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Re BRL Hardy Ltd

Re BRL Hardy Ltd

Case [2003] SASC 97 27 March 2003

Scheme of Arrangement

Corporate Restructuring

Shareholder Approval

Takeover

Good Faith

Corporate Law & Governance

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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…

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.

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Details

AGLC: Re BRL Hardy Ltd [2003] SASC 97
Case: [2003] SASC 97
Decision Date: 27 March 2003

CaseChat Overview and Summary

The case of Re BRL Hardy Ltd involved the plaintiff, BRL Hardy Ltd, which sought orders to convene meetings of its members and option holders for the purpose of considering and potentially approving schemes of arrangement. The primary objective of these schemes was to facilitate a merger, or more accurately a takeover, by the United States-based company Constellation Brands, Inc. The court was tasked with determining whether the schemes were fair and reasonable, and whether the statutory requirements for approval were met. The case hinged on whether the meetings were properly convened, the resolutions were passed by the necessary majorities, and if the court should approve the arrangements.

The court identified several key legal issues that needed resolution. These included whether the meetings were duly convened in accordance with the statutory requirements, whether the resolutions approving the schemes were passed by the necessary statutory majorities, and whether the court should approve the schemes under section 411(4)(b) of the Corporations Act 2001. Additionally, the court had to consider if section 411(17) of the Act applied, which could prevent the approval of the schemes if they were proposed to avoid certain provisions of the Act related to takeovers.

In delivering the judgment, the court found that the meetings were properly convened and that the resolutions were passed by the required majorities. The court further determined that the schemes were fair and reasonable, as evidenced by the unanimous approval of the board of Hardys and an independent expert's report. The court was satisfied that the members and option holders acted in good faith and that there was no evidence of improper purposes such as oppressing a minority. The court also noted that ASIC had no objections to the schemes, which alleviated concerns about the schemes being proposed to avoid certain provisions of the Act. Consequently, the court approved the schemes and granted the necessary orders to facilitate the takeover by Constellation Brands, Inc.

Orders