Re Village Roadshow Limited (No 2)

[2003] VSC 456

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

CORPORATIONS LIST

No. 7620 of 2003

In the matter of VILLAGE ROADSHOW LIMITED
VILLAGE ROADSHOW LIMITED	Plaintiff

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JUDGE:	Mandie J
WHERE HELD:	Melbourne
DATE OF HEARING:	18 November 2003
DATE OF JUDGMENT:	20 November 2003
CASE MAY BE CITED AS:	In the matter of Village Roadshow Limited (No.2)
MEDIUM NEUTRAL CITATION:	[2003] VSC 456

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Corporations – Application for approval of scheme of arrangement between company and preference shareholders involving the buy-back of all preference shares – irregularities in voting on buy-back resolution – whether application should be adjourned to enable a further vote on the buy-back resolution at adjourned general meeting

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A.C. Archibald QC with Mr I. Martindale	Minter Ellison
For Boswell Filmgesellschaft mbH	Mr A.J. Myers QC with Mr D.J. O’Callaghan	Blake Dawson Waldron
For ASIC	Mr A. Bulman	ASIC

HIS HONOUR:

1. These reasons should be read together with my reasons in In the matter of Village Roadshow Limited [2003] VSC 440. After those reasons were published on 14 November 2003, the Company’s application for approval of the scheme of arrangement (“the Scheme”) between it and its preference shareholders was adjourned until 18 November 2003 for the purpose of hearing submissions as to whether the application for approval should be further adjourned in order to permit a further vote on the buy-back resolution at an adjourned or reconvened general meeting, a possibility raised by the Court for debate. The “irregularities” which occurred in relation to the voting on the buy-back resolution at the general meeting held on 3 November 2003 are explained in the reasons above referred to published on 14 November 2003.

1. At the conclusion of the adjourned hearing before me on 18 November 2003, I stated that, in the interests of the shareholders, the Company and the market, I would state my decision immediately and provide reasons later.  I announced that in all the circumstances I was not satisfied that the application for approval of the Scheme should be adjourned for the purposes proposed by the Company and, accordingly, that I considered that the application should be dismissed, and the Court so ordered.  These are the reasons for that order. 

1. The entitlement to vote at the general meeting held on 3 November 2003 was based upon the state of the register of members of the Company as at 7pm, Melbourne time, on 1 November 2003.  That was in accordance with the Corporations Regulations 2001 (Cth). Regulation 7.11.37(2) provides that the convener of a relevant meeting may determine that the shares of the relevant body corporate at a specified time before the meeting are taken to be held by the persons who held them at the specified time, and reg. 7.11.37(3)(b) provides that the specified time, in any case, must not be more than 48 hours before the meeting.

1. The Company proposed that the adjourned general meeting should be further adjourned until early December 2003, at which time the buy-back resolution should be put again to the meeting.  This was in order that all combined shareholders and all preference shareholders should have the opportunity to vote against the buy-back resolution, an opportunity which they had not had, or not properly had, at the original meeting (as explained in my previous reasons). 

1. It was submitted on behalf of Boswell that this procedure was not permissible under the Company’s Constitution, because the matter of the buy-back resolution was not “unfinished business” for the purpose of the adjourned general meeting.  That is a question of fact.  In my opinion, because the poll was not declared and questions were raised about the entitlement of combined shareholders to vote against the resolution, the matter of the buy-back resolution was unfinished business at the general meeting.  It follows, in my opinion, that the Company would be entitled to put the buy-back resolution again at an adjourned general meeting, for a vote based upon voting entitlements which existed as at 7pm, Melbourne time, on 1 November 2003. 

1. However, although the Company would be entitled to put the resolution in this way to an adjourned general meeting, the question arises whether that is an appropriate course as a prelude to an adjourned application for approval of the Scheme.  In my opinion, having heard the submissions of the parties on the question, it is not an appropriate course.  There is no evidence before the Court about the nature or the volume of transactions in shares of the Company which have occurred since 1 November 2003.  In those circumstances, I cannot be satisfied that the persons who would now be entitled to vote are substantially the same persons as those who were entitled to vote on 1 November 2003.  In my view the “specified time” for determining voting entitlements (ie, 1 November 2003) would be too stale by the time of the proposed date for the adjourned general meeting.  A vote in December 2003 would reflect the views of the “constituency” as at 1 November 2003, but might not fairly reflect the views of the “constituency” on or about the relevant date in December 2003.  The Corporations Regulations evince an intention that entitlement to vote at a meeting should reflect the views of shareholders identified at a time not more than 48 hours prior to the meeting.  Of course, this would not necessarily occur at a meeting adjourned for any substantial period, but, with a matter of the present importance, I do not think that the Court, in its discretion and for the purposes of an application for approval of this Scheme, should countenance such a long period between the time of the identification of those entitled to vote and the time of voting. 

1. In addition, the course proposed by the Company represents a disturbance of the basic machinery set up for obtaining approval of the proposed Scheme – namely, the passing of the buy-back resolution at a general meeting followed “promptly” by the holding of the Scheme meeting.  The course now urged by the Company precludes the ability of preference shareholders at the Scheme meeting to consider the results of the general meeting (the Scheme meeting having of course concluded on 3 November 2003).  Preference shareholders entitled to vote at the Scheme meeting are now unable to consider any developments which have taken place since 3 November 2003 which they might consider relevant.  This, to my mind, constitutes a serious dislocation of the procedure as originally envisaged, and is of substantive relevance to the Court’s consideration of this adjournment application, and ultimately to the question of the approval of the Scheme itself. 

1. Further, matters previously disclosed in the scheme booklet may also have changed, yet the material before the Court suggests that the Company intends to offer a further copy of the scheme booklet (with its existing misstatements) to any shareholder wishing to obtain the same.  I accept, as Senior Counsel for the Company indicated, that the Company might provide further and other information to shareholders in the light of matters now canvassed before the Court, but there is no evidence before the Court as to what that information might be. 

1. It was submitted on behalf of ASIC, which generally took a neutral stance on all other matters, that it would be preferable and simpler for shareholders if a fresh general meeting were held, rather than an adjourned general meeting, for the purpose of obtaining a vote on the buy-back resolution.  In my opinion, that course would be unsatisfactory, because the “constituency” for the buy-back resolution would then be determined at a different entitlement time to the entitlement time adopted for the Scheme meeting and, again, the members entitled to vote at a Scheme meeting would not have the opportunity to consider the results of such fresh general meeting.  However the point made by ASIC draws attention to the need to avoid confusion amongst shareholders and to keep any procedure as simple as possible, whereas I think that the course proposed by the Company may well complicate the situation and continue to cause a degree of confusion. 

1. In short, as was submitted on behalf of Boswell, “the eggs cannot be unscrambled” and it is preferable, despite the additional costs involved, if the Company wishes to proceed with this Scheme, that it start again.  For all of the foregoing reasons, the application for adjournment is refused and the application for approval of the Scheme is dismissed.

1. I will hear the parties on the question of costs.