Hostworks Group Limited ACN 008 010 820, in the matter of Hostworks Group Limited ACN 008 010 820 [2008] FCA 64
CORPORATIONS LAW – Corporations Act 2001 (Cth) – corporations – Scheme of Arrangement – application for order under s 411(1) that company convene meeting of members to consider proposed scheme of arrangement – consideration of performance risk – “no stop” and “no talk provisions” – “break fee” clause – deemed warranty
Corporations Act 2001 (Cth) s 411(1),(2),(3),(4)(d), s 411(3A), s 411(3)(b), s 411(17)(a), s 411(17)(b) Corporation Regulations 2001 (Cth) Reg 5.1.01(1), 8.3.03
IN THE MATTER OF HOSTWORKS GROUP LIMITED (ACN 008 010 820)
HOSTWORKS GROUP LIMITED (ACN 008 010 820) Plaintiff
JUDGE:
MANSFIELD J
DATE:
12 FEBRUARY 2008
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
THE NATURE OF THE APPLICATION
Hostworks Group Limited (Hostworks) sought an order under s 411(1) of the Corporations Act 2001 (Cth) (the Act) for the convening of a meeting of its members for the purpose of considering a proposed scheme of arrangement. The objective of the proposed scheme is to effect a merger between Hostworks and Broadcast Australia Pty Ltd (Broadcast Australia) whereby, if the proposed scheme is approved, Hostworks will become a wholly owned subsidiary of Broadcast Australia.
Hostworks’ business is managing the availability, performance and running costs of business applications. It is a profitable enterprise, and has a substantial surplus of assets and liabilities.
It is apparent that, for the purposes of the takeover of Hostworks by Broadcast Australia, both Hostworks and Broadcast Australia have adopted the means available under Pt 5.1 of the Act in…
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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AGLC
Re Hostworks Group Ltd [2008] FCA 64
Case
[2008] FCA 64
Decision Date
CaseChat Overview and Summary
Hostworks Group Limited sought an order under s 411(1) of the Corporations Act 2001 (Cth) (the Act) for the convening of a meeting of its members for the purpose of considering a proposed scheme of arrangement to effect a merger between Hostworks and Broadcast Australia Pty Ltd whereby, if the proposed scheme is approved, Hostworks will become a wholly owned subsidiary of Broadcast Australia. The Court was required to decide whether there had been proper disclosure with nothing misleading or deceptive in any material sense and that the scheme would, if and when approved by members, be likely then to be approved by the Court as being "so far fair and reasonable as an intelligent and honest man" may approve. The Court was also required to consider the disclosure obligations of Hostworks and the appropriateness of particular features of the arrangement, including "no-shop" and "no-talk" provisions, a break fee, and a deemed warranty.
The Court was satisfied that the explanatory statement provided by Hostworks contained all the information required by s 411(3) and the regulations, and was comprehensive and candid. The Court was satisfied that the proposed scheme was not improper and there was no reason why the scheme would not be approved if the members of Hostworks at the proposed meeting of the scheme support the proposed scheme. The Court was satisfied that the "no-shop" and "no-talk" provisions were subject to a fiduciary carve-out and that the break fee provision was not of an inappropriate magnitude. The Court was also satisfied that the deemed warranty clause was not onerous and unreasonable.
Accordingly, the Court made orders under s 411(1) of the Act that Hostworks convene the proposed scheme meeting for the purpose of considering and, if thought fit, approving a scheme of arrangement for the transfer of all of the fully paid ordinary shares in the issued capital of Hostworks to Broadcast Australia, being the scheme contained in and more particularly described in what is Appendix C to the draft explanatory statement contained in the scheme booklet. The Court also made further orders for the despatch of the scheme booklet to each member of Hostworks and as to the conduct of the meeting.