Re Legend Corporation Limited

Case [2019] FCA 1249


FEDERAL COURT OF AUSTRALIA

Legend Corporation Limited, in the matter of Legend Corporation Limited [2019] FCA 1249

File number(s): VID 659 of 2019
Judge(s): O'BRYAN J
Date of judgment: 12 August 2019
Catchwords: CORPORATIONS – scheme of arrangement – first court hearing – order sought under s 411(1) of the Corporations Act 2001 (Cth) – exercise of discretion – orders made for convening of shareholders’ meeting
Legislation:

Corporations Act 2001 (Cth) ss 411(1), 411(17), 412(1)

Corporations Regulations 2001 (Cth) reg 5.1.01, Sch 8, Pt 3

Federal Court (Corporations) Rules 2000 (Cth)

Cases cited:

ASC v Marlborough Gold Mines Ltd (1993) 177 CLR 485

FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69

Re Coles Group Ltd (2007) 25 ACLC 1380

Re Amcor Ltd [2019] FCA 346

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 Cytopia Ltd [2009] VSC 560

Re DuluxGroup Ltd [2019] FCA 961

Re Dyno Nobel Ltd [2008] VSC 154

Re Foundation Healthcare Ltd (2002) 42 ACSR 252

Re Healthscope Ltd [2010] VSC 367

Re Hostworks Group Ltd (2008) 26 ACLC 137

Re Macquarie Private Capital A Ltd (2008) 26 ACLC 366

Re NRMA Insurance Ltd (No 1) (2000) 156 FLR 349; 33 ACSR 595

Re Skilled (No 1) (2015) 113 ACSR 525

Re Toll Holdings [2015] VSC 123

Re Veda Advantage Limited [2007] FCA 822

Ross Human Directions Ltd [2010] ATP 8

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

Date of hearing: 5 July 2019
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 87
Counsel for the Plaintiff: Mr G J Ahern
Solicitor for the Plaintiff: Minter Ellison
Counsel for the Other: Mr N P De Young
Solicitor for the Other: Gilbert + Tobin

ORDERS

VID 659 of 2019

IN THE MATTER OF LEGEND CORPORATION LIMITED (ACN 102 631 087)

BETWEEN:

LEGEND CORPORATION LIMITED (ACN 102 631 087)

Plaintiff

GREENLAND BIDCO PTY LTD (ACN 633 363 096)

Interested Person

JUDGE:

O'BRYAN J

DATE OF ORDER:

5 JULY 2019

OTHER MATTERS:

A.       The Court notes that the Australian Securities and Investments Commission (ASIC) was provided with at least 14 days’ notice of the hearing of this application.
B.       The Court is satisfied that ASIC has had a reasonable opportunity to:

a.        examine the terms of the proposed scheme of arrangement to which the application relates and a draft explanatory statement relating to that arrangement; and
b.        make submissions to the Court in relation to the proposed scheme of arrangement and the draft explanatory statement.

C.       The Court notes the letter from ASIC to the Directors of Legend Corporation Limited ACN 102 631 087 dated 5 July 2019 produced at the hearing.

THE COURT ORDERS THAT:

1.Pursuant to rule…

Continue reading Re Legend Corporation Limited

Sign in free to access the full text

Details
AGLC
Re Legend Corporation Limited [2019] FCA 1249
Case
[2019] FCA 1249
Decision Date

CaseChat Overview and Summary

The case of Re Legend Corporation Limited involved the company seeking approval from the Court to convene a meeting of its members to consider a proposed scheme of arrangement. The scheme involved the transfer of all shares in Legend to BidCo in return for cash consideration. The primary legal issue before the Court was whether the scheme was fit for consideration by the members and whether the members were properly informed about the nature of the scheme. The Court also needed to determine if there were any elements of unfairness in the terms of the scheme that would preclude the approval of the scheme if it came before the Court for a second hearing.

The Court found that the scheme was straightforward and involved the transfer of all shares in Legend to BidCo in return for cash consideration. The Explanatory Booklet provided to members contained a recommendation from all directors that shareholders vote in favour of the scheme, a statement that all directors intended to vote in favour of the scheme, and an independent expert report that the scheme was fair and reasonable and in the best interests of Legend shareholders. The Court also scrutinised the terms of the scheme to satisfy itself that there was no element of unfairness that would be likely to preclude the approval of the scheme if it came before the Court at a second hearing for approval. The Court found that none of the particular features of the scheme raised any concerns and that the scheme was fit for consideration by the members.

The Court concluded 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 also found that the members were properly informed as to the nature of the scheme. Therefore, the Court made the orders sought by Legend to convene the scheme meeting.

The Court's decision provides guidance to companies seeking to convene scheme meetings and the considerations that the Court will take into account in determining whether to approve such meetings. The Court's scrutiny of the terms of the scheme and its finding that the scheme was fit for consideration by the members provides reassurance to companies that the Court will not lightly refuse to convene scheme meetings where the scheme is properly presented and the members are properly informed.

Orders

Orders of the court

Full text does not contain this section.

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

Sub-section 411(1) provides that, if the Court has made an order convening a meeting or meetings of members or creditors, the Court “may approve the explanatory statement.” The practice of courts varies in this respect. Consistent with recent practice in this Court, I have not made an order approving the Explanatory Booklet: see Re Amcor Ltd [2019] FCA 346 at [114]-[115]; Re Verdant Minerals Ltd [2019] FCA 556 at [84]; Re Healthscope Ltd [2019] FCA 542 at [189]; Re DuluxGroup Ltd [2019] FCA 961 at [63].E. Conclusion In conclusion, I am satisfied that the Scheme is of such a nature and cast in such terms that, if it achieves the statutory majorities at the scheme meeting, the Court would be likely to approve it and that it is therefore appropriate to make the orders sought by Legend.

Ratio Decidendi

Legal Principle Established

Before ordering a meeting, the Court needs to be satisfied of two matters:(a)first, that the scheme is fit for consideration by the proposed meeting in the sense that it is “of such a nature and cast in such terms that, if it achieves the statutory majority at the […] meeting the court would be likely to approve it on the hearing of a petition which is unopposed”: FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72 per Street CJ; ASC v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 504; Re Coles Group Ltd (2007) 25 ACLC 1380 at [29]-[36] per Robson J; and(b)second, that “the members [are to be] properly informed as to the nature of the scheme before the scheme meeting”: Re NRMA Insurance Ltd (No 1) (2000) 156 FLR 349 at [30]; 33 ACSR 595; Re Foundation Healthcare (2002) 42 ACSR 252 at [38].D.1 The Scheme is fit for consideration As I observed recently in Re DuluxGroup Ltd [2019] FCA 961 at [20] in respect of a scheme which was materially the same as the present scheme:The question whether or not to accept particular consideration for shares is quintessentially a commercial matter for the members of DuluxGroup to assess: Re Amcor Ltd [2019] FCA 346 at [50]. Members ought not be prevented from having the opportunity to do so provided that the Court can be satisfied that they are “acting on sufficient information and with time to consider what they are voting about”: Re English, Scottish and Australian Chartered Bank [1893] 3 Ch 385 at 409 per Lindley LJ, cited with approval in Re ACM Gold Ltd (1992) 34 FCR 530 at 534 per O’Loughlin J. The Scheme is straightforward. It involves the transfer of all of the shares in Legend to BidCo in return for cash consideration. The Explanatory Booklet sets out reasons why members might vote for or against the Scheme. The Explanatory Booklet also contains:(a)a recommendation from all directors that shareholders vote in favour of the Scheme;(b)a statement that all directors intend to vote in favour of the Scheme; and(c)an independent expert report that the Scheme is fair and reasonable and in the best interests of Legend shareholders. Notwithstanding those recommendations, the Court will also scrutinise the terms of a scheme to satisfy itself that there is no element of unfairness in those terms that would be likely to preclude the approval of the scheme if it came before the Court at a second hearing for approval. In this case, Legend raised the following particular features of the Scheme for the attention of the Court:(a)the funding of the Scheme consideration;(b)performance risk;(c)the exclusivity provisions;(d)the break fee and the reverse break fee;(e)the deemed warranty provision;(f)the performance rights and the associated question of “class” for the purposes of s 411(1) of the Act;(g)the special dividend and the associated question of financial assistance; and(h)section 411(17) of the Act. For the reasons set out below, I am satisfied that none of these matters provide a reason for the Court to refrain from making an order convening the scheme meeting.D.1.1 Funding of the Scheme consideration by BidCo