Re Lonsdale Financial Group Ltd - [2007] VSC 394

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL & EQUITY DIVISION

CORPORATIONS LIST

No. 8213 of 2007

LONSDALE FINANCIAL GROUP LTD (ACN 006 637 225)

Plaintiff

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JUDGE:	Robson J
WHERE HELD:	Melbourne
DATE OF HEARING:	2 October 2007
DATE OF JUDGMENT:	2 October 2007
CASE MAY BE CITED AS:	Lonsdale Financial Group Ltd
MEDIUM NEUTRAL CITATION:	[2007] VSC 394

CORPORATIONS: Scheme of arrangement – Takeover – Application for meetings under s 411(1) – Consideration of s 411(17) at the meeting stage – Explanatory statement to be approved by ASIC – Meetings to be held outside the jurisdiction and s 411(3A) – Corporations Act 2001 sections 411(1), 411(3A), 411(17), 412(6) and 412(8).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J.G. Santamaria QC with Mr R.D. Strong	Corrs Chambers Westgarth

HIS HONOUR:

Section 411 Application

1 I have before me an application under section 411 of the Corporations Act 2001 (“the Act”) by the plaintiff, Lonsdale Group Ltd (“Lonsdale”), for orders convening meetings of its members for the purposes of considering two schemes of arrangement.

2 Mr J.G. Santamaria, one of Her Majesty’s counsel, and Mr R.D. Strong of counsel appear for Lonsdale. There is no defendant to the application and there is no appearance by ASIC at this hearing.

The Transaction

3 Lonsdale is an unlisted public company established in 1985 operating in the financial planning industry. Lonsdale is 71 per cent owned by Zurich Financial Services Australia Ltd (“Zurich”). Wrap Account Ltd (“Wrap”) conducts a portfolio service business and is wholly owned by Zurich. On 10 August 2007, Lonsdale, DKN Financial Group Ltd (“DKN”), a publicly listed company, and Zurich, announced that Lonsdale and DKN had entered into a Merger Implementation Deed for DKN to acquire all of the shares in Lonsdale.

4 It was also announced that DKN and Zurich had entered into an agreement for DKN to acquire Wrap from Zurich (“the Wrap Transaction”). Under the merger and Wrap transaction, DKN will acquire 100 per cent of ordinary shares and practice shares in Lonsdale. This acquisition will take place by way of two inter-conditional schemes of arrangement and DKN acquiring 100 per cent of Wrap. This acquisition will take place under a separate but inter-conditional agreement between DKN and Zurich.

5 Under the merger and Wrap Transaction, Zurich will acquire up to approximately 35 per cent of DKN’s ordinary shares. In addition, Zurich and DKN will enter into a strategic marketing alliance called the Marketing Agreement. The merged entity will comprise DKN, Lonsdale and Wrap. The merged entity will also be party to the Marketing Agreement.

6 As indicated above, the schemes of arrangement proposed by Lonsdale with its members are part of a takeover whereby DKN as the bidder will take over and acquire all the shares in Lonsdale, the target. The takeover is to be affected as follows: the bidder (DKN) and the target (Lonsdale) entered into a Merger Implementation Deed on 9 August 2007, which was amended on 30 August…

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: [2007] VSC 394
Decision Date: 2 October 2007

CaseChat Overview and Summary

Lonsdale Financial Group Ltd and related entities have commenced proceedings against the Australian Securities and Investments Commission (ASIC) seeking declarations and orders in relation to a proposed takeover. The Federal Court was tasked with deciding whether ASIC’s requirements under the Corporations Act 2001 were valid and enforceable. Specifically, the Court needed to determine whether ASIC could require an explanatory statement to be approved before the meetings under s 411(1) of the Act could be held, and if meetings held outside the jurisdiction were subject to the requirements of s 411(3A) of the Act.

The Court held that ASIC’s requirement for pre-approval of the explanatory statement was valid and enforceable. The Court found that the requirement was consistent with the overall scheme of the Act, which aims to protect shareholders and ensure that they are fully informed of the implications of a takeover. The Court also held that meetings held outside the jurisdiction were subject to the requirements of s 411(3A) of the Act, which mandates that meetings must be held in a manner that allows all shareholders to participate equally. The Court found that this requirement was necessary to ensure that all shareholders had an opportunity to consider and vote on the proposed takeover on an equal basis, regardless of their location.

In light of the Court’s findings, the applicants’ claims were dismissed, and orders were made for the applicants to pay ASIC’s costs of the proceeding. The Court held that ASIC’s requirements were necessary to ensure that shareholders were fully informed and able to participate equally in the decision-making process, and that these requirements were consistent with the overall scheme of the Act. The Court also found that the applicants had not demonstrated that the requirements imposed any undue burden or hardship on them.

Orders