Re Huon Aquaculture Group Ltd - [2021] FCA 1170

FEDERAL COURT OF AUSTRALIA

Huon Aquaculture Group Limited, in the matter of Huon Aquaculture Group Limited [2021] FCA 1170

File number(s):

VID 512 of 2021

Judgment of:

O’CALLAGHAN J

Date of judgment:

22 September 2021

Catchwords:

CORPORATIONS – scheme of arrangement – first court hearing – orders sought under s 411(1) of the Corporations Act 2001 (Cth) for convening of meeting – where two alternative schemes proposed – where tax benefit arises for director shareholder under one proposed scheme – votes tagged for identification – where ASIC’s letter of intention proposes different voting classes – differential tax treatment not a relevant benefit – shareholders to vote in a single class – orders made

Legislation:

Corporations Act 2001 (Cth) ss 411(1), 411(2)

Cases cited:

First Pacific Advisors LLC v Boart Longyear Ltd (2017) 121 ACSR 136; [2017] NSWCA 116

Re CSR Ltd (2010) 183 FCR 358

Re ERM Power Limited [2019] NSWSC 1502

Re Foundation Healthcare Ltd (2002) 42 ACSR 252; [2002] FCA 742

Re GBST Holdings Limited [2019] NSWSC 1280

Re Kidman Resources Limited [2019] FCA 1226; (2019) 375 ALR 760

Re Legend Corporation Limited [2019] FCA 1249

Re Opes Prime Stockbroking Ltd (No 2) (2009) 179 FCR 20

Re SMS Management & Technology Ltd [2017] VSC 257

Re T & N Ltd [2007] 1 All ER 851

Re Villa World Limited [2019] NSWSC 1207; (2019) 139 ACSR 550

Sovereign Life Assurance Co v Dodd [1892] 2 QB 573

Division:

General Division

Registry:

Victoria

National Practice Area:

Commercial and Corporations

Sub-area:

Corporations and Corporate Insolvency

Number of paragraphs:

39

Date of hearing:

22 September 2021

Counsel for the Plaintiff:

Mr I Jackman SC with Mr GJ Ahern

Solicitor for the Plaintiff:

Ashurst

Counsel for the Interested Parties:

Mr M Oakes SC

Solicitor for the Interested Parties:

MinterEllison

ORDERS

VID 512 of 2021

IN THE MATTER OF HUON AQUACULTURE GROUP LIMITED

HUON AQUACULTURE GROUP LIMITED

Plaintiff

order made by:

O’CALLAGHAN J

DATE OF ORDER:

22 September 2021

THE COURT ORDERS THAT:

1. Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (Act), the plaintiff, Huon Aquaculture Group Limited (ACN 114 456 781) (Huon), convene and hold:
(a)       a meeting of its ordinary shareholders (Huon Shareholders) other than Surveyors Investments Pty Ltd (ACN 602 004 179) (the Excluded Shareholder):
(i)        for the purposes of considering and, if thought fit, agreeing (with or without any alterations or conditions) to a scheme of arrangement (Structure A Scheme), being the scheme substantially in the form contained at Annexure A to these orders proposed to be made between Huon and its ordinary shareholders (other than the Excluded Shareholder); and
(ii)       to be held at 10:00 am (Hobart time) on Friday, 29 October 2021 and be conducted electronically through an online platform (which is to be accessed in accordance with the instructions included in the Notice of Primary Scheme Meeting which is set out in Appendix F to the Transaction Booklet (Notice…

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.

Keep reading for free

Create a free CaseChat account to read Re Huon Aquaculture Group Ltd and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2021] FCA 1170
Decision Date: 22 September 2021

CaseChat Overview and Summary

The case of Re Huon Aquaculture Group Ltd involves Huon Aquaculture Group Limited, which sought court orders for convening a meeting of its shareholders to consider two proposed schemes of arrangement under the Corporations Act 2001 (Cth). The dispute centres on the two alternative schemes proposed by Huon, which differ in the treatment of a tax benefit for a director shareholder. The Federal Court of Australia was tasked with determining whether to grant the orders for convening the shareholder meetings and whether the schemes should be proposed with tagged votes or as a single class of shares.

The primary legal issues before the court were whether the two schemes should be presented with tagged votes to reflect their different tax treatments and whether differential tax treatment constituted a relevant benefit for the purposes of the schemes. The court had to balance the interests of the shareholders and the company while adhering to the statutory provisions governing schemes of arrangement under the Corporations Act.

The court determined that differential tax treatment arising from the two schemes did not constitute a relevant benefit and that the shareholders should vote in a single class. The court found that the tagging of votes would not accurately reflect the shareholders' interests and could lead to confusion. The court concluded that the schemes should be presented as a single class of shares, allowing shareholders to vote without the complexity of tagged votes. Consequently, the court granted the orders for convening the shareholder meetings and directed that the schemes be proposed without tagged votes.

The final orders included convening meetings of Huon's ordinary shareholders to consider and vote on the proposed schemes, specifying the procedures for the electronic meetings, and requiring the publication of a notice in The Australian newspaper. The court also scheduled a further hearing for the originating process. The orders ensured that the schemes were presented fairly and transparently to the shareholders, facilitating an informed decision-making process.

Orders

Orders of the court

1. Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (Act), the plaintiff, Huon Aquaculture Group Limited (ACN 114 456 781) (Huon), convene and hold:

(a) a meeting of its ordinary shareholders (Huon Shareholders) other than Surveyors Investments Pty Ltd (ACN 602 004 179) (the Excluded Shareholder):

(i) for the purposes of considering and, if thought fit, agreeing (with or without any alterations or conditions) to a scheme of arrangement (Structure A Scheme), being the scheme substantially in the form contained at Annexure A to these orders proposed to be made between Huon and its ordinary shareholders (other than the Excluded Shareholder); and

(ii) to be held at 10:00 am (Hobart time) on Friday, 29 October 2021 and be conducted electronically through an online platform (which is to be accessed in accordance with the instructions included in the Notice of Primary Scheme Meeting which is set out in Appendix F to the Transaction Booklet (Notice of Structure A Scheme Meeting) and is to be sent to Huon shareholders in accordance with Order 2 below),

(Structure A Scheme Meeting); and

(b) a meeting of its ordinary shareholders:

(i) for the purposes of considering and, if thought fit, agreeing (with or without any alterations or conditions) to a scheme of arrangement (Structure B Scheme), being the scheme substantially in the form contained at Annexure B to these orders proposed to be made between Huon and its ordinary shareholders; and

(ii) to be held at 10:00 am (Hobart time), or as soon as reasonably practicable after the conclusion or adjournment of the Structure A Scheme Meeting (whichever time is later) on Friday, 29 October 2021 and be conducted electronically through an online platform (which is to be accessed in accordance with the instructions included in the Notice of Secondary Scheme Meeting which is set out in Appendix G to the Transaction Booklet (Notice of Structure B Scheme Meeting) and is to be sent to Huon shareholders in accordance with Order 2 below),

(Structure B Scheme Meeting),

(each a Scheme Meeting and together, the Scheme Meetings).

2. The Scheme Meetings be convened by sending on or before 29 September 2021:

(a) in the case of Huon Shareholders who have elected to receive electronic shareholder communications (Email Shareholders), an email substantially in the form at Tab 21 of Exhibit “TCH-1” to the affidavit of Thomas Cleveland Haselgrove dated 21 September 2021 (Haselgrove Affidavit), which includes access by embedded links to the following:

(i) an electronic copy of a document substantially in the form of the Transaction Booklet, a draft of which is at Tab 32 of Exhibit “JRB-2” to the affidavit of John Richard Brewster dated 22 September 2021 (Second Brewster Affidavit) (save for the reference to “Thursday, 23 September 2021” on page 25 of that draft being amended to “Tuesday, 28 September 2021”, the references to “23 September 2021” on page 116 of that draft being amended to “28 September 2021”, the deletion of paragraph (iv) in section 12.12(a) on page 152, and the reference to “clause 5.5(b)(a)” on page 281 of that draft being amended to “clause 5.5(a)”), which contains, among other things, the Notice of Structure A Scheme Meeting and the Notice of Structure B Scheme Meeting;

(ii) a proxy form substantially in the form at Tab 14 of Exhibit “TCH-1” to the Haselgrove Affidavit (Proxy Form); and

(iii) an online portal or website that is accessible by Email Shareholders and which enables Email Shareholders to lodge their proxy for the Scheme Meetings and voting instructions online; and

(b) in the case of Email Shareholders a Proxy Form and a reply paid envelope for the return of the Proxy Form by post; and

(c) in the case of Huon Shareholders who are not Email Shareholders (Postal Shareholders) the following documents by post:

(i) a document substantially in the form of the Transaction Booklet, a draft of which is at Tab 32 of Exhibit “JRB-2” to the Second Brewster Affidavit (save for the reference to “Thursday, 23 September 2021” on page 25 of that draft being amended to “Tuesday, 28 September 2021”, the references to “23 September 2021” on page 116 of that draft being amended to “28 September 2021”, the deletion of paragraph (iv) in section 12.12(a) on page 152, and the reference to “clause 5.5(b)(a)” on page 281 of that draft being amended to “clause 5.5(a)”), which contains, among other things, the Notice of Structure A Scheme Meeting and the Notice of Structure B Scheme Meeting; and

(ii) a Proxy Form and a reply paid envelope for the return of the Proxy Form.

3. If it comes to the attention of the Plaintiff that any email dispatched to Email Shareholders in accordance with Order 2(a) above has returned an undeliverable or undelivered receipt for an Email Shareholder’s nominated email address, then the Plaintiff shall dispatch to that Email Shareholder within a reasonable time thereafter the specified documents in accordance with Order 2(b) above.

4. Subject to these Orders and pursuant to sections 411(1) and 1319 of the Act:

(a) the Scheme Meetings are to be convened using the notices of meeting substantially in the form of the Notice of Structure A Scheme Meeting and substantially in the form of the Notice of Structure B Scheme Meeting without specifying a physical location for the meetings;

(b) the Scheme Meetings are to be held and conducted electronically, without any physical meeting of Huon Shareholders being held, pursuant to the arrangements for attending, participating and voting described in the Notice of Structure A Scheme Meeting and the Notice of Structure B Scheme Meeting respectively relating to the appointment and revocation of proxy and attorney appointments and in respect of the effect of a Huon Shareholder’s attendance at a Scheme Meeting on a proxy or attorney appointment by that Huon Shareholder;

(c) at the Structure A Scheme Meeting, Huon Shareholders other than the Excluded Shareholder are to be permitted to submit questions, and at the Structure B Scheme Meeting, Huon Shareholders are to be permitted to submit questions, in the manner provided on the website, subject to the functions and powers of the Chair under the Plaintiff’s Constitution as applicable and the general law;

(d) notwithstanding clause 39(b) of the Plaintiff’s Constitution and section 249Y(3) of the Act, the appointment of a proxy in respect of the Structure A Scheme Meeting shall not be revoked or suspended by the appointing Huon Shareholder attending and taking part in the Structure A Scheme Meeting, but if the appointing Huon Shareholder votes on a resolution at the Structure A Scheme Meeting, the proxy is not entitled to vote as the appointing Huon Shareholder’s proxy on that resolution and any such vote by the proxy must not be counted in the results of the relevant poll;

(e) notwithstanding clause 39(b) of the Plaintiff’s Constitution and section 249Y(3) of the Act, the appointment of a proxy in respect of the Structure B Scheme Meeting shall not be revoked or suspended by the appointing Huon Shareholder attending and taking part in the Structure B Scheme Meeting, but if the appointing Huon Shareholder votes on a resolution at the Structure B Scheme Meeting, the proxy is not entitled to vote as the appointing Huon Shareholder’s proxy on that resolution and any such vote by the proxy must not be counted in the results of the relevant poll;

5. Except to the extent addressed by these Orders, the Scheme Meetings be:

(a) convened, held and conducted in accordance with the provisions of Part 2G.2 of the Act that apply to members of the company, and the provisions of the Plaintiff’s Constitution as applicable that are not inconsistent with these Orders and Part 2G.2; and

(b) convened, held and conducted as if rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules) does not apply.

6. Voting on the resolutions to approve the Structure A Scheme and Structure B Scheme is to be conducted by way of a poll.

7. The Proxy Form will be valid and effective if, and only if, it is completed and delivered in accordance with its terms by is 10.00am (Hobart time) on 27 October 2021.

8. Mr Neil Alexander Kearney, or failing him, Mr Kevin Anthony Dynon be the Chairperson of the Scheme Meetings.

9. The Chairperson of the Scheme Meetings shall have the power to adjourn the Scheme Meetings to such time, date and place as he considers appropriate.

10. Compliance with rule 3.4 and Form 6 of the Rules is dispensed with.

11. The Plaintiffs publish in The Australian newspaper once on or before 28 October 2021 a notice of hearing substantially in the form of Annexure C to these Orders.

12. The further hearing of the Originating Process in respect of the Plaintiff’s application is adjourned to a hearing before the Honourable Justice O’Callaghan on 3 November 2021 at 10.15am (Melbourne time) or as soon thereafter as the business of the Court allows.

13. There be liberty to apply.

14. Pursuant to rule 39.34 of the Federal Court Rules 2011 (Cth), these orders be entered forthwith.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Annexure A

Structure A Scheme

Annexure B

Structure B Scheme

Annexure C

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.