Re Toll Holdings Ltd (No 2)

[2015] VSC 236

IN THE SUPREME COURT OF VICTORIA AT MELBOURNE Not Restricted

COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2015 00074

IN THE MATTER OF TOLL HOLDINGS LIMITED
ACN 006 592 089

TOLL HOLDINGS LIMITED
ACN 006 592 089 Plaintiff

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JUDGE:	Robson J
WHERE HELD:	Melbourne
DATE OF HEARING:	14 May 2015
DATE OF JUDGMENT:	14 May 2015
CASE MAY BE CITED AS:	Re Toll Holdings Limited (No 2)
MEDIUM NEUTRAL CITATION:	[2015] VSC 236

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CORPORATIONS — Scheme of arrangement — Takeover scheme — Approval of scheme — Tests to be applied — Scheme approved — Corporations Act 2001 (Cth) s 411.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr N J Young, one of Her Majesty’s Counsel with Mr C M Archibald	Herbert Smith Freehills
For Japan Post Co Ltd	Mr A J Myers AO, one of Her Majesty’s Counsel with Mr R D Strong	Clayton Utz

HIS HONOUR:

1. On 18 February 2015, Toll Holdings Ltd (Toll) announced that it had entered into an agreement with Japan Post Co, Ltd (Japan Post) to propose a scheme of arrangement (the scheme) under which Japan Post would acquire all of the issued shares in Toll for $9.04 per share.  This price represented a 49 per cent premium over the price of Toll shares on the day before the announcement.

1. By originating process filed 18 March 2015, Toll made an application pursuant to s 411 of the Corporations Act 2001 (Cth) (the Act), seeking:

First court hearing

(a) An order that pursuant to s 411(1) of the Act, Toll convene a meeting of scheme participants (scheme meeting) to be held in the Melbourne Convention Centre on 13 May 2015 for the purpose of considering and, if thought fit, agreeing (with or without modification) to the scheme;

(b)   Such directions as to the manner in which the scheme meeting is to be convened and conducted, the time and place at which the meeting is to be held, and the persons authorised to act as chairman and alternate chairman at the scheme meeting as the court deems proper;

(c) An order pursuant to s 411(1) of the Act that the explanatory statement in relation to the scheme be approved to accompany the notice of the scheme meeting;

Second court hearing

(a) An order pursuant to s 411(4)(b) of the Act that the scheme be approved.

(b) An order pursuant to s 411(12) of the Act that Toll be exempted from compliance with s 411(11) of the Act.

1. The application involved a two‑stage process as provided for in s 411(4) of the Act. First, Toll must obtain an order to convene a meeting of its ordinary shareholders (scheme participants) and put the proposed scheme to them. Second, if the meeting approves the scheme, Toll must apply to the court for the approval of the scheme.

1. On 1 April 2014, I heard the first stage of the application.  I made an order that Toll convene a meeting of scheme participants for the purpose of considering and, if thought fit, agreeing (with or without modification) to the scheme.[1]  On 13 May 2015, the scheme was agreed to at a meeting of scheme participants.

   [1]See Re Toll Holdings Limited [2015] VSC 123.

1. Toll now seeks an order pursuant to s 411(4)(b) of the Act that the scheme be approved, and for an order pursuant to s 411(12) of the Act that Toll be exempted from compliance with s 411(11) of the Act.

1. The evidence in support of the application is primarily found in the affidavit of Paul Django Wenk, sworn 14 May 2015, and the exhibits thereto.  The exhibits include results of the scheme meeting, that 95.88 per cent of Toll shareholders, present and voting, voted in favour of the resolution that the scheme be adopted, and that 99.72 per cent of the votes cast were in favour of the resolution.

1. Associate Justice Randall made an order on 13 May 2015, which declared that the meeting of the ordinary shareholders of Toll was held on 13 May, at which the resolution agreeing to the scheme was passed by majority of the members present, voting either in person or by proxy, and by more than 75 per cent of the votes cast on the resolution.  Randall AsJ also found that the scheme meeting was duly convened and held in accordance with my orders of 1 April 2015 and the scheme resolution was duly passed.

1. Mr Young QC, senior counsel for Toll, has taken me to the evidence that the conditions precedent, to the implementation of the scheme, which had to be satisfied by each of Toll and Japan Post, have been satisfied and have been certified as being so satisfied by each of the companies.

1. In order to approve the scheme, I have to be satisfied of certain matters.  I discussed these in Re Coles Group Limited (No 2).[2]  There I held that the matters I must be satisfied of were set out by Fry LJ in Re Alabama, New Orleans, Texas and Pacific Junction Railway Company,[3] where he said in relation to the approval of a scheme of arrangement by the court that:

… the Court is bound to ascertain that all the conditions required by the statute have been complied with; it is bound to be satisfied that the proposition was made in good faith; and, further, it must be satisfied that the proposal was at least so far fair and reasonable, as that an intelligent and honest man, who is a member of that class, and acting alone in respect of his interest as such a member, might approve of it.  What other circumstances the Court may take into consideration I will not attempt to forecast.[4]

[2][2007] VSC 523 (Coles No 2).

[3](1891) 1 Ch 213.

[4]Ibid at 257.

1. I am satisfied that the proposition putting forward the scheme was made in good faith.  The scheme is a simple cash offer for all issued shares of Toll.  At the time the scheme was announced, that price was some 40 per cent above the price which the shares were trading on the Australian Stock Exchange. 

1. I have already referred to the overwhelming majority in favour of the scheme.  I am satisfied that full disclosure of all relevant matters has been made to the members of Toll.  Grant Samuel, an independent expert valuer, has estimated the underlying value of Toll’s shares in the range of $8.22 to $9.10 per share.  Grant Samuel opined:

The proposal is fair and reasonable and is therefore in the best interests of Toll shareholders in the absence of a superior proposal.

1. I am satisfied that the proposed scheme is fair and reasonable. 

1. As to the conditions required by the statute. ASIC has provided a letter to Toll in which it advises that under s 411(17)(b) of the Act ASIC has no objection to the proposed scheme of arrangement under pt 5.1 of the Act between Toll and its shareholders as outlined in the scheme booklet registered with ASIC on 2 April 2015 and approved by shareholders on 13 May 2015.

1. Section 411(17) provides:

The Court must not approve a compromise or arrangement under this section unless:

(a)it is satisfied that the compromise arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6; or

(b)there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement;

but the Court need not approve a compromise or arrangement merely because a statement by ASIC stating that ASIC has no objection to the compromise or arrangement has been produced to the Court as mentioned in paragraph (b).

1. In Coles (No 2), I canvassed whether, if ASIC does produce a letter under s 411(17)(b), as it has here, I should give further consideration to s 411(17)(a). For the reasons given in Coles (No 2), there is no need in this case for me to consider any issue relating to the provisions of ch 6.  No one has raised any issue concerning ch 6.

1. Finally, there is no objection to the application before me. 

1. Accordingly, for these reasons, I will exercise my discretion under s 411(4)(b) to approve the scheme.

1. As for the constitution. Toll seeks an order pursuant to s 411(12) of the Act that Toll be exempted from compliance with s 411(11) of the Act. Section 411(11) provides:

Subject to subsection (12), a copy of every order of the Court made for the purposes of paragraph (4)(b) must be annexed to every copy of the constitution of the body issued after the order has been made.

1. As Toll is now a wholly owned subsidiary of Japan Post, there is no purpose to be achieved in attaching the court order to the constitution.  I will make the order sought.