Re Programmed Maintenance Services Ltd

Case [2017] FCA 1265

FEDERAL COURT OF AUSTRALIA

Programmed Maintenance Services Limited, in the matter of Programmed Maintenance Services Limited [2017] FCA 1265

File number: WAD 406 of 2017
Judge: MCKERRACHER J
Date of judgment: 27 October 2017
Catchwords: CORPORATIONS – scheme of arrangement – application under s 411(1) of the Corporations Act 2001 (Cth) to convene a meeting to consider a proposed scheme of arrangement – application under s 411(4)(b) of the Act to approve a proposed scheme of arrangement – where Independent Expert concluded scheme of arrangement is fair – where applications are unopposed – relevant principles

Legislation:

Corporations Act 2001 (Cth) ss 9, 231, 411(1), 411(2), 411 (2)(a), 411 (2)(b), 411(3), 411(3)(b), 411(4), 411 (4)(a)(ii), 411(4)(a)(ii)(A), 411(4)(a)(ii)(B), 411(4)(b), 411(11), 411(12), 411(17), 411(17)(b), 412, 412(1)(a)(i), 412(1)(a)(ii), 412(6)

Corporations Regulations 2001 (Cth) Sch 8, cll 8301-8310, regs 5.1.01, 5.1.01(1)(b)

Federal Court (Corporations) Rules 2000 (Cth) r 3.2
Cases cited: 

FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69

Gantry Acquisition Corp v Parker & Parsley Petroleum Australia Pty Ltd (1994) 51 FCR 554

Re ACM Gold Ltd; Mt Leyshon Gold Mines Ltd (1992) 34 FCR 530

Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213

Re Alinta Ltd (No 2) [2007] FCA 1378

Re Amcom Telecommunications Ltd [2015] FCA 341

Re APN News & Media Ltd (2007) 62 ACSR 400

Re Central Pacific Minerals NL [2002] FCA 239

Re Coles Group (No 2) (2007) 215 FLR 411

Re CSR Ltd (2010) 183 FCR 358

Re Dorman Long & Co Ltd [1934] Ch 635

Re HIH Casualty and General Insurance Ltd (2006) 200 FLR 243

Re International Goldfields Ltd (2003) 21 ACLC 1199

Re Investa Properties Limited [2007] FCA 1104

Re Macquarie Private Capital A Ltd [2008] NSWSC 323

Re Seven Network Ltd [2010] FCA 220

Re Seven Network Ltd (No 3) (2010) 267 ALR 583

Re Sonodyne International Ltd (1994) 15 ACSR 494

Re NRMA Insurance Ltd (No 1) (2000) 33 ACSR 595

Re NRMA Ltd (No 2) (2000) 156 FLR 412

Sovereign Life Assurance Company v Dodd [1892] 2 QB 573

UDL Argos Engineering & Heavy Industries Co Ltd v Li Oi Lin [2001] 3 HKLRD 634
Date of hearing: 10 October 2017
Registry: Western Australia
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 98
Counsel for the Plaintiff: Mr S K Dharmananda SC and Mr L Lee
Solicitor for the Plaintiff: Ashurst Australia

ORDERS

WAD 406 of 2017

IN THE MATTER OF PROGRAMMED MAINTENANCE SERVICES LIMITED ACN 054 742 264

PROGRAMMED MAINTENANCE SERVICES LIMITED ACN 054 742 264

Plaintiff

JUDGE:

MCKERRACHER J

DATE OF ORDER:

10 OCTOBER 2017

THE COURT ORDERS THAT:

1.Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) the scheme of arrangement between the Plaintiff and its members, as set out in Annexure ‘CGS-28’ to the supplementary affidavit of Christopher Glen Sutherland sworn 28 August 2017, is approved.

2.Pursuant to s 411(12) of…

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AGLC
Re Programmed Maintenance Services Ltd [2017] FCA 1265
Case
[2017] FCA 1265
Decision Date

CaseChat Overview and Summary

Programmed Maintenance Services Ltd sought approval for a proposed scheme of arrangement, and the Court was required to decide whether the scheme met the statutory requirements under the Corporations Act 2001 (Cth). The first legal issue concerned the convening of a meeting to consider the scheme, while the second related to the approval of the scheme itself. The Court had to ensure that Programmed had complied with the orders made at the first hearing and any statutory requirements, including the avoidance of Chapter 6 of the Act and the fairness of the scheme.

The Court reviewed the submissions and materials provided by Programmed, confirming that all relevant matters for convening a scheme meeting were addressed. The Court was satisfied that Programmed had complied with the orders and statutory requirements. The Court noted that ASIC had no objection to the scheme and had provided a written statement to that effect. The Court considered the fairness of the scheme, taking into account various principles such as good faith voting, full disclosure, and the absence of oppression of minority shareholders. The Court also considered the Independent Expert's conclusion that the scheme was fair. The Court was satisfied that all legal requirements had been met and that the scheme was properly proposed, fair, and reasonable.

The Court approved the scheme of arrangement between the Plaintiff and its members. The Court also exempted the Plaintiff from compliance with certain provisions of the Corporations Act in relation to the scheme. The orders were made under sections 411(4)(b) and 411(12) of the Act. The Court's approval of the scheme and the exemption from certain compliance requirements were essential for the successful implementation of the proposed arrangement.

Orders

Orders of the court

1. Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) the scheme of arrangement between the Plaintiff and its members, as set out in Annexure ‘CGS-28’ to the supplementary affidavit of Christopher Glen Sutherland sworn 28 August 2017, is approved.

2. Pursuant to s 411(12) of the Act, the plaintiff be exempted from compliance with s 411(11) of the Act in relation to the scheme of arrangement referred to in order 1.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Section 411(17) is not considered at the first Court hearing. It is a second Court hearing issue: Re Macquarie Private Capital A Ltd [2008] NSWSC 323 (at [23]-[31]).Conclusion regarding first scheme hearing The submissions and material in support of the application to convene a Scheme meeting was extensive. Overall I was satisfied that each of the matters relevant to an order convening a Scheme meeting under s 411 was addressed and that of the orders sought by Programmed, none went beyond existing practice. SECOND SCHEME HEARING: APPROVAL OF THE SCHEMEIssues and standard of review for Second Court hearing The Court’s primary concern at the second Court hearing in respect of a scheme is that all legal requirements have been met. The Court must be satisfied that Programmed has complied with the orders made by this Court at the first Court hearing on 30 August 2017 (Orders) and any statutory requirements. In relation to the statutory requirements, the Court must be satisfied:(a)under s 411(17) of the Act that the Scheme has not been proposed to avoid the operation of Chapter 6 of the Act or, alternatively, that Programmed has received a written statement from ASIC to the effect that ASIC has no objection to the Scheme; and (b)under s 411(4)(b) of the Act that the Scheme is otherwise properly proposed, fair and reasonable. In considering the principles which govern the Court’s discretion to approve a scheme, Jacobson J in Re Seven Network Ltd (No 3) (2010) 267 ALR 583 (at [35]-[40]) referred to the following list of considerations set out by the Corporations and Markets Advisory Committee in its December 2009 report: (a)whether the members have voted in good faith and not for an improper purpose;(b)whether the proposal is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it. This leading test of fairness was set out by Fry LJ in Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 (at 247);(c)whether the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court’s discretion;(d)whether there has been full and frank disclosure of all information material to the members’ decision;(e)whether minority shareholders would be oppressed by the scheme; and(f)whether the scheme offends public policy. The Court’s jurisdiction in relation to an arrangement is supervisory. The Court is to be satisfied that there has been no oppression and the arrangement is one that is capable of being accepted. The Court must be satisfied that the meeting to approve the scheme has been completed and that the resolution has been passed in accordance with the statutory requirements and that the scheme is fair and reasonable to members in a general sense.Materials In addition to its submissions and the affidavits filed for the first scheme hearing (identified above at [9]), Programmed also relied upon:(a)the affidavit of Christopher Glen Sutherland sworn on 6 October 2017 (6 October Sutherland Affidavit) which provided evidence:(i)that a copy of the Scheme Booklet approved by the Court on 30 August 2017 was registered with ASIC on 31 August 2017;(ii)that a copy of the Orders as made on 30 August 2017 was lodged with ASIC on 31 August 2017;(iii)relating to the printing and dispatch of the Scheme Booklets and related materials to the Members;(iv)that the Scheme Meeting was held in accordance with Programmed’s constitution, the Act and the Orders, and that the Scheme was approved at the Scheme Meeting by the requisite statutory majorities of Members; and(v)that notice of the second Court hearing was given in accordance with the Orders;(b)the affidavit of Mark Barrie Sheedy, Creative Services Manager at Financial & Corporate Relations Pty Limited (FCR), affirmed on 4 October 2017 (Sheedy Affidavit), which provides evidence of the preparation of the typeset Scheme Booklet for printing, and of the printing of the Scheme Booklet;(c)the affidavit of Rodney Rex Somes, Senior Relationship Manager at Computershare Investor Services Pty Ltd (Computershare), affirmed on 6 October 2017 (Somes Affidavit), which provides evidence relating to the dispatch of the Scheme Booklet and other meeting materials and related documents to the Members; and(d)the supplementary affidavit of Christopher Glen Sutherland sworn on 10 October 2017 (10 October Supplementary Sutherland Affidavit), which provides evidence that: (i)the conditions precedent to the Scheme becoming effective have all been satisfied or waived, with the exception of the condition precedent relating to the Court’s approval of the Scheme;(ii)no party has given Programmed notice that it intends to object to the application for orders to approve the Scheme; and(iii)ASIC has no objection to the Scheme for the purposes of s 411(17)(b) of the Act.Jurisdiction to approve Scheme

Ratio Decidendi

Legal Principle Established

Rule 3.2 of the Corporations Rules requires Programmed to file an affidavit stating the names of the persons who have been nominated to be the chairman and alternate chairman of the meeting, that each person nominated is willing to act as chairman, has had no previous relationship or dealing with Programmed, or any other person interested in the Scheme except as disclosed in the affidavit, and has no interest or obligation that may give rise to a conflict of interest or duty if the person were to act as chairman of the meeting, except as disclosed in the affidavit. This requirement was met by the First Sutherland Affidavit. ASIC’s consideration ASIC considers that its role is to assist the Court by, inter alia, reviewing the content of scheme documents, reviewing the nature and function of a proposed scheme, representing the interests of investors and creditors, and bringing all relevant matters to the court’s attention before it orders a scheme meeting or confirms a scheme: see ASIC Regulatory Guide 60 at RG 60.4. The jurisdiction of the Court to make an order convening meetings under s 411(1) is conditional upon the matters set out in s 411(2). Section 411(2) requires that the Court be satisfied of two matters before making an order. First, that ASIC has been given 14 days’ notice of the hearing, or such lesser period of notice as the Court or ASIC permits: s 411(2)(a). Second, that ASIC has had a reasonable opportunity to examine the terms of the scheme and the draft explanatory statement and to make submissions to the Court: s 411(2)(b). The Scheme Booklet was first lodged with ASIC on 7 August 2017. ASIC has examined the terms of the Scheme and the draft Scheme Booklet and provided comments to Programmed. Programmed has lodged revised versions of the Scheme Booklet, and a revised version of the Independent Expert’s Report which is Annexure E to the Scheme Booklet, with ASIC responding to those comments. On 7 August 2017, ASIC was given notice that Programmed intended to seek to have the first Court hearing listed for hearing on 30 August 2017. On 11 August 2017, ASIC was given notice that the first Court hearing had been provisionally listed for hearing on 30 August 2017. On 16 August 2017, ASIC was provided with the filed and stamped copy of the originating process which stated that the first Court hearing would take place on 30 August 2017. On the evening of 29 August 2017, ASIC informed the Programmed’s solicitors by letter that it did not ‘propose to appear to make submissions, or intervene to oppose the Scheme at the first hearing’. ASIC also confirmed its view that it had been given at least 14 days’ notice of the first scheme hearing and that it had a reasonable opportunity to examine the terms of the Scheme and the draft explanatory statement. Further, Programmed confirmed that the Scheme Booklet would be registered by ASIC before it was dispatched in accordance with s 412(6) and that prior to the second Court hearing, Programmed would seek and provide a statement from ASIC pursuant to s 411(17)(b).Unusual aspects of the transaction