Re BRL Hardy Ltd

BRL HARDY LTD
[2003] SASC 97
Civil

PERRY J. (ex tempore) On 10 February 2003 I made an order pursuant to s 411(1) of the Corporations Act 2001 (Cth) (“the Act”) that the plaintiff, BRL Hardy Ltd (“Hardys”), summon and convene a meeting of its members for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement to be made between Hardys and its members.
On the same date, I ordered separately that, pursuant to s 411(1) of the Act, Hardys summon and convene a meeting of persons holding options to subscribe for ordinary shares in the capital of Hardys pursuant to what may be described as “Hardys employee option plan”, for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement to be made between Hardys and the option holders.
Both schemes of arrangement are intended to facilitate what is described as a “merger” of Hardys and a company incorporated in the United States of America, Constellation Brands, Inc (“Constellation”). In fact, the merger might better be described as a takeover by Constellation of Hardys.
The essential element of the scheme of arrangement with Hardys members involves the transfer by Hardys members of their shares in Hardys for a consideration to be advanced by Constellation, being either $10.50 paid in cash per share, or Constellation scrip, or a combination of cash and Constellation scrip.
In the case of the option holders, they are to receive a cash consideration with the cancellation of their options.
While ultimate control of Hardys will pass to Constellation if the schemes are approved, it has been made clear that the intention is that Hardys will retain responsibility for the conduct of its present Australian operations; that its head office will remain at Reynella; and that it is not proposed there be any reduction either in the scale of its Australian operations or in the number of its employees in Australia.
At the time I made the order of 10 February 2003, I did not trouble to publish reasons for doing so.
It is appropriate now to record that at the time I was satisfied that the relevant requirements of s 411 and s 412 of the Act were satisfied. In particular, although I did not expressly incorporate in the order that I approved the explanatory statement required by s 412(1)(a) to accompany notices of the meetings, the explanatory statement was before me and I was satisfied that it was adequate to ensure proper disclosure of the matters necessary to enable the shareholders and the option holders to exercise an adequately informed judgment on the proposed schemes.
I was satisfied also of the other statutory requirements for the exercise of the jurisdiction to order the meetings to be convened, including the requirement that Australian Securities and Investments Commission (“ASIC”) had been afforded a reasonable opportunity to examine the terms of the proposed arrangements and to make submissions in relation to them and in relation to the draft explanatory statement (s 411(2)). ASIC did not seek to be heard at the hearing leading up to the making of the order of 10 February 2003.
Furthermore, I was then satisfied that, having regard to the terms of the two schemes of arrangement, subject to them being approved by the necessary statutory majorities, the court would be likely to approve them on an application for that purpose after the meetings had been held, if the application to that end was not opposed.
On 20 March 2003 meetings were duly held in accordance with my order. In order for the shareholders and the proxy holders effectively to approve the schemes of arrangement, it was necessary for each scheme to be approved by a majority in number of the members present and voting either in person or by proxy at the meetings, and by at least 75 per cent of the votes cast. Those requirements were easily met.
93.02 per cent of the members present and voting either in person or by proxy voted in favour of the resolution which approved the arrangement with the shareholders, the number of votes cast in favour of the resolution being 99.15 per cent of the total votes lodged at the meeting.
The corresponding figures for the resolution considered at the separate meeting of option holders was 98.1 per cent and 99.63 per cent respectively.
It is not without significance that votes were cast by a high percentage of the holders of the total shares on issue, the votes cast with respect to the arrangement for the shareholders representing approximately 46 per cent of the shares on issue. Votes cast with respect to the scheme proposed for option holders represented an even higher percentage of the eligible option holders.
Following the holding of the meetings, an application was taken out by Hardys on 21 March 2003 seeking orders that the two schemes of arrangement be formally approved by the court pursuant to s 411(4)(b). The application came before me today. It was supported by a number of affidavits dealing with the various requirements of the Act relevant to the grant of the approval sought.
In addition, I heard Mr Sullivan QC of counsel for Hardys and Mr Archibald QC of counsel for Constellation.
I do not propose to canvass all of the matters set out in the affidavits or in the submissions of counsel. It is sufficient for me to say that I am satisfied as to what I understand to be the two essential requirements for me to address at this stage. (References to authorities to which I have been referred appear in the schedule to these reasons.)
In the first place, I am satisfied that the meetings were duly convened in accordance with my order of 10 February 2003 and with the procedures laid down in the Act, the Corporations Regulations 2001 and the Corporations Rules of Court, and that the resolutions expressing the approval of the members and of the option holders to the schemes of arrangement were passed by the statutory majorities in number and in value.
The other essential issue for me to address is whether or not, in all the circumstances, it is proper for the court to approve the schemes.
As to the function of the court in considering whether the arrangements should be approved pursuant to s 411(4)(b), the authorities make it plain that it is not for this Court to second-guess the view of the statutory majority of the members in the exercise of their commercial judgment, if, as is clearly the case, they have reached the view that they wish to participate in the schemes of arrangement. It is not for the court to substitute its commercial judgment for theirs.
It is sufficient for the Court to reach the view that the proposals embodied in the schemes of arrangement are fair and reasonable and that intelligent, honest and reasonable people acquainted with the terms of the schemes of arrangement would be prepared to enter into them.
I am satisfied as to those matters, and I am also satisfied that those voting in favour of the schemes were acting in good faith and have not been shown to have done so in pursuit of any improper purpose, such as oppression of a minority.
These schemes have the unanimous approval of the board of Hardys, and the consideration being offered for the transfers of the shares and cancellation of the options has been described in the report of an independent expert as “fair and reasonable”, and that in the absence of any higher offer, the schemes are in the best interests of the shareholders and option holders respectively as a whole.
I accept that opinion and, at the same time, express my own view that the schemes are fair and reasonable and that it is proper to approve them.
I must, of course, consider whether or not s 411(17) applies, as if it does, it would not be proper to approve the schemes of arrangement.
Pursuant to that section, were it not for two letters from ASIC which have been tendered, I would have been obliged to address the question whether or not the schemes of arrangement have been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Act, which deals with takeovers.
It is, however, unnecessary to address that question, as, pursuant to s 411(17)(b), the letters from ASIC confirm that it has no objection to either scheme of arrangement.
I have been asked to exempt Hardys from compliance with s 411(11). I am satisfied that it is proper to do so and the exemption will be included in the order disposing of the application.
In my opinion, having regard to all of the circumstances, it is proper for the Court to approve both schemes of arrangement. I so order in terms of the minutes of order this day initialled by me.
SCHEDULE OF CASES CONSIDERED
1.Re Central Pacific Minerals NL (2002) FCA 239
2.Re Amcor Limited (2000) 34 ACSR 199
3.Re Hudson Conway Limited (2000) 18 ACLC 266
4.Re NRMA (2000) 33 ACSR 595
5.Re Bond Corporation Holdings Limited (1991) 5 ACSR 304
6.Re Pheon Pty Ltd (1986) 47 SASR 427
7.In re Alabama, New Orleans, Texas and Pacific Junction Railway Company [1891] 1 Ch 213.
8.Re Chevron (Sydney) Ltd [1963] VR 249
9.Re ACM Gold Ltd (1992) 34 FCR 530
10.Re Stockbridge Ltd (1993) 9 ACSR 637
11.Re Crusader Ltd (1995) 17 ACSR 336
12.Re Advance Bank Australia Ltd (1996) 22 ACSR 476
13.Re Arnotts Ltd (1997) 16 ACLC 423.

[2003] SASC 97

27 March 2003