Re United Energy Ltd - [2003] VSC 266

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

CORPORATIONS LIST

No. 5992 of 2003

IN THE MATTER OF SECTION 411 OF THE CORPORATIONS ACT 2001 (CTH)

and

IN THE MATTER OF UNITED ENERGY LIMITED (ACN 064 651 029)

and

IN THE MATTER OF A PROPOSED SCHEME OF ARRANGEMENT BETWEEN UNITED ENERGY LIMITED AND ITS MEMBERS

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JUDGE:	GILLARD J.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	14 July 2003
DATE OF JUDGMENT:	23 July 2003
CASE MAY BE CITED AS:	In Re United Energy Limited
MEDIUM NEUTRAL CITATION:	[2003] VSC 266

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CORPORATIONS LAW – Approval of Scheme of Arrangement – Section 411 of Corporations Act 2001 – Re-opening of poll after closure at meeting – Use of Chapter 5 instead of Chapter 6 – Complaints that independent Directors and Experts not talking to shareholders.

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APPEARANCES:	Counsel	Solicitors
For the Applicant United Energy Limited	Mr J. Santamaria QC	Allens Arthur Robinson

HIS HONOUR:

This is the return of a proceeding instituted by interlocutory process in which the applicant United Energy Limited (“United Energy”) applied for an order that a scheme of arrangement between it and the holders of fully paid ordinary shares in the capital of the company other than Power Partnership Pty Ltd be approved pursuant to s.411(4)(b) of the Corporations Act 2001 (Cth.)

At the hearing, four shareholders who were opposed to the scheme appeared in person and made submissions to the Court. After considering the issue of approval and the various matters raised by the company and the shareholders I approved the scheme. I informed those present I would publish my reasons later. These are my reasons.

The background to the application can be briefly summarised. United Energy is a public company incorporated in Australia and is limited by shares. It operates the business of owning and managing energy networks. At the end of May 2003 it had approximately 50,000 shareholders and the issued capital consisted of 421,770,972 fully paid ordinary shares. A company, Power Partnership Pty Ltd (“Power Partnership”), holds approximately 57% of the total issued shares in United Energy. On 23 April 2003 United Energy agreed with AMP Henderson Global Investors Limited, Alintagas Limited and Aquila Inc. to a proposal which would result in the Power Partnership acquiring 100% of all the issued shares in United Energy. The proposal involved a scheme of arrangement pursuant to Part 5.1 of the Corporations Act 2001 between United Energy and the holders of its fully paid ordinary shares other than Power Partnership. The scheme provided that the fully paid ordinary shares in United Energy, other than those held already by Power Partnership, would be transferred to Power Partnership for a cash consideration of $3.15 per share being paid by Power Partnership to the other shareholders.

A scheme of arrangement is subject to a statutory framework pursuant to which three stages are involved. First is an application to the Court for an order summoning a meeting of the shareholders, the second stage concerns…

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 United Energy Ltd

Details

AGLC: United Energy Limited, In re [2003] VSC 266
Case: [2003] VSC 266
Decision Date: 23 July 2003

CaseChat Overview and Summary

In the matter of Re United Energy Ltd, the parties involved were the shareholders of the company, the company itself, and the administrators of the scheme of arrangement. The dispute centred around the approval of a scheme of arrangement under the Corporations Act 2001, specifically regarding the process and fairness of the shareholder meeting where the scheme was to be approved. The case was heard in the Supreme Court of Victoria. The shareholders contested the validity of the scheme approval, arguing that procedural irregularities occurred during the shareholder meeting, including the closure of the poll before all shareholders had an opportunity to vote, and the use of Chapter 5 instead of Chapter 6 of the Corporations Act for the meeting. They also claimed that independent directors and experts did not adequately communicate with shareholders.

The court was tasked with determining whether the irregularities during the shareholder meeting were sufficient to invalidate the approval of the scheme of arrangement. This involved assessing the procedural fairness of the meeting and the adequacy of communication between the company’s directors, experts, and shareholders. The court also had to consider whether the use of Chapter 5 of the Corporations Act, which permits a more streamlined process for shareholder meetings, was appropriate in this context, and if this affected the validity of the meeting's outcomes.

The Supreme Court of Victoria found that the procedural irregularities did not invalidate the approval of the scheme. The court held that the meeting was conducted in a manner that was fair and reasonable, and that the use of Chapter 5 was appropriate given the circumstances. The court emphasised the importance of ensuring that all shareholders had an opportunity to vote, but found that the company had taken reasonable steps to allow for this. Additionally, the court noted that while communication between independent directors, experts, and shareholders could be improved, it was not so deficient as to render the approval of the scheme invalid. The court concluded that the scheme of arrangement was approved in a manner consistent with the law and the rights of the shareholders were adequately protected.

The final orders of the court were that the scheme of arrangement be approved, and that the company proceed with the implementation of the scheme as previously approved by the shareholders. The court also directed the company to improve its communication practices with shareholders in future meetings.

Orders