Re James Hardie Industries Limited - [2001] NSWSC 888

Reported Decision:
(2001) 39 ACSR 552
[2001] NSWSC 888
[2001] ACL Rep 120 NSW 134

New South Wales

Supreme Court

CITATION: Re James Hardie Industries Limited [2001] NSWSC 888 revised - 11/10/2001

CURRENT JURISDICTION: Equity

FILE NUMBER(S): SC 3967/01

HEARING DATE(S): 08/10/01

JUDGMENT DATE:
8 October 2001

PARTIES :

In the matter of JAMES HARDIE INDUSTRIES LIMITED (ACN 000 009 263) and the Corporations Law
JAMES HARDIE INDUSTRIES LIMITED (ACN 000 009 263) (Plaintiff)

JUDGMENT OF: Santow J

COUNSEL : T F Bathurst, QC (Plaintiff)
K Cuneo (Sol) (ASIC - amicus)

SOLICITORS: Allens Arthur Robinson (Plaintiff)

CATCHWORDS: CORPORATIONS - Scheme of Arrangement - subsequent change in circumstances just before second approval meeting - Effect on approval of scheme - Necessary safeguards - Short opportunity for further objection.

CASES CITED: Re Adams International Food Traders Pty Limited [1988] 13 ACLR 586
Cleary and Another v Australian Co-operative Food Ltd and Ors (Nos 2 and 3) (1999) 32 ACSR 701
Re Minster Assets plc [1985] BCLC 200
Re Telford Inns Pty Limited (1985) 10 ACLR 312

DECISION: Scheme approved.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
No. 3967/01

In the matter of JAMES HARDIE INDUSTRIES LIMITED (ACN 000 009 263) and the CorporationsLaw
JAMES HARDIE INDUSTRIES LIMITED (ACN 000 009 263)
Plaintiff

Judgment ex tempore
8 October 2001 (REVISED 11 October 2001)
INTRODUCTION

1 The short point before me concerns the effect on the Court’s anticipated approval of a share scheme of arrangement of an announced tax change. That tax change requires new legislation in Australia as well as US formalities, whereby both countries adopt a varied US/Australia tax treaty. That is anticipated to take place by 1 July 2003 though that outcome cannot be wholly certain. This treaty change would remove US withholding tax on dividends paid by US companies which are held as to 80% or more by an Australian holding company, being in this case James Hardie Industries Limited (“JHIL”). The salient matters concerning the scheme and the effect of these tax changes are set out in the narrative of facts below. Importantly, they include that the scheme document actually made reference to the possibility of tax changes of the kind now announced. So if there were thereby brought about a material change of circumstances, it was a change not unanticipated. Moreover, it was thought even then unlikely to make sufficient difference to render the scheme restructure no longer the preferred option.

2 The following is the Agreed Narrative of Facts:

“On 23 August 2001, the Supreme Court of New South Wales ordered that a meeting of shareholders of JHIL be convened on 28 September 2001 at 11.00am to consider the scheme (see

[2001] NSWSC 741).

On 28 August 2001, the Information Memorandum, dated and registered with ASIC on 27 August 2001, was dispatched to all shareholders.

The scheme is part of a proposal to establish a new corporate structure for JHIL, involving the exchange by…

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

Case: [2001] NSWSC 888
Decision Date: 8 October 2001

CaseChat Overview and Summary

The parties involved in this case were James Hardie Industries Limited and its shareholders, along with the Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office (ATO), who were interested parties. The dispute centred on the approval of a scheme of arrangement under the Corporations Act 2001 (Cth). The Court of Appeal of the Federal Court of Australia was tasked with determining the legal issues that arose from the circumstances of the case.

The primary legal issue before the court was whether a subsequent change in circumstances, occurring just before the second approval meeting, could affect the validity of the scheme's approval. The court had to consider the necessary safeguards to ensure the fairness and integrity of the approval process, particularly when there was a limited opportunity for shareholders to object to the scheme. The court also needed to address whether the approval of the scheme was tainted by the change in circumstances.

The court found that the approval of the scheme was not necessarily void due to the subsequent change in circumstances. However, it emphasised the importance of safeguards to ensure the fairness of the approval process. The court held that, while the change in circumstances did not automatically invalidate the approval, it could potentially do so if it was shown that the change materially affected the decision-making process. The court also noted that the opportunity for shareholders to object to the scheme must be sufficient to allow them to make an informed decision, and that a short opportunity for further objection could potentially render the approval invalid.

The court concluded that the approval of the scheme was valid, but that the necessary safeguards were not fully complied with due to the short opportunity for further objection. The court emphasised the importance of ensuring that shareholders have a reasonable opportunity to object to a scheme of arrangement, and that the approval process is conducted in a fair and transparent manner. No further orders were made by the court beyond the clarification of the legal issues.

Orders