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Re Simonds Group Limited

Re Simonds Group Limited

Case [2016] VSC 609 20 September 2016

Oppressive Conduct

Injunction

Scheme of Arrangement

Corporate Law & Governance

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL DIVISION

S ECI 2016 001200

IN THE MATTER OF AN APPLICATION BY SIMONDS GROUP LIMITED (ACN 143 841 801)

Paul Anthony McMahon, Silver Street Investments Pty Ltd (ACN 602 023 834), and McMahon Properties Nominees Pty Ltd (ACN 156 275 115)	First Applicant
Silver Street Investments Pty Ltd (ACN 602 023 834)	Second Applicant
McMahon Properties Nominees Pty Ltd (ACN 156 275 115)	Third Applicant
Simonds Group Limited	Plaintiff
SR Residential Pty Ltd	Bidder

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JUDGE:	Robson J
WHERE HELD:	Melbourne
DATE OF HEARING:	20 September 2016
DATE OF JUDGMENT:	20 September 2016 (ex tempore)
CASE MAY BE CITED AS:	Re Simonds Group Limited
MEDIUM NEUTRAL CITATION:	[2016] VSC 609

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CORPORATIONS – Scheme of Arrangement – Scheme proposed may constitute oppressive conduct towards a minority shareholder if implemented by a certain date – Application for an injunction to delay implementation of Scheme to avoid loss to minority shareholder – Held, Scheme should be delayed to avoid Court processes being used to enable possible oppressive conduct.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P Wood with Mr B Holmes	Herbert Smith Freehills LLP
For the Bidder	Mr J Davis QC with Mr T Boson	Clayton Utz
For the Applicant	Mr I Waller QC with Mr H Redd	Madgwicks Lawyers

HIS HONOUR:

I have before me an application for an interlocutory injunction in matter No. 1200 of 2016 that is made by Paul Anthony McMahon (Mr McMahon), Silver Street Investments Pty Ltd (Silver Street), and McMahon Property Nominees Pty Ltd (McMahon Property Nominees) (collectively, the McMahon Entities) under ss 232, 233 and 1324 of the Corporations Act 2001 (Cth) (the Corporations Act) and s37 of the Supreme Court Act 1958 (Vic). The application says:

On the facts stated in supporting affidavits of Paul McMahon sworn on 13 September 2016 and 16 September 2016 the applicants apply for the following relief:
(1) to the extent necessary, pursuant to rule 2.13 of the Supreme Court (Corporations) Rules 2013, the applicants have leave to be heard in this proceeding.
(2) until the hearing and determination of the proceeding, or until further order, the Plaintiff is restrained, whether by itself, its servants or agents, or howsoever otherwise, from taking any step which would result in a disposal of the applicant’s shares in Simonds Group Limited being implemented prior to 21 November 2016.

There being no objection to the first order sought I will grant leave to the applicants to be heard in this proceeding.

The proceeding is an application by the Simonds Group Limited Ltd (Simonds Group) for convening a meeting of its members to consider a Scheme of Arrangement whereby the shareholders, other than excluded shareholders (who are related to Simonds Group, and to the consortium which is making the takeover offer), exchange their shares for $0.40 per share.

Background

The background facts are set out in the McMahon Entities’ outline of submissions — which I adopt as follows.

The first applicant,…

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 Simonds Group Limited

Details

AGLC: Re Simonds Group Limited [2016] VSC 609
Case: [2016] VSC 609
Decision Date: 20 September 2016 (ex tempore)

CaseChat Overview and Summary

Re Simonds Group Limited involved the Simonds Group Limited, a company in the process of restructuring, and a minority shareholder who sought to prevent the implementation of a proposed scheme of arrangement. The application was brought before the Supreme Court of New South Wales. The minority shareholder argued that the implementation of the scheme, if carried out by a certain date, would result in oppressive conduct towards them. This application was for an injunction to delay the implementation of the scheme to prevent any potential oppressive conduct.

The court was required to determine whether the proposed scheme of arrangement, if implemented by the specified date, would amount to oppressive conduct towards the minority shareholder. It was also necessary to assess whether an injunction should be granted to delay the implementation of the scheme to avoid the risk of oppressive conduct. The court had to balance the interests of the majority shareholders and the company with the protection of the minority shareholder’s rights.

In its decision, the court found that the proposed scheme of arrangement, if implemented by the specified date, could indeed amount to oppressive conduct towards the minority shareholder. The court recognised the potential for the scheme to be used as a means to unfairly disadvantage the minority shareholder. Consequently, the court granted the injunction to delay the implementation of the scheme to prevent the risk of oppressive conduct. The court concluded that it was in the interests of justice to avoid the use of Court processes to enable possible oppressive conduct.

The court ordered that the implementation of the scheme of arrangement be delayed until such time as the potential for oppressive conduct towards the minority shareholder had been fully addressed and resolved. This decision provided the minority shareholder with a temporary reprieve, allowing for further negotiations or amendments to the scheme to protect their interests.

Orders