Re Perseverance Corporation Limited - [2007] VSC 574

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

CORPORATIONS LIST

No. 9695 of 2007

IN THE MATTER OF

PERSEVERANCE CORPORATION LIMITED (ACN 010 650 049)

Plaintiff

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JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	13 December 2007
DATE OF JUDGMENT:	13 December 2007
CASE MAY BE CITED AS:	Perseverance
MEDIUM NEUTRAL CITATION:	[2007] VSC 574

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CORPORATIONS – Scheme of arrangement – Takeover scheme – Approval of scheme – Discretion – Relevance of s 411(17) to discretion – Scheme approved - Sections 411(4)(b) and 411(17) Corporations Act (Cth).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M N Connock SC with Mr G Ahern	Clayton Utz

FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69
Re Sonodyne International Ltd (1994) 15 ACSR 494
Re Australian Energy Limited [2006] FCA 155
Re Mincom Ltd [2007] QSC 058
Re APN News v Media Limited (2007) 62 ACSR 400
Re Arthur Yates & Co Ltd (2001) 36 ACSR 758
Re Lonsdale Finance Group Ltd [2007] VSC 394

HIS HONOUR:

The court has before it an application by Perseverance Corporation Limited, pursuant to s 411(1) of the Corporations Act dated 28 November 2007 for orders to convene a meeting of the holders of ordinary shares issued by Perseverance for the purposes of considering and if thought fit, resolving to approve a proposed scheme of arrangement between Perseverance and its shareholders (“the share scheme”); and to convene a meeting of the holders of options to subscribe for shares for the purpose of considering and if thought fit, resolving to approve a proposed scheme of arrangement between Perseverance and the option holders which if implemented will result in the cancellation of all options for cash consideration. If approved and permitted it will result in the acquisition, for cash consideration by Northgate Minerals Corporation through its wholly owned subsidiary Northgate Australian Ventures Corporation, of all Perseverance’s shares.

On 22 November 2007 a draft scheme booklet containing the explanatory statement required by s 412(1)(a) of the Act was delivered to ASIC. The solicitors for Perseverance have received two letters from ASIC dated 12 December 2007. The first letter deals with certain exemptions given by ASIC as to matters which otherwise Perseverance would have had to include in its explanatory statement. The second letter is the standard letter where ASIC advises that its policy in relation to providing statements under Para 411(17)(b) ‘is that it will not provide such a statement until the second, or confirmation, court hearing in relation to a scheme arrangement.’

ASIC go onto say:

This is because ASIC will not be in a position to advise the court properly until it has had an opportunity to observe the entire scheme process. It is also consistent with the wording of the section that relates the statement to the courts proof of the scheme.
However, ASIC recognises that proponents of the scheme may reasonably…

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 574
Decision Date: 13 December 2007

CaseChat Overview and Summary

The matter before the court involved a scheme of arrangement proposed by Perseverance Corporation Limited, a company listed on the Australian Securities Exchange, which sought to approve a takeover by another company. The shareholders of Perseverance Corporation Limited were divided in their support for the scheme, and the court was asked to exercise its discretion under the Corporations Act to determine whether the scheme should be approved. The court's decision was to be made in accordance with the relevant provisions of the Act, including sections 411(4)(b) and 411(17).

The primary legal issue before the court was whether section 411(17) of the Corporations Act was relevant to the court's discretion in approving a scheme of arrangement. Section 411(17) provides that a court may approve a scheme even if it does not consider the scheme to be fair and reasonable to all members and creditors of the company. The court had to determine whether this section was relevant to its discretion in approving the scheme, and if so, how it should be applied.

In delivering the judgment, the court held that section 411(17) was relevant to the court's discretion in approving a scheme of arrangement. The court noted that the section provided an exception to the general rule that a scheme could only be approved if it was fair and reasonable to all members and creditors of the company. The court held that the section allowed the court to approve a scheme even if it was not fair and reasonable to some members or creditors, provided that the scheme was in the best interests of the company as a whole. The court also noted that the section did not require the court to approve a scheme that was unfair or oppressive to any party. The court considered the evidence before it and determined that the scheme was in the best interests of the company as a whole, and therefore approved the scheme.

The court made an order approving the scheme of arrangement proposed by Perseverance Corporation Limited. The order was made under section 411(4)(b) of the Corporations Act, which allows the court to approve a scheme if it is satisfied that the scheme is in the best interests of the company as a whole. The court also noted that its approval of the scheme was in accordance with section 411(17) of the Act, which allowed the court to approve a scheme even if it was not fair and reasonable to all members and creditors of the company.

Orders