfair or oppressive to minority shareholders, and that the risk of performance was a matter that the shareholders could consider when deciding whether to approve the scheme.

The Court ultimately decided that it was appropriate to make the orders convening the meeting, and that the minority shareholder’s concerns were matters that could be addressed at the meeting itself, rather than being a bar to the convening of the meeting. The Court held that it was not appropriate to second-guess the commercial decisions of the company and its advisors, and that the merits of the proposed scheme were a matter for the shareholders to decide.

The Court made orders convening a first meeting of AWB Limited’s members to consider and approve the proposed scheme of arrangement. The Court also made orders that the meeting could be adjourned if necessary to allow time for the resolution of any issues that arose during the meeting. The Court held that it would retain jurisdiction to make further orders if necessary in relation to the scheme.

Orders