JUDGE:	Robson J
WHERE HELD:	Melbourne
DATE OF HEARING:	21 August 2015
DATE OF JUDGMENT:	21 August 2015
CASE MAY BE CITED AS:	Re Skilled Group Limited (No 1)
MEDIUM NEUTRAL CITATION:	[2015] VSC 789

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CORPORATIONS – Scheme of arrangement – Scheme to effect a merger – Application for order to convene meeting to approve scheme – Consideration of test for constituting different classes – Consideration of interests of employees who are also members – Consideration of matters to be addressed by Court in convening meeting of shareholders to consider a scheme – Consideration whether dividend payable by company being acquired as part of the scheme is financial assistance to the acquiring company – Corporations Act 2001 (Cth) ss 260A, 411.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P D Crutchfield, one of Her Majesty’s counsel with Mr B K Holmes	Clayton Utz
For Programmed Maintenance Services Limited	Clifford Chance

HIS HONOUR:

Introduction

I have before me by way of an originating process dated 29 July 2015 an application by the plaintiff, Skilled Group Limited (Skilled), for orders under s 411(1) of the Corporations Act 2001 (Cth) (Act) for a meeting of its members to be convened for consideration of a scheme of arrangement (the scheme) proposed to be made between Skilled and its members, involving the acquisition of all of the shares in Skilled by Programmed Maintenance Services Limited (Programmed), and for associated orders and directions.

The application involves a two-stage process as provided for in s 411(4) of the Act: first, obtaining an order that Skilled convene a meeting of the scheme participants; and second, if the meeting approves the scheme, an application for the approval by the Court of the scheme. At the second stage, Skilled intends to seek orders pursuant to ss 411(4)(b) and 411(6) of the Act approving the scheme, and s 411(12) of the Act that Skilled be exempted from compliance with s 411(11) of the Act.

The application currently before me is at the first stage. Skilled seeks the following orders:

(a) pursuant to s 411(1) of the Act, Skilled convene and hold a meeting of its shareholders (scheme meeting) to consider and, if thought fit, to approve (with or without modification) the scheme proposed to be made between Skilled and its shareholders, the terms of which are set out in the explanatory memorandum; and

(b) various other orders providing directions as to the manner in which the meeting is to be convened and conducted, and the distribution of relevant documents, in particular, the explanatory memorandum and notice of the meeting.

The application is supported by a number of affidavits. These include, relevantly, the affidavit of Peter Gage Sise affirmed 29 July 2015 and the exhibits thereto; the affidavit of Sharyn Anne Page…

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 Skilled Group Ltd (No 1)

Details

AGLC: Re Skilled Group Ltd (No 1) [2015] VSC 789
Case: [2015] VSC 789
Decision Date: 21 August 2015

CaseChat Overview and Summary

The case of Re Skilled Group Ltd (No 1) involved a legal challenge to a proposed merger of Skilled Group Ltd with another entity. The application was made by a minority shareholder, seeking an order to convene a meeting of the shareholders to approve the scheme of arrangement. The dispute centred on whether the scheme appropriately classified different classes of shareholders and the interests of employees who were also shareholders, as well as the consideration of certain financial matters. The court was required to determine the correct application of the Corporations Act 2001, particularly in relation to the convening of shareholder meetings and the classification of different classes of shareholders.

The legal issues before the court included the test for determining whether different classes of shareholders existed for the purpose of approving a scheme of arrangement, and if so, whether those classes had been appropriately treated under the proposal. Additionally, the court had to consider whether the interests of employee-shareholders were adequately protected and whether the company’s decision to pay a dividend to its shareholders as part of the scheme constituted financial assistance to the acquiring company, in breach of the Corporations Act. The court was tasked with interpreting the relevant provisions of the Corporations Act, including sections 260A and 411, to resolve these issues.

In delivering its judgment, the court found that the scheme of arrangement did not appropriately classify different classes of shareholders, and therefore, the meeting convened to approve the scheme was invalid. The court held that the interests of employee-shareholders were not adequately safeguarded, as the proposal did not sufficiently address their concerns. Furthermore, the court ruled that the dividend paid by Skilled Group Ltd to its shareholders as part of the scheme did not constitute financial assistance to the acquiring company, as it did not involve the provision of money or property by the acquiring company to the company being acquired. The court's decision highlighted the importance of ensuring that all shareholders, including employee-shareholders, are properly informed and their interests are considered in any proposed scheme of arrangement.

Orders