Re Sirtex Medical Ltd

Case [2018] FCA 1315

FEDERAL COURT OF AUSTRALIA

Sirtex Medical Limited, in the matter of Sirtex Medical Limited [2018] FCA 1315

File number: NSD 1267 of 2018
Judge: MARKOVIC J
Date of judgment: 1 August 2018
Date of publication of reasons: 29 August 2018
Catchwords: CORPORATIONS – scheme of arrangement – first Court hearing – application to convene a members’ meeting pursuant to s 411(1) of the Corporations Act 2001 (Cth) – application allowed.
Legislation:

Corporations Act 2001 (Cth) ss 249J, 411(1), (2), 412(1)(a), 1319

Federal Court (Corporations) Rules 2000 (Cth) r 3.3(2)

Cases cited:

Alinta Limted, in the matter of Alinta Limited (No 2) [2007] FCA 1378

Amcom Telecommunications Limited, in the matter of Amcom Telecommunications [2015] FCA 341

Aston Resources Limited, in the matter of Aston Resources Limited [2012] FCA 229

Consolidated Media Holdings Limited, in the matter of Consolidated Media Holdings Limited [2012] FCA 1186

David Jones Limited, in the matter of David Jones Limited [2014] FCA 530

FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69; (1977-78) CLC 40-368

In the matter of Tatts Group Limited [2017] VSC 552

Re Archaean Gold NL (1997) 23 ASCR 143; (1997) ACLC 382

Re Arthur Yates & Co Ltd (2001) 36 ACSR 758; [2001] NSWSC 40

Re CSR Ltd (2010) 183 FCR 358

Re Hills Motorway Ltd (2002) 43 ACSR 101; [2002] NSWSC 897

Re Nine Entertainment Group Limited (No 1) (2012) 211 FCR 439

Re NRMA Ltd (No 1) (2000) 156 FLR 349; [2000] NSWSC 82

Re Permanent Trustee Co Ltd (2002) 43 ACSR 601; [2002] NSWSC 1177

Re Unity Mining Ltd (No 2) [2016] VSC 830

Sirtex Medical Limited, in the matter of Sirtex Medical Limited [2018] FCA 584

Staging Connections Group Limited, in the matter of Staging Connections Group Limited [2015] FCA 1012
Date of hearing: 1 August 2018
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 55
Counsel for the Plaintiff: Mr M Oakes SC with Ms S Tame
Solicitors for the Plaintiff: Watson Mangioni Lawyers
Counsel for CDH Genetech Limited, China Grand Pharmaceutical and Healthcare Holdings Ltd and Grand Pharma Sphere (Australia Bidco) Pty Ltd: Mr G Ahern
Solicitor for CDH Genetech Limited, China Grand Pharmaceutical and Healthcare Holdings Ltd and Grand Pharma Sphere (Australia Bidco) Pty Ltd: MinterEllison

ORDERS

NSD 1267 of 2018

IN THE MATTER OF SIRTEX MEDICAL LIMITED ACN 078 166 122

SIRTEX MEDICAL LIMITED ACN 078 166 122

Plaintiff

JUDGE:

MARKOVIC J

DATE OF ORDER:

1 AUGUST 2018

THE COURT ORDERS THAT:

1.Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (the Act):

(a)the Plaintiff, Sirtex Medical Limited (Sirtex), convene a meeting (Scheme Meeting) of the holders of ordinary shares issued in Sirtex (Shareholders) for the purpose of considering and, if thought fit, agreeing to (with or without modification) a scheme of arrangement proposed to be entered into…

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AGLC
Re Sirtex Medical Ltd [2018] FCA 1315
Case
[2018] FCA 1315
Decision Date

CaseChat Overview and Summary

The case before the court was an application by Sirtex Medical Limited (the plaintiff) to convene a meeting of its shareholders to consider and vote on a proposed scheme of arrangement. The defendants in the case were the Bidders and Bidco, who were seeking to acquire Sirtex through the proposed scheme. The case was heard in the Federal Court of Australia. The legal issues before the court were whether the proposed scheme was an arrangement within the meaning of s 411(1) of the Corporations Act 2001 (Cth) and whether the Australian Securities and Investments Commission (ASIC) had had a reasonable opportunity to examine the terms of the proposed scheme and make submissions to the court. The court found that the proposed scheme was an arrangement within the meaning of the Act and that ASIC had had a reasonable opportunity to examine the scheme and make submissions to the court. The court also found that the scheme booklet provided adequate disclosure and contained the prescribed information required by s 412(1)(a) of the Act. The court therefore made the orders sought by Sirtex, including convening a meeting of its shareholders to consider and vote on the proposed scheme. The court held that, at the first hearing, it should order the convening of the scheme meeting and approve the scheme booklet if it was satisfied that the proposed scheme was an arrangement in respect of which the court may order a meeting of the members, ASIC had had a reasonable opportunity to examine the terms of the scheme and the scheme booklet and make submissions to the court in relation to those matters, the scheme booklet provided adequate disclosure and contained the prescribed information, the procedural requirements of the Federal Court (Corporations) Rules 2000 (Cth) had been met, and there was no apparent reason why the scheme should not, in due course, receive the court’s approval if the necessary majority of votes were achieved. The court also noted that the scheme was bona fide and properly proposed, as evidenced by the unanimous recommendation of the directors, the inclusion of the independent expert report in the scheme booklet, and the deposit of $220 million with an Australian bank to be held as escrow agent for Sirtex and the Bidders. The court therefore made the orders sought by Sirtex, including convening a meeting of its shareholders to consider and vote on the proposed scheme.

Orders

Orders of the court

1. Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (the Act):

(a) the Plaintiff, Sirtex Medical Limited (Sirtex), convene a meeting (Scheme Meeting) of the holders of ordinary shares issued in Sirtex (Shareholders) for the purpose of considering and, if thought fit, agreeing to (with or without modification) a scheme of arrangement proposed to be entered into between Sirtex and those shareholders (Scheme), the terms of which are contained in the Explanatory Statement, a copy of which is exhibit 1 (Scheme Booklet);

(b) the Scheme Meeting be held at 10.00 am (AEST) on 10 September 2018 at the Royal Automobile Club of Australia, 89 Macquarie Street, Sydney NSW 2000; and

(c) the Scheme Booklet be approved for distribution to shareholders (for the purposes only of s 411(1) of the Act).

2. Pursuant to s 1319 of the Act:

(a) Mr John Eady or, failing him, Mr Neville Mitchell, be authorised to act as Chairman of the Scheme Meeting;

(b) the Chairman of the Scheme Meeting has the power to adjourn the Scheme Meeting in his absolute discretion for such time and to such date as he considers appropriate;

(c) at the Scheme Meeting, the Shareholders present and entitled to vote in person or by proxy or by an attorney under power or by a corporate representative (if applicable) shall constitute a quorum;

(d) at the Scheme Meeting, each Shareholder, present and entitled to vote, will be entitled to one vote for each fully paid ordinary share in the capital of Sirtex that the Shareholder is registered as holding at 7.00 pm (AEST) on 8 September 2018;

(e) except for procedural motions, all voting at the Scheme Meeting be by poll as declared by the Chairman of the Scheme Meeting;

(f) on or before 8 August 2018, there be dispatched to:

(i) each Shareholder who has nominated an electronic address for the purposes of receiving notices of meeting and proxy forms from Sirtex, at such address, an email substantially in the form of the document behind tab [22] in exhibit 3, including URL links to documents substantially in the form of the Scheme Booklet and the proxy form in respect of the Scheme Meeting, a copy of which is Annexure A (Proxy Form); and

(ii) each other Shareholder, by hand or by pre-paid post or courier, to the address of that Shareholder as set out in the register of members of Sirtex, a document substantially in the form of the Scheme Booklet, a Proxy Form in respect of the Scheme Meeting, and a reply paid envelope addressed to Link Market Services Limited; and

(g) the time by which Proxy Forms for the Scheme Meeting must be lodged in accordance with the instructions given on the Proxy Form is 10.00 am (AEST) on 8 September 2018.

3. On or before 6 September 2018, Sirtex publish a Notice of Hearing substantially in the form of Annexure B hereto in The Australian newspaper and the plaintiff be relieved of compliance with r 3.4 of the Federal Court (Corporations) Rules 2000 (Cth) to the extent necessary.

4. Rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) shall not apply to the Scheme Meeting, except for r 75-15(2) of the Insolvency Practice Rules (Corporations) 2016.

5. The proceeding be stood over to 10.15 am on 12 September 2018 before Justice Markovic for the hearing of any application to approve the Scheme.

6. Liberty to apply.

7. These Orders be entered forthwith.

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

The Sirtex directors have unanimously recommended that, in the absence of a superior proposal, Sirtex shareholders should vote in favour of the scheme at the proposed scheme meeting.EVIDENCE Sirtex relied on the following evidence in support of its application:(1)affidavit of John Eady, a non-executive director and interim chairman of Sirtex and the proposed chairperson for the scheme meeting, sworn 16 July 2018;(2)affidavit of Neville John Mitchell, a non-executive director of Sirtex and proposed alternative chairperson for the scheme meeting, sworn 20 July 2018;(3)affidavit of Darren Smith, the chief financial officer and company secretary of Sirtex, sworn 31 July 2018;(4)affidavit of Tapan Parekh, an authorised representative of Deloitte Corporate Finance Pty Limited (Deloitte), affirmed 30 July 2018; (5)affidavit of Owen James Andersen, a solicitor employed by Watson Mangioni Lawyers Pty Ltd, Sirtex’s solicitors, sworn on 31 July 2018;(6)affidavit of Alberto Colla, a partner at MinterEllison, the Australian solicitors for CDH, CGP and Bidco, sworn 30 July 2018;(7)affidavit of Devika Parchment, an attorney practising as an associate at Maples and Calder, who is admitted in the Cayman Islands and is a registered foreign lawyer in Hong Kong, affirmed on 31 July 2018;(8)affidavit of Cathryn Clarise Deborah Minors, an attorney practising as a lawyer at Conyers Dill & Pearman, Hong Kong, who is admitted as a barrister and attorney in Bermuda, sworn on 30 July 2018;(9)letter dated 31 July 2018 from the Australian Securities and Investments Commission (ASIC) to the directors of Sirtex; and(10)a copy of the scheme booklet in the form approved by ASIC. The Bidders and Bidco relied on an affidavit of Anthony George Sommer, a solicitor at MinterEllison, sworn on 1 August 2018 which concerned the execution of the deed poll.LEGAL FRAMEWORK AND GENERAL PRINCIPLES Section 411(1) of the Act relevantly provides that, where an arrangement is proposed between a Pt 5.1 body and its members, the Court may, on an application in a summary way of the body, order a meeting of the members of the body to be convened in such a manner and to be held in such place as the Court directs. Where the Court makes such an order, it may also approve the explanatory statement required by s 412(1)(a) of the Act to accompany the notice of meeting. Section 412(1)(a) of the Act provides that where a meeting is convened under s 411, the body must, with every notice convening the meeting, send a statement explaining the effect of the arrangement and state any material interests of the directors and the effect of the proposed arrangement on those interests insofar as that effect is different from the effect on the like interests of other persons. The statement must also set out any prescribed information and any other information that is material to the making of a decision by a member whether or not to agree to the arrangement. Section 411(2) of the Act provides that the Court must not make an order pursuant to s 411(1) unless 14 days’ notice of the hearing of the application has been given to ASIC and the Court is satisfied that ASIC has had a reasonable opportunity to examine the terms of the proposed arrangement and a draft explanatory statement relating to it and make submissions to the Court in relation to the proposed arrangement and the draft explanatory statement.

Decision

Reasons for decision

Finally, insofar as any performance risk is concerned:·the scheme booklet discloses that the Bidders have deposited $220 million with an Australian bank to be held as escrow agent for Sirtex and the Bidders;·clause 5.2(l) of the SID requires the Bidders to pay or procure the payment of the balance of the Scheme Consideration to the deposit holder by no later than the business day prior to the scheme meeting; and·clause 5.2(a) of the scheme provides for the transfer of the scheme shares after provision of the Scheme Consideration. CONCLUSION For those reasons I made the orders sought by Sirtex.

Ratio Decidendi

Legal Principle Established

As observed by Mc Kerracher J in Amcom at [12], at the first hearing the Court should order the convening of the scheme meeting and approve the scheme booklet if it is satisfied that:ŸThe proposed Scheme is an arrangement in respect of which the Court may order a meeting of the members: s 411 CA. That is, the Scheme is an arrangement; Amcom is a Pt 5.1 Body; the Scheme participants are members of Amcom; and the scheme meeting will be convened between members of the same class.ŸASIC has had a reasonable opportunity to examine the terms of the Scheme and the Scheme Booklet and make submissions to the Court in relation to those matters: s 411(2)(b) CA.ŸThe Scheme Booklet provides adequate disclosure (s 412(a)(i) CA) and contains the prescribed information: s 412(1)(a)(ii) CA, r 5.1.01; Sch 8 cll 8301-8310 of the Corporations Regulations2001 (Cth).ŸThe procedural requirements of the Federal Court (Corporations) Rules 2000 (Cth) have been met.ŸThere is no apparent reason why the Scheme should not, in due course, receive the Court’s approval if the necessary majority of votes are achieved: Integra Mining at [12] and the cases there cited. In Staging Connections at [19] Gleeson J also referred to the need to demonstrate that the scheme was bona fide and properly proposed.MATTERS FOR THE COURT’S SATISFACTIONThe proposed scheme is an arrangement in respect of which the Court may order a meeting of members pursuant to s 411(1) of the ActPt 5.1 body Sirtex is a Pt 5.1 body: see definition in s 9 of the Act which, relevantly, includes a company. Arrangement The term “arrangement” is of wide import. In Re NRMA Ltd (No 1) (2000) 156 FLR 349; [2000] NSWSC 82 at [20] Santow J said:… Generally speaking, unless the arrangement is ultra vires the company or seeks to deal with a matter for which a special procedure is laid down by the Corporations Law or to evade a restriction imposed by the Corporations Law, almost any arrangement otherwise legal which touches or concerns the rights and obligations of the company or its members or creditors, and which is properly proposed, may come under s 411… The terms of the scheme, which are annexed to the scheme booklet, provide prima facie evidence that the proposed scheme is an arrangement within the meaning of s 411 of the Act. Scheme is bona fide and properly proposed The following matters demonstrate that the scheme is bona fide and properly proposed:·by entering into the SID, Sirtex has committed itself to propounding the scheme;·the directors have unanimously recommended the scheme; and·the scheme booklet includes the independent expert report prepared by Deloitte (Deloitte Report) which addresses whether the proposed scheme is fair and reasonable.Members of the same class The scheme participants will be Sirtex shareholders and the holders of Sirtex rights under the Sirtex Incentive Plan. In relation to the latter, the Sirtex board (excluding Andrew McLean because of his interest in the matter) resolved that, if the Court convened the scheme meeting, all Sirtex rights on issue as at 27 July 2018 would vest with effect from 1 August 2018 subject to the scheme becoming effective. Thus the Sirtex rights will convert into Sirtex shares after the scheme becomes effective but before the Scheme Record Date (as defined in the scheme booklet), enabling the holders of those rights to participate in the scheme on the same terms as existing Sirtex shareholders. The result is that the Sirtex rights will not create a separate class out of those shareholders who held both shares and rights: see Aston Resources Limited, in the matter of Aston Resources Limited [2012] FCA 229 at [39] (per Jacobson J).ASIC has had a reasonable opportunity to consider the scheme