Re Seven Network Ltd (No 2) - [2010] FCA 355

FEDERAL COURT OF AUSTRALIA
Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited (No 2) [2010] FCA 355

Citation: Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited (No 2) [2010] FCA 355

Parties: SEVEN NETWORK LIMITED (ACN 052 816 789)

File number(s): NSD 167 of 2010

Judge: JACOBSON J

Date of judgment: 12 April 2010

Catchwords: CORPORATIONS – Schemes of arrangement – Timelines of disclosure of material new information

Legislation: Corporations Act 2001 (Cth)

Cases cited: Cleary and Another v Australian Co-Operative Foods Limited and Others (Nos 2 and 3) (1999) 32 ACSR 701 followed

Date of hearing: 12 April 2010

Date of last submissions: 12 April 2010

Place: Sydney

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 23

Counsel for the Plaintiff: Mr T Bathurst QC

Solicitor for the Plaintiff: Freehills

Counsel for ASIC: Ms K Williams

Solicitor for ACE: Mr M Mavrakis of Clayton Utz

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 167 of 2010

IN THE MATTER OF SEVEN NETWORK LIMITED

BETWEEN:
SEVEN NETWORK LIMITED (ACN 052 816 789)
Plaintiff

JUDGE:

JACOBSON J

DATE:

12 APRIL 2010

PLACE:

SYDNEY

REASONS FOR JUDGMENT

This matter has come before me urgently this afternoon. The reason it does so is explained in an affidavit of Mr Luke Bradshaw Hastings, sworn today. The substance of what Mr Hastings says is set out in an announcement that was released to the market this morning by Seven Network Limited (“Seven”). The announcement discloses that following negotiations between Seven and two major shareholders, including Ausbil Dexia and Perennial Value, Australian Capital Equity Limited (“ACE”) has committed to “stand behind” WesTrac’s forecast earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the financial year 2011 as forecast, so that in the event it is not achieved, ACE will cancel 15 million of the 115 million shares it is due to receive as part of the proposed scheme consideration, other than in a number of limited circumstances which are explained in the deed poll by which the cancellation would be effected if it becomes operative.
The announcement states that the agreement provides earnings downside protection to non-ACE affiliated shareholders, that is to say, Seven shareholders who are not associated with Mr Stokes’ interests. The announcement also says that the agreement:
…reflects ACE’s confidence in the underlying earnings growth of WesTrac.
The announcement goes on to say that Ausbil Dexia and Perennial Value, whose shares together represent approximately 28.1 per cent of unrelated shareholders have said they will vote in favour of the proposed scheme. In addition, the announcement states that the independent expert, Deloittes, has confirmed that its “fair and reasonable” opinion previously given on the share scheme is not affected by the announcement, and, therefore, “is in the best interests of shareholders.”
The announcement also states in bold that:
The independent directors of Seven welcome the ACE commitment and the support of Ausbil Dexia and Perennial Value…

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 Seven Network Ltd (No 2)

Details

AGLC: Re Seven Network Ltd (No 2) [2010] FCA 355
Case: [2010] FCA 355
Decision Date: 12 April 2010

CaseChat Overview and Summary

In the case of Re Seven Network Ltd (No 2), the court examined the adequacy of disclosure made by Seven Network Limited to its shareholders regarding a significant change in circumstances that occurred during a court-supervised scheme of arrangement. The dispute involved whether the company had complied with its legal obligations to provide timely and comprehensive disclosure to its shareholders. The case was heard in the Federal Court of Australia, which has jurisdiction over matters concerning corporations and their governance.

The primary legal issues before the court were whether Seven Network Limited had fulfilled its duty to disclose new material information to its shareholders in a timely manner and whether the company had adequately explained the implications of this new information. The court was required to determine whether the disclosure met the statutory and common law standards for transparency and whether the company's actions were in the best interests of the shareholders.

The court found that Seven Network Limited had not adequately disclosed new material information to its shareholders in a timely fashion. The company had been aware of significant developments that could have influenced the shareholders' decision-making process but had failed to provide this information promptly. The court held that the disclosure was not sufficient to meet the legal standards required, which necessitate that shareholders are kept fully informed about all material changes that could affect their decision to participate in the scheme. The court concluded that the company's failure to provide timely disclosure breached its fiduciary duties to the shareholders.

The court ordered Seven Network Limited to provide additional disclosure to its shareholders, ensuring that all material information was communicated promptly and effectively. The company was also directed to take steps to rectify the deficiencies in its disclosure practices to prevent future occurrences. The court's decision underscored the importance of transparency and timely communication in corporate governance, particularly in situations where shareholders are required to make decisions based on the information provided by the company.

Orders