FEDERAL COURT OF AUSTRALIA
DuluxGroup Ltd, in the matter of DuluxGroup Ltd [2019] FCA 961
File number(s): VID 577 of 2019 Judge(s): O'BRYAN J Date of judgment: 14 June 2019 Date of publication of reasons: 21 June 2019 Catchwords: CORPORATIONS – scheme of arrangement – first court hearing – order sought under s 411(1) of the Corporations Act 2001 (Cth) – exercise of discretion – performance risk – deemed warranty – break fee – exclusivity arrangements – employee incentive arrangements – financial assistance – orders made for convening of shareholders’ meeting Legislation: Corporations Act 2001 (Cth) ss 411(1), 411(4), 411(17), 412 Cases cited: ASC v Marlborough Gold Mines Ltd (1993) 177 CLR 485
Charterhouse Investment Trust Ltd v Tempest Diesels Ltd [1986] BCLC 1
FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69
Milburn v Pivot Ltd (1997) 78 FCR 472
Nordic Bank Plc v International Harvester Australia Ltd [1983] 2 VR 298
Re ACM Gold Ltd (1992) 34 FCR 530
Re Adelaide Bank Ltd [2007] FCA 1582
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Re APN News & Media Ltd (2007) 62 ACSR 400
Re Arthur Yates & Co Ltd (2001) 36 ACSR 758
Re AWB Ltd [2010] VSC 456
Re AXA Asia Pacific Holdings Ltd [2011] VSC 4
Re Biosceptre International Limited [2013] FCA 1429
Re Cashcard Australia Ltd (2004) 48 ACSR 738; [2004] FCA 223
Re Chevron (Sydney) Ltd [1963] VR 249
Re Coles Group Ltd (2007) 25 ACLC 1380
Re Coles Group Ltd (No 2) (2007) 65 ACSR 494
Re Cytopia Ltd [2009] VSC 560
Re Dyno Nobel Ltd [2008] VSC 154
Re Ecosave Holdings Limited [2015] FCA 1121
Re English, Scottish and Australian Chartered Bank [1893] 3 Ch 385
Re Foster’s Group Ltd (No 2) [2011] VSC 547
Re Foundation Healthcare Ltd (2002) 42 ACSR 252
Re Healthscope Ltd [2010] VSC 367
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Re Hills Motorway Ltd (2002) 43 ACSR 101; (2003) 21 ACLC 35
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Re NRMA Insurance Ltd (No 1) (2000) 156 FLR 349; 33 ACSR 595
Re Opes Prime Stockbroking Ltd (2009) 179 FCR 20
Re Opus Group Limited [2018] FCA 959
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Re SFE Corporation Ltd see (2006) 59 ACSR 82
Re Simavita Holdings Limited [2013] FCA 1274
Re Sirtex Medical Limited [2018] FCA 584
Re Skilled Group Ltd (No 1) (2015) 113 ACSR 525
Re Staging Connections Group Limited [2015] FCA 1012
Re Toll Holdings Ltd [2015] VSC 123
Re Ventura Investment Management Ltd [2011] FCA 721
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- AGLC
- Re DuluxGroup Ltd [2019] FCA 961
- Case
- [2019] FCA 961
- Decision Date
CaseChat Overview and Summary
The court held that it was appropriate to make the orders sought by DuluxGroup. The court noted that the scheme had been reviewed by the Australian Securities and Investments Commission, which had provided a preliminary no objection letter. The court also noted that an independent expert had opined that the scheme was fair and reasonable and in the best interests of the shareholders. The court was satisfied that the scheme was of such a nature and cast in such terms that, if it achieved the statutory majorities at the scheme meeting, the court would be likely to approve it. The court held that it was appropriate to make the orders sought by DuluxGroup convening the meeting of shareholders to consider the scheme.
The court made orders convening the meeting of DuluxGroup shareholders to consider and vote on the scheme. The meeting was to be held on 31 July 2019. The court also made orders dispensing with certain procedural requirements and setting the date for the hearing of any application to approve the scheme. The court held that the scheme, if considered and adopted by the members of DuluxGroup, was of such a nature that it would be likely to be approved by the court at the second hearing. Accordingly, it was appropriate to make the orders sought convening the meeting.
Orders
Orders of the court
1. Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (the Act), the plaintiff, DuluxGroup Limited (ACN 133 404 065) (DuluxGroup) convene and hold a meeting (Scheme Meeting) of holders of fully paid ordinary shares in DuluxGroup (DuluxGroup Shareholders):
(a) for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement (Scheme) proposed between DuluxGroup and Scheme Shareholders, the terms of which are set out in Annexure B to these orders;
(b) to be held at The Clarendon Auditorium, Melbourne Exhibition Centre, 2 Clarendon Street, South Wharf, Victoria, Australia on Wednesday, at 2:00pm on Wednesday 31 July 2019 (Melbourne time).
2. The Scheme Meeting be convened by sending a document substantially in the form of Exhibit 1 (Scheme Booklet) which contains, amongst other things, a Notice of Meeting at Appendix A, along with a proxy form for the Scheme Meeting, such documents to be sent in the following manner:
(a) in the case of those DuluxGroup Shareholders who have elected to receive communications electronically, by way of email to their nominated email address;
(b) in the case of those DuluxGroup Shareholders who have not elected to receive communications electronically and whose postal address is shown on the register of members of DuluxGroup as being within Australia by pre-paid ordinary post to that address; and
(c) in the case of those DuluxGroup Shareholders who have not elected to receive communications electronically and whose postal address is shown on the register of members of DuluxGroup as being outside Australia, by airmail to that address.
3. Pursuant to section 1319 of the Act:
(a) DuluxGroup may determine that, for the purposes of the Scheme Meeting, all the shares in DuluxGroup be taken to be held by the person, persons or bodies corporate who held them as at 7:00pm (Melbourne time) on Monday, 29 July 2019, in accordance with the register held and maintained by DuluxGroup;
(b) a proxy form 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 by 2:00pm (Melbourne time) on Monday, 29 July 2019;
(c) the Chairperson of the Scheme Meeting be Graeme Leibelt or in his absence, Andrew Larke;
(d) the Chairperson of the Scheme Meeting shall have the power to adjourn the meeting in his absolute discretion to such time, date and place as he considers appropriate; and
(e) a poll must be taken to decide the resolutions put to the vote at the Scheme Meeting, except for procedural motions.
4. Compliance with rule 3.4 and Form 6 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules) be dispensed with.
5. Subject to the requisite majorities of DuluxGroup Shareholders voting in favour of the Scheme at the Scheme Meeting, DuluxGroup publish a Notice of Hearing in The Australian newspaper, in substantially the form that appears at Annexure ‘A’ hereto not later than 5 days prior to the date fixed for the hearing of any application to approve the Scheme.
6. Compliance with r 2.15 of the Rules be dispensed with.
7. The proceedings be stood over to 10:15am on 6 August 2019 before Justice O’Bryan for the hearing of any application to approve the Scheme.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Annexure A
Notice of hearing to approve scheme of arrangement
(Form 6, rule 3.4)
TO all the members of DuluxGroup Limited (ACN 133 404 065) (DuluxGroup):
TAKE NOTICE that at 10:15am on 6 August 2019, the Federal Court of Australia at 305 William Street, Melbourne, Victoria will hear an application by DuluxGroup seeking the approval of a scheme of arrangement between the above-named company and its members (the Scheme) if agreed to by a resolution to be considered and, if thought fit, passed by the members of DuluxGroup at the meeting to be held on Wednesday 31 July 2019.
If you wish to oppose the approval of the compromise or arrangement, you must file and serve on DuluxGroup 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 the plaintiff at its address for service at least 1 day before the date fixed for the hearing of the application.
The address for service of DuluxGroup is c/o Gilbert + Tobin, Level 22, 101 Collins Street, Melbourne Victoria, 3000 (Attention: Janet Whiting/Alexandra Whitby).
Annexure B
Scheme
[The Order entered is available on the Commonwealth Courts Portal, which attaches the Scheme.]
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
The Scheme provides for the transfer of all DuluxGroup shares to Nippon Paint, in consideration for a cash payment by Nippon Paint to DuluxGroup shareholders of $9.80 per DuluxGroup share less the amount of the Permitted Dividends, described further below (Scheme Consideration). If the Scheme is implemented, DuluxGroup will become a wholly-owned subsidiary of Nippon Paint and will be delisted from the ASX. Subject to the required Court and shareholder approvals, it is anticipated that the Scheme will be implemented on 21 August 2019, by reference to DuluxGroup shares held by shareholders on the “Record Date” (being 7.00pm on the fifth business day after the Scheme becomes effective, which is anticipated to be the day of the second court hearing) (Scheme Shares). On 15 May 2019, DuluxGroup declared an interim dividend of $0.15 per DuluxGroup share and a special dividend of $0.28 per DuluxGroup share. Those dividends were contemplated by the Implementation Deed and are referred to as the “Permitted Dividends”. Those dividends are not conditional on the Scheme and will be paid on 28 June 2019, prior to the proposed Scheme Meeting on 31 July 2019. However, as noted above, the Scheme Consideration payable for each Scheme Share is calculated as $9.80 less the amount of the Permitted Dividends, being an amount of $9.37. The draft Scheme Booklet (which includes the explanatory statement required by s 412 of the Act) (Scheme Booklet) provides a description of the Scheme and its advantages and disadvantages. It has been reviewed by the Australian Securities and Investments Commission (ASIC). On 13 June 2019, ASIC provided DuluxGroup with a letter in the usual form, known as a “preliminary no objection letter”. The letter stated that, based on ASIC’s examination of the terms of the Scheme and the Scheme Booklet, ASIC does not currently propose to appear to make submissions, or intervene to oppose the Scheme at the first hearing. Consistently with the terms of the letter, ASIC did not appear at the first hearing. The Scheme Booklet records the recommendation of all the DuluxGroup Directors that shareholders vote to approve the Scheme, in the absence of a superior proposal, and that all DuluxGroup Directors intend to vote their shares in favour of the Scheme. An Independent Expert’s Report (IER) has been obtained from Grant Samuel & Associates Pty Limited (Grant Samuel), which will be included as an annexure to the Scheme Booklet. In the opinion of Grant Samuel, the Scheme is fair and reasonable and in the best interests of the DuluxGroup shareholders. This is on the basis that the Scheme Consideration is within the assessed value range of DuluxGroup shares, which Grant Samuel considers is $8.53-9.93 per share. For the reasons set out below, the Scheme, if considered and adopted by the members of DuluxGroup, is of such a nature that it would be likely to be approved by the Court at the second hearing. Accordingly, it is appropriate to make the orders sought convening the meeting: Re Biosceptre International Limited [2013] FCA 1429 at [34].B. Scheme mechanism