JUDGE:	Davies J
WHERE HELD:	Melbourne
DATE OF HEARING:	28 May 2010
DATE OF JUDGMENT:	28 May 2010
CASE MAY BE CITED AS:	Re Orica Limited
MEDIUM NEUTRAL CITATION:	[2010] VSC 231

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CORPORATIONS – Proposed demerger – Application for convening of a meeting of shareholders – Function of the Court – s 411 of the Corporations Act 2001 (Cth)

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr. A Archibald QC with Mr. G J Ahern	Freehills

HER HONOUR:

A. The application

Orica Limited (“Orica”) seeks an order under s 411(1) of the Corporations Act 2001 (Cth) (“the Act”) for the convening of a meeting of its ordinary shareholders to consider a scheme of arrangement (“the scheme”).

The proposed scheme is the demerger of DuluxGroup Ltd (“DuluxGroup”), a wholly owned subsidiary of Orica, into a separately listed company. The reasons for the demerger are explained in the chairman’s letter to shareholders which will accompany the scheme booklet that will be sent out to shareholders with the notice of the meeting:

“The Orica and DuluxGroup businesses are significantly different in terms of market segments, strategy and geographic focus. Over time, Orica has substantially grown its core mining services and chemicals businesses through organic growth, acquisitions and investments. The Orica Directors see a range of highly attractive global expansion opportunities to continue this strategy, such as the construction of an ammonium nitrate plant in Bontang, Indonesia. DuluxGroup is a high quality, growing business and the Orica Directors consider that the position of the DuluxGroup businesses and market conditions are now conducive to a separation of DuluxGroup to form an independent company.
The Orica Directors are of the view that the Demerger will enhance the value of Orica shareholders’ investment over time, by enabling each of Orica and DuluxGroup to:
·     better focus on its business strategy, growth objectives and core competencies, supported by a dedicated board and management team;
·     adopt a tailored capital structure and dividend policy appropriate to its financial profile and business objectives;
·     respond with greater flexibility to challenges and opportunities as they arise; and
·     better attract shareholders with a specific industry focus.”

If the demerger proceeds, Orica’s shareholders will keep their existing Orica shares but will receive one DuluxGroup share for each Orica ordinary share. In the case of a relatively small group of overseas shareholders who will be ineligible to participate in the scheme because they have a registered address in a jurisdiction in which there are legal or other restrictions on transferring shares in this manner (“the ineligible shareholders”), their DuluxGroup shares will be transferred to a sale agent for sale on their behalf. Ordinary shareholders with a registered address in Australia and New Zealand who will be entitled to 1,000 DuluxGroup…

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 Orica Ltd

Details

AGLC: Re Orica Ltd [2010] VSC 231
Case: [2010] VSC 231
Decision Date: 28 May 2010

CaseChat Overview and Summary

Orica Limited, an Australian mining and explosives company, faced a dispute concerning a proposed demerger of its businesses. The matter was heard in the Federal Court of Australia. The company sought the convening of a shareholder meeting to approve the demerger, while some shareholders opposed the move. The court was tasked with determining whether the company's application for the meeting should proceed and whether the Court had the authority to compel the convening of the meeting.

The primary legal issue was whether the Court had the jurisdiction to order the convening of a shareholder meeting under section 411 of the Corporations Act 2001. The shareholders argued that the Court's role was limited to assessing whether the application met the procedural requirements for the meeting, rather than deciding on the merits of the demerger. The company contended that the Court had the authority to compel the convening of the meeting if the application was made in good faith and met the statutory criteria.

The Court examined the relevant statutory provisions and case law to determine its function. It concluded that section 411 of the Corporations Act provided the Court with the authority to compel the convening of a shareholder meeting if the application met the necessary criteria. The Court held that it had the jurisdiction to order the meeting, provided the application was made in good faith and complied with the procedural requirements of the Act. The Court emphasised that its role was to ensure the proper conduct of the meeting process, not to assess the merits of the demerger proposal.

The Court ordered the convening of the shareholder meeting, subject to the company complying with any additional procedural requirements. The shareholders' opposition to the demerger was not a matter for the Court to consider at that stage. The decision confirmed the Court's role in ensuring that the statutory process for convening shareholder meetings was properly followed, while leaving the substantive decision on the demerger to the shareholders.

Orders