FEDERAL COURT OF AUSTRALIA
CSR Limited, in the matter of CSR Limited [2010] FCAFC 34
Citation: CSR Limited, in the matter of CSR Limited [2010] FCAFC 34 Appeal from: CSR Limited, in the matter of CSR Limited [2010] FCA 33 Parties: CSR LIMITED ACN 000 001 276 File number: NSD 127 of 2010 Judges: KEANE CJ, FINKELSTEIN AND JACOBSON JJ Date of judgment: 23 April 2010 Catchwords: CORPORATIONS LAW – application pursuant to s 411 Corporations Act 2001 (Cth) for orders convening meeting of shareholders to approve scheme of arrangement and approving explanatory statement – proposed capital reduction condition precedent to scheme – risk that capital reduction will prejudice ability of CSR to meet asbestos liabilities – whether primary judge erred in dismissing application Legislation: Corporations Act 2001 (Cth) ss 256B, 411, 1324 Cases cited: Attorney-General (Cth) v Alinta Limited (2008) 233 CLR 542 cited
Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 applied
Carr v Western Australia (2007) 232 CLR 138 applied
Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 cited
In the matter of Opes Prime Stockbroking Ltd [2009] FCA 813 applied
Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 cited
Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 applied
Re Avram Investments Pty Ltd (1992) 10 ACLC 1747 discussed
Re BAT Industries Plc (unreported, 1998 WL 1076712) cited
Re Central Pacific Minerals NL [2002] FCA 239 applied
Re Hawke Insurance Co Ltd [2002] BCC 300; [2001] 2 BCLC 480; [2001] EWCA Civ 241 cited
Re Foundation Healthcare Limited (2002) 42 ACSR 252 considered
Re National Bank Ltd [1966] 1 WLR 819 cited
Re NRMA Insurance Ltd (No 1) (2000) 156 FLR 349 considered
Re Mascot Home Furnishings Pty Ltd (in liquidation) [1970] VR 593 discussed
Re T & N Ltd [2006] EWHC 1447 (Ch) considered
Re Telewest Communications plc [2004] BCC 342 cited
St George Bank Ltd v Commissioner of Taxation [2009] FCAFC 62 citedDate of hearing: 29 and 30 March 2010 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 90 Counsel for the Applicant: NJ Young QC, DFC Thomas and CG Button Solicitor for the Applicant: Freehills Counsel for the Attorney-General for the State of New South Wales MB Oakes SC and M Izzo Solicitor for the Attorney-General for the State of New South Wales Crown Solicitor Counsel for the Australian Securities and Investments Commission: R Beech-Jones SC and J Emmett Solicitor for the Australian Securities and Investments Commission: Australian Securities and Investments Commission Counsel for James Hardie 117 Pty Ltd ACN 116 110 948 and James Hardie Industries SE (formerly James Hardie Industries NV) ABN 49 097 829 895: RM Foreman Solicitor for James Hardie 117 Pty Ltd ACN 116 110 948 and James Hardie Industries SE (formerly James Hardie Industries NV) ABN 49 097 829 895: Johnson Winter & Slattery Counsel for the Asbestos Injuries Compensation Fund Limited ACN 117 363 461: AJ Meagher…
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- AGLC
- Re CSR Ltd [2010] FCAFC 34
- Case
- [2010] FCAFC 34
- Decision Date
CaseChat Overview and Summary
The legal issues before the court were primarily centered around the interpretation and application of section 411 of the Corporations Act 2001 (Cth). Specifically, the court had to determine whether the primary judge correctly exercised his discretion under s 411(2) in dismissing the application for convening the shareholders' meeting. The court also had to consider whether the primary judge applied an incorrect legal test when he decided the application. The central question was whether the risk of prejudice to the company's ability to meet its asbestos liabilities was sufficient to warrant the dismissal of the application.
The Full Court found that the primary judge had indeed erred in dismissing the application. The court held that while the primary judge was entitled to take into account the risk of prejudice to CSR's ability to meet its asbestos liabilities, this factor should not have been determinative in the exercise of the court's discretion under s 411(2). The court held that the primary judge applied an incorrect legal test by considering the risk of prejudice as a standalone reason to dismiss the application, rather than as one factor among others. The Full Court concluded that the primary judge's decision was therefore flawed, and granted leave to appeal, allowed the appeal, set aside the primary judge's order, and remitted the proceedings to a single judge of the Court for further consideration.
The court made several orders to give effect to its decision. Firstly, leave to appeal was granted. Secondly, the appeal was allowed, and the order of Stone J dated 3 February 2010 was set aside. Thirdly, the court ordered that pursuant to subsection 411(1) of the Corporations Act 2001 (Cth), a meeting of the ordinary shareholders of CSR Limited be convened at a date and time to be determined by a single judge of the Court. Lastly, the proceedings were remitted to a single judge of the Court for further consideration in light of the Full Court's decision.
Orders
Orders of the court
1.
Leave to appeal be granted.
2.
The appeal be allowed and the order of Stone J dated 3 February 2010 be set aside.
3.
Pursuant to subsection 411(1) of the Corporations Act 2001 (Cth), a meeting of the ordinary shareholders of CSR Limited be convened at a date and time to be determined by a single judge of the Court.
4.
The proceedings be remitted to a single judge of the Court.
Note:
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
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Ratio Decidendi
Legal Principle Established
Established by: KEANE CJ
Section 411 of the Act envisages three steps: first, the calling of a meeting of either creditors or members depending on whose rights are to be rearranged; second, a vote by those persons; and third, a further application to the court for approval of the rearrangement. Section 411(1) and (2) relevantly provide:Administration of compromises etc.(1) Where a compromise or arrangement is proposed between a Part 5.1 body and its creditors or any class of them or between a Part 5.1 body and its members or any class of them, the Court may, on the application in a summary way of the body or of any creditor or member of the body, or, in the case of a body being wound up, of the liquidator, order a meeting or meetings of the creditors or class of creditors or of the members of the body or class of members to be convened in such manner, and to be held in such place or places (in this jurisdiction or elsewhere), as the Court directs and, where the Court makes such an order, the Court may approve the explanatory statement required by paragraph 412(1)(a) to accompany notices of the meeting or meetings.…(2) The Court must not make an order pursuant to an application under subsection (1) … unless:(a) 14 days notice of the hearing of the application, or such lesser period of notice as the Court or ASIC permits, has been given to ASIC; and(b) the Court is satisfied that ASIC has had a reasonable opportunity:(i) to examine the terms of the proposed compromise or arrangement to which the application relates and a draft explanatory statement relating to the proposed compromise or arrangement; and(ii) to make submissions to the Court in relation to the proposed compromise or arrangement and the draft explanatory statement. It is convenient to note here that s 411(2) contains a statement of the circumstances in which the first meeting must not be ordered. Section 411 contains no statement of the criteria which must be satisfied before a meeting is ordered, but it is clear that the court has a discretion to exercise in relation to whether the first meeting should be ordered: Re Hawke Insurance Co Ltd [2002] BCC 300 at 306 [21]; [2001] 2 BCLC 480; [2001] EWCA Civ 241. The content of the draft explanatory statement which must be provided to creditors or members is addressed in s 411(3) as follows:(3) In subsection (2), draft explanatory statement, in relation to a proposed compromise or arrangement between a body and its creditors or any class of them or between a body and its members or any class of them, means a statement:(a) explaining the effect of the proposed compromise or arrangement and, in particular, stating any material interests of the directors of the body, whether as directors, as members or creditors of the body or otherwise, and the effect on those interests of the proposed compromise or arrangement in so far as that effect is different from the effect on the like interests of other persons; and(b) setting out such information as is prescribed and any other information that is material to the making of a decision by a creditor or member of the body whether or not to agree to the proposed compromise or arrangement, being information that is within the knowledge of the directors of the body and has not previously been disclosed to the creditors or members of the body.