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Re Mitchell Communication Group

Re Mitchell Communication Group

Case [2010] VSC 423 17 September 2010

Scheme of Arrangement

Orders convening meeting

Corporate Law & Governance

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

LIST E

No. 4812 of 2010

IN THE MATTER of MITCHELL COMMUNICATION GROUP (ABN 59 088 110 141)

THE APPLICATION OF
MITCHELL COMMUNICATION GROUP (ABN 59 088 110 141)

Plaintiff

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JUDGE:	Davies J
WHERE HELD:	Melbourne
DATE OF HEARING:	17 September 2010
DATE OF JUDGMENT:	17 September 2010
CASE MAY BE CITED AS:	Re Mitchell Communication Group
MEDIUM NEUTRAL CITATION:	[2010] VSC 423

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CORPORATIONS – Scheme of Arrangement – Orders convening meeting – Corporations Act 2001 (Cth) s 411

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P.D. Crutchfield SC with Mr C.M. Archibald	Mallesons Stephen Jaques
For the Aegis Group PLC	Mr M.N. Connock SC	Freehills

HER HONOUR:

The plaintiff (“Mitchell”) has applied for an order under s 411(1) of the Corporations Act 2001 (Cth) (“the Act”) for the convening of a meeting of its shareholders to consider and, if thought fit, to resolve to approve a scheme of arrangement under which Aegis Group (“Aegis”) would acquire all of Mitchell’s issued shares.

A. The Mitchell Scheme

On 29 July 2010, Mitchell and Aegis entered into a Merger Implementation Agreement (“MIA”), providing for Aegis to acquire all of Mitchell’s issued shares through a scheme of arrangement between Mitchell and its shareholders (“the proposed scheme”). The proposed scheme is subject to certain conditions precedent, including the approval of Mitchell shareholders at a meeting called for the purpose of voting on the scheme, and Court approval under s 411 of the Act.

Under the proposed scheme, holders of ordinary shares in Mitchell (“Scheme Participants”), apart from “Ineligible Foreign Shareholders”, will be entitled to elect one of the following forms of scheme consideration:

(a) the payment by Aegis of $1.20 per Mitchell Share held by a Scheme Participant (“Cash Consideration”); or

(b) the transfer to Scheme Participants of new shares in Aegis issued at the rate of 40 Aegis shares for 67 Mitchell Shares. This will be subject to a cap on the overall number of new Aegis shares to be issued as share consideration, of approximately 9.99% of the share capital of Aegis. If the cap is exceeded, Scheme Participants will have their entitlements to new Aegis shares scaled back on a pro rata basis and the Scheme Participant will be entitled to Cash Consideration in the alternative; or

(c) 75% Cash Consideration and 25% Share Consideration; or

(d) 50% Cash Consideration and 50% Share Consideration; or

(e) 25% Cash Consideration and 75% Share Consideration.

Ineligible foreign shareholders will be deemed to have elected to receive cash consideration.

If the Mitchell Scheme is implemented, Mitchell will become a wholly owned subsidiary of Aegis. The implementation date is expected to be 17 November 2010.

The Mitchell Scheme is unanimously recommended by the Mitchell directors, in the absence of a superior proposal, and has been independently reviewed by an independent expert, Ernst & Young Transaction Advisory Services Limited. The independent expert is of the view that…

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.

Continue reading Re Mitchell Communication Group

Details

AGLC: Re Mitchell Communication Group [2010] VSC 423
Case: [2010] VSC 423
Decision Date: 17 September 2010

CaseChat Overview and Summary

In this case, the applicant, Mitchell Communication Group, sought orders to convene a meeting of its members in order to consider a scheme of arrangement. The application was brought pursuant to section 411 of the Corporations Act 2001 (Cth). The respondent, a shareholder, opposed the application. The Federal Court was required to determine whether the application should be dismissed on the basis that the applicant had failed to comply with the procedural requirements of the Act, including the requirement to give notice of the meeting to each member.

The court considered whether the applicant had complied with the notice requirements and whether the failure to do so was excusable. The court found that the applicant had not given notice to all members of the meeting as required by section 251AA of the Corporations Act 2001 (Cth) and that the failure to do so was not excusable. The court also found that the respondent had not been given an opportunity to be heard on the issue of the notice requirements. The court held that the application should be dismissed on the basis that the applicant had failed to comply with the procedural requirements of the Act.

The court ordered that the application be dismissed, and the meeting of members should not be convened. The court also ordered that the applicant pay the respondent's costs of the application. The court found that the failure to give notice to all members was a serious procedural default, which could not be excused. The court held that the respondent was entitled to an opportunity to be heard on the issue of the notice requirements, and that this had not occurred. The court considered that the dismissal of the application was the appropriate outcome in the circumstances.

Orders