FEDERAL COURT OF AUSTRALIA
Spicers Limited, in the matter of Spicers Limited [2019] FCA 731
File number(s): VID 388 of 2019 Judge(s): ANDERSON J Date of judgment: 17 May 2019 Date of publication of reasons: 22 May 2019 Catchwords: CORPORATIONS – members’ scheme of arrangement – first court hearing – order sought under s 411(1) of the Corporations Act 2001 (Cth) – content of explanatory statement – nature of court’s discretion – fairness of proposed scheme – performance risk – proper disclosure – foreign enforceability of deed poll – break fee – exclusivity restrictions – director performance rights – order made for convening of shareholders’ meeting Legislation: Corporations Act 2001 (Cth) ss 9, 256C(1), 411(1), 411(2)(a), 411(2)(b), 411(4)(a)(ii), 411(4)(b)
Federal Court (Corporations) Rules 2000 (Cth) r 2.13(1)
Cases cited: Adelaide Bank Limited, in the matter of Adelaide Bank Limited ACN 061 461 550 [2007] FCA 1582
Amcor Limited, in the matter of Amcor Limited [2019] FCA 346
Associated Advisory Practices Limited, in the matter of Associated Advisory Practices Limited [2013] FCA 761
In the matter of Coles Group Limited (2007) 25 ACLC 1380
In the matter of Hostworks Group Ltd ACN 008 010 820 (2008) 26 ACLC 137
Macquarie Private Capital A Limited (2008) 26 ACLC 366
Re APN News & Media Ltd (2007) 62 ACSR 400
Re Arthur Yates & Co Ltd (2001) 36 ACSR 758
Re Foundation Healthcare Ltd (2002) 42 ACSR 252
Re Macquarie Capital Alliance Ltd (2008) 67 ACSR 484
Re SFE Corporation Ltd (ABN 74 000 299 392) (No 1) (2006) 59 ACSR 82
Re Skilled Group Ltd (ACN 005 585 811) (No 1) (2015) 113 ACSR 525
Simavita Holdings Limited, in the matter of Simavita Holdings Limited [2013] FCA 1274
Date of hearing: 17 May 2019 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 36 Counsel for the Plaintiff: Mr C M Archibald QC Solicitor for the Plaintiff: Allens Counsel for the Other: Mr G Ahern Solicitor for the Other: Herbert Smith Freehills ORDERS
VID 388 of 2019 IN THE MATTER OF SPICERS LIMITED (ACN 005 146 350)
BETWEEN: SPICERS LIMITED (ACN 005 146 350)
Plaintiff
KOKUSAI PULP & PAPER CO., LTD.
Interested Person
JUDGE:
ANDERSON J
DATE OF ORDER:
17 MAY 2019
OTHER MATTERS:
A.The Court notes that the Australian Securities and Investments Commission (ASIC) was provided with at least 14 days' notice of the hearing of this application.
B.The Court is satisfied that ASIC has had a reasonable opportunity to:
(a)examine the terms of the proposed scheme of arrangement to which the application relates and a draft explanatory statement relating to that arrangement; and
(b)make submissions to the Court in relation to the proposed scheme of arrangement and the draft explanatory statement.
C.The Court notes the letter from ASIC to the Directors of Spicers Limited dated 16 May 2019 produced at the hearing.
THE COURT ORDERS THAT:
1.Pursuant to Rule 2.13(1) of the Federal Court (Corporations Rules) 2000 (Cth)…
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- Re Spicers Limited [2019] FCA 731
- Case
- [2019] FCA 731
- Decision Date
CaseChat Overview and Summary
The court held that the explanatory statement provided sufficient information to enable shareholders to make an informed decision. The court found that the scheme was fair and equitable to the shareholders, and that the directors had not breached their duties in approving the scheme. The court also found that the deed poll was enforceable outside Australia and that the exclusivity restrictions and director performance rights were appropriate. The court granted the order for the convening of the shareholders' meeting to consider the scheme, noting that the scheme would proceed only if all conditions precedent were satisfied or waived.
The court's decision was grounded in the statutory requirements under the Corporations Act, emphasizing the need for fairness and proper disclosure to shareholders. The court's approval of the scheme was conditional upon the satisfaction of all conditions precedent, including the independent expert's report, shareholder approval, and court approval. The court also noted that the scheme involved a complex transaction with significant financial implications for the shareholders, and that the explanatory statement provided adequate information for shareholders to make an informed decision.
The orders made by the court included convening the shareholders' meeting on 26 June 2019, authorizing the chairperson, and dispensing with certain procedural rules. The court also ordered that the explanatory statement and proxy forms be despatched to shareholders by 28 May 2019, with provisions for undelivered emails. The hearing for the approval of the scheme was adjourned to 10.15am on 3 July 2019.
Orders
Orders of the court
1. Pursuant to Rule 2.13(1) of the Federal Court (Corporations Rules) 2000 (Cth) (the Rules), Kokusai Pulp & Paper Co., Ltd. has leave to be heard in the proceeding without becoming a party to it.
2. Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (the Act), a meeting be convened by the plaintiff (the Scheme Meeting) of the holders of ordinary shares of the Plaintiff other than any "Excluded Shareholders" as defined in the Scheme (Scheme Shareholders) for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement between the Plaintiff and the Scheme Shareholders and in the form set out in Exhibit MGC-3 which is Annexure B to the explanatory statement in the proceedings (the Scheme).
3. The Scheme Meeting be held on Wednesday, 26 June 2019 at Computershare Conference Centre, Yarra Falls, 452 Johnston Street, Abbotsford, Victoria, Australia commencing at 10.00am (Melbourne time).
4. Jonathan Trollip or, should he be unable to attend for any reason, Andrew Preece, be authorised to chair the Scheme Meeting and any adjournment of that meeting.
5. The chairperson of the Scheme Meeting be given power to adjourn the Scheme Meeting in his absolute discretion to such time, date and place as he considers appropriate.
6. All voting at the Scheme Meeting be by poll as declared by the chairperson.
7. The Scheme Shareholders who are eligible to vote at the Scheme Meeting, for the purposes of regulation 7.11.37(3)(b) of the Corporations Regulations 2001 (Cth), will be those whose names are recorded in the register of members of the Plaintiff at 7.00pm (Melbourne time) on Monday, 24 June 2019.
8. The documents substantially in the form of the:
(a) document entitled "Explanatory Booklet" that forms Exhibit MGC-2 in the proceedings (and the Explanatory Booklet's annexures which are Annexure PM-2 and Exhibits MGC-3, MGC-4 and MGC-6 in the proceedings); and
(b) proxy forms contained in tab 5 of Exhibit MGC-1 (the Proxy Forms),
accompany the notice of meeting, substantially in the form of Exhibit MGC-5 in the proceedings (together, the Scheme Materials).
9. By no later than Tuesday, 28 May 2019, the documents be despatched by the Plaintiff in the form, or substantially in the form, of the Scheme Materials to each Scheme Shareholder as recorded in the register of members of the Plaintiff at 7.00pm (Melbourne time) on 16 May 2019 as follows:
(a) in the case of Scheme Shareholders who have nominated an electronic address for the purpose of receiving communications from the Plaintiff (such as notices of meeting and proxy appointment forms for the Plaintiff), by email to that address containing a link to a website at which those documents can be accessed;
(b) in respect of Scheme Shareholders, other than those in paragraph (a) above, whose registered address is in Australia, by ordinary post (including a reply paid envelope addressed to Computershare Investor Services Pty Limited (ABN 48 078 279 277) (Computershare)); or
(c) in the case of Scheme Shareholders, other than those in paragraph (a) above, whose registered address is outside Australia, by prepaid airmail or air courier (including a self-addressed envelope to Computershare).
10. If the Plaintiff receives an automatic electronic "bounce-back" notification that the Scheme Materials were unable to be delivered to the nominated electronic address of any Scheme Shareholder to whom Scheme Materials were despatched in accordance with paragraph 9(a) above (Undelivered Email Recipients), the Scheme Materials be despatched by the Plaintiff to Undelivered Email Recipients as follows:
(a) in the case of Undelivered Email Recipients whose registered address is in Australia, by ordinary post (including a reply paid envelope addressed to Computershare); and
(b) in the case of Undelivered Email Recipients whose registered address is outside Australia, by prepaid airmail or air courier (including a self-addressed envelope to Computershare).
11. A proxy form in respect of the Scheme Meeting will be valid and effective if, and only if, it is completed and delivered in accordance with its terms by 10.00am (Melbourne time) on 24 June 2019.
12. On or before Monday, 24 June 2019, the hearing of the application under subsection 411(4) of the Act for orders approving the Scheme be advertised once in The Australian newspaper in the form, or substantially in the form, of the annexure to these Orders marked "A".
13. The Plaintiff be dispensed from compliance with:
(a) Rule 3.4 and Form 6 of the Rules, to the extent necessary;
(b) Rule 2.15 of the Rules, except insofar as it operates to apply rule 75-15(2) of the Insolvency Practice Rules (Corporations) 2016 (Cth) to the Scheme Meeting; and
(c) Replaceable Rules (within the meaning of s135 of the Act) which appear in Part 2G.2 of the Act, to the extent that a Replaceable Rule in that part is displaced or modified by the Plaintiff's constitution.
14. The proceedings be adjourned to 10.15am on 3 July 2019.
15. The Plaintiff be given liberty to apply.
16. These orders be entered forthwith.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Annexure "A"
Notice of hearing to approve scheme of arrangement
TO all the members of Spicers Limited (ACN 005 146 350) (Spicers).
TAKE NOTICE that at 10:15am (Melbourne time) on 3 July 2019, the Federal Court of Australia at Owen Dixon Commonwealth Law Courts Building, 305 William Street, Melbourne, VIC 3000 will hear an application by Spicers seeking the approval of a scheme of arrangement between Spicers and its shareholders (Members) as proposed by a resolution (if passed) at the meeting of Members to be held on 26 June 2019.
If you wish to oppose the approval of the scheme of arrangement, you must file and serve on Spicers a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on Spicers at its address for service at least 1 day before the date fixed for the hearing of the application.
The address for service of Spicers is c/- Allens, Deutsche Bank Place, Corner Hunter and Phillip Streets, Sydney NSW 2000 (Attention: Kim Reid).
Name of Spicers' legal practitioner: Kim Reid, Allens.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
If the Scheme is approved and all conditions precedent are satisfied or waived, the directors of Spicers currently expect that the aggregate consideration to be paid to Scheme Shareholders and the Capital Return (Transaction Consideration) will be an amount equal to 7 cents per “Scheme Share” (as defined in the SID), comprising:(a)the “Base Scheme Consideration” (as defined in the SID) to be paid by KPP—equal to $90 million (4.3 cents per Scheme Share); plus(b)the “Deferred Consideration” (as defined in the SID), if any; plus(c)the amount of the Capital Return, currently expected to be approximately $57.6 million (2.7 cents per Scheme Share) (Capital Return Consideration). The following key steps are contemplated in order to implement the Scheme:(a)a meeting of Scheme Shareholders (Scheme Meeting) is scheduled to be convened on 26 June 2019 to consider and vote on the resolution approving the Scheme. The “Notice of Meeting” is Annexure D of the Explanatory Booklet;(b)a meeting of Scheme Shareholders (Capital Reduction Meeting) is scheduled to be convened immediately following the Scheme Meeting to consider and vote on the resolution for an equal capital reduction pursuant to s 256C(1) of the Act. The “Notice of Special General Meeting” is Annexure E of the Explanatory Booklet;(c)an application will be made to suspend trading of Spicers shares on the ASX;(d)KPP will pay the Base Scheme Consideration to a trust account operated on behalf of Spicers as trustee for the Scheme Shareholders (Trust Account) to be paid by Spicers to Scheme Shareholders in accordance with the Scheme;(e)Spicers will transfer the Capital Return Consideration to the Trust Account to be paid to Scheme Shareholders in accordance with the SID;(f)KPP will acquire all of the Scheme Shares by way of the Scheme; and(g)if there is any Deferred Consideration following the Scheme implementation, KPP will procure the payment of the Deferred Consideration to the Scheme Shareholders in accordance with the KPP Deed Poll. A proposed timetable is set out at page 3 of the Explanatory Booklet. There are a number of conditions precedent to the Scheme set out in clause 3.1 of the SID as follows:(a)(Independent Expert's Report) the Independent Expert provides the Independent Expert's Report to Spicers, stating that in its opinion the Scheme is in the best interests of Spicers Shareholders, and the Independent Expert does not change its conclusion or withdraw the Independent Expert's Report by notice in writing to Spicers prior to 8am on the Second Court Date;(b)(Spicers Shareholder approval Scheme) the Scheme Resolution is approved by the requisite majorities of Spicers Shareholders under s 411(4)(a)(ii) of the Act;(c)(Spicers Shareholder approval of Capital Returns) Spicers Shareholders, to the extent they have not already done so, approve the Capital Return Resolutions by the requisite majority under section 256C(1) of the Act at the Special General Meeting;(d)(Scheme Consideration and Capital Returns) as at 8am on the Second Court Date, the aggregate of:(i) the Base Scheme Consideration;(ii) the Deferred Consideration; and(iii) the amounts to be returned to Scheme Shareholders by way of Capital Returns,is equal to or greater than 6.6 cents per Scheme Share;(e)(Court approval of Scheme) the Scheme is approved by the Court in accordance with section 411(4)(b) of the Act; and(f)(no restraints) no judgment, order, decree, statute, law, ordinance, rule or regulation, or other temporary restraining order, preliminary or permanent injunction, restraint or prohibition, entered, enacted, promulgated, enforced or issued by any court or other Governmental Agency of competent jurisdiction, remains in effect as at 8am on the Second Court Date that prohibits, materially restricts, makes illegal or restrains the completion of the Transactions or any Transaction Document.