Re Lifeplan Australian Friendly Society Limited (No 2)
[2009] VSC 641
•25 June 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
| AT MELBOURNE COMMERCIAL AND EQUITY DIVISION |
COMMERCIAL COURT CORPORATIONS LIST
No. 6021 of 2009
IN THE MATTER OF LIFEPLAN AUSTRALIA FRIENDLY
SOCIETY LIMITED (ACN 087 649 492)
| LIFEPLAN AUSTRALIA FRIENDLY SOCIETY LIMITED | Plaintiff |
| (ACN 087 649 492) |
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| JUDGE: | ROBSON J |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 24 April, 8, 11, 13 May and 25 June 2009 |
| DATE OF JUDGMENT: | 25 June 2009 |
| CASE MAY BE CITED AS: | Re Lifeplan Australian Friendly Society Limited (No 2) |
| MEDIUM NEUTRAL CITATION: | [2009] VSC 641 |
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CORPORATIONS – scheme of arrangement – application for order for meeting to consider a scheme – whether requirements of s 412 (1) of the Corporations Act 2001 satisfied – in particular whether or not the explanatory statement included information that is material to the making of a decision by a creditor or member whether or not to agree to the compromise or arrangement, being information that is within the knowledge of the directors and has not previously been disclosed to the creditors or members - order for meeting granted
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J G Santamaria QC with | Hugh Scales |
| Mr G J Ahern | ||
| For ASIC | No appearance |
Cases cited
Alabama New Orleans Texas and Pacific Junction Railway Co [1891] 1 Ch 213
Australian Securities Commission 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 Lifeplan Australian Friendly Society Limited (No 1) [2009] VSC 640
HIS HONOUR:
INTRODUCTION
On 13 May 2009, I adjourned the hearing of an application by Lifeplan Australia Friendly Society Limited (“Lifeplan”) for an order to summon a meeting at which the members of Lifeplan may consider an arrangement between themselves and Lifeplan whereby Lifeplan will, in effect, merge with Australian Unity Limited (“Australian Unity”).
For the reasons I gave on 13 May 2009,[1] I was not satisfied that proper or clear disclosure had been made in the explanatory statement. I indicated that I was not prepared to order a meeting to be summoned on the material then before me, but would be prepared to reconsider the matter if further evidence was provided. I then set out the matters upon which I required further evidence if I was to make the orders sought.
[1] Re Lifeplan Australian Friendly Society Limited (No 1) [2009] VSC 640
Under s 412(1) of the Corporations Act 2001, the explanatory statement must explain the effects of the arrangement and set out “such information as is prescribed and any other information that is material to the making of a decision by a creditor or member whether or not to agree to the compromise or arrangement, being information that is within the knowledge of the directors and has not previously been disclosed to the creditors or members”.
The matters that I found were not satisfied are set out in my decision of 13 May 2009. In substance, I required further evidence from a director or the directors of Lifeplan deposing to whether or not there is financial information or quantitative information within the knowledge of the directors that is material to the making of a decision by members that had not otherwise been made available to members.
I also indicated in paragraphs 35 to 37 as follows:
35. Further, the Court would be assisted by evidence as to whether or not an expert’s report on the value of a Lifeplan membership before and after the merger would be material to a member making a decision whether or not to agree to the scheme.
36. Further, the Court would be assisted by evidence from a suitably qualified expert as to whether or not the determination of the respective enterprise values of Lifeplan and Australian Unity is material to a member making a decision whether or not to agree to the scheme.
37. Finally, the Court would be assisted by evidence from a suitably qualified person as to whether or not the allocation of value to current members of Lifeplan, or an indication thereof, in the event of a winding up or demutualisation is material to a member making a decision whether or not to agree to the scheme.
The matter is again before me and is further supported by an interlocutory process of 24 June 2009. Lifeplan relies on the further supplementary submissions of 24 June 2009. The submissions set out in detail the matters I raised in my reasons of 13 May 2009 and the evidence that has now been provided to meet the matters I raised. I accept the submissions in their entirety.
Lifeplan relies upon the further affidavit of John Charles Butler sworn 23 June 2009. Mr Butler deposes that the board of Lifeplan met on 28 May 2009, at which all directors were present in person, and at which my reasons of 13 May 2009 were discussed.
Mr Butler describes, in considerable detail, the current financial position of Lifeplan and the position of the respective funds that it manages. He deposes in particular that:
Lifeplan is profitable and is able to meet its liabilities with respect to the benefit funds and other creditors. However, the decline in revenue may constrain the ability of Lifeplan to increase the size of its business and to issue new products and compete; it also has affected Lifeplan’s ability to provide some services.
Further the board of Lifeplan considers that if there were to be a repeat of the decline in external economic conditions experienced in 2008, the medium to long-term viability of Lifeplan’s business may become doubtful and the
business may not be able to continue without restructuring.[2]
[2] Paragraphs 16 and 17.
Mr Butler deposes that:
Apart from what is disclosed:
(a) in this affidavit; or
(b) in the revised member information booklet [which he exhibits to his
affidavit]I do not believe that there is any other financial information of which the board of Lifeplan is aware which would be material to the making of a decision by members of Lifeplan whether or not to agree to the proposed scheme.
Significant amendments have been made to the member information booklet and it now includes the letter from the Lifeplan chairman. The amendments include the following:
As a result of these conditions, Lifeplan’s funds under management have declined and this has resulted in a decline in management fee income and operating profits.
Lifeplan is profitable and is able to meet its commitments to members. However the decline in management fee income (and the ramifications of the deteriorated operating conditions) may constrain Lifeplan’s ability to maintain the level of some services to members, to increase the size of its business and to issue new products.
The chairman also repeats what is said in Mr Butler’s affidavit about Lifeplan’s position if there is a repeat of the decline in external economic conditions as experienced in 2008.
Under paragraph 3, there are significant amendments made describing Lifeplan’s products and the impact of the global financial crisis on them. There is also, in paragraph 3.2, an expanded section on the benefits of the merger with Australian Unity.
Mr Butler also exhibits to his affidavit an opinion of Deloitte Actuaries and Consultants Limited, given by Caroline Bennett and Penelope Butler, both Fellows of the Institute of Actuaries of Australia, addressing in particular the questions that I raised in paragraphs 35 to 37 of my 13 May 2009 decision. In substance, it is fair to say that they are of the opinion that the quantification of the value of a member’s membership before and after the proposed merger should not be material to a member making a decision whether or not to approve the merger. They expressed the same view about whether or not a determination in respect of enterprise values of Lifeplan and Australian Unity is material to a member making a decision whether or not to agree to the scheme, and also whether or not the allocation of value to current members of Lifeplan, or an indication thereof, in the event of a winding up or demutualisation is material to a member making a decision whether or not to agree to the scheme.
I have carefully considered all that has been put forward by Mr Butler, the amendments to the member information booklet, the opinion from Deloitte Actuaries and Consultants Limited dated 22 June 2009 and the helpful submissions, both written and oral, of counsel. I am satisfied that proper disclosure has been made of all material matters necessary and appropriate for the members to consider in the merger scheme.
By letter dated 23 June 2009, ASIC informed Lifeplan’s solicitor, Mr Hugh Scales, that ASIC did not propose to appear to make submissions or intervene to oppose the above scheme at the first hearing.[3]
[3] JCB16.
I am satisfied that the requirements of s 411(2) of the Corporations Act 2001 have been satisfied. I have had regard to the provisions of the proposed scheme concerning the “break fee” and the exclusivity provision. I have had regard to the outline of submissions filed on behalf of the plaintiff of 4 May 2009 and accept them.
As I said in my reasons of 13 May 2009, the Court will not ordinarily summon a meeting unless the scheme is of such a nature and cast in such terms that, if it achieves a statutory majority at the meeting of members, the Court will be likely to approve it: see FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd[4] and also Australian Securities Commission v Marlborough Gold Mines Ltd.[5] If the statutory requirements are satisfied, the Court will normally approve the scheme if it appears that the scheme is so far fair and reasonable, as that an intelligent and honest person, who is a member and acting alone in respect of his or her own interest as such a member, might approve it: see Re Alabama New Orleans Texas and Pacific Junction Railway Co.[6] The scheme appears to me to satisfy all these requirements.
[4] (1977) 3 ACLR 69 at [72] per Street CJ.
[5] (1993) 177 CLR 485.
[6] [1891] 1 Ch 213 per Fry LJ.
In those circumstances, I am prepared to make the order sought for the convening of the meeting.
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