FEDERAL COURT OF AUSTRALIA
Vita Group Ltd, in the matter of Vita Group Ltd [2023] FCA 400
File number(s): NSD 252 of 2023 Judgment of: JACKMAN J Date of judgment: 1 May 2023 Catchwords: CORPORATIONS – scheme of arrangement – first Court hearing – application for orders under s 411 of the Corporations Act 2001 (Cth) that company convene meeting of its members to consider scheme of arrangement – where the payment of a dividend is conditional or contingent – potential disenfranchisement of a member who has appointed a proxy but attends meeting virtually – court hearings for schemes of arrangement should be conducted in alignment with the overarching purpose of the civil practice and procedure provisions – evidentiary requirements for schemes of arrangement – whether Court approval required for communications with shareholders other than the explanatory statement – ex parte obligations of the plaintiff company in schemes of arrangement Legislation: Corporations Act 2001 (Cth) Pts 2G.2, 5.1, 9.5, ss 249Y, 254T, 260A, 411, 1319
Evidence Act1995 (Cth) s 79
Federal Court of Australia Act1976 (Cth) Pt VB, s 37M
Corporations Regulations 2001 (Cth) reg 5.1.01, Sch 8, cll 8303 and 8306
Federal Court (Corporations) Rules 2000 (Cth) rr 1.3, 2.4, 3.2, 3.3, 3.4
Federal Court Rules2011 (Cth) r 23
Jurisdiction of Courts (Cross-Vesting) Act 1993 (ACT) s 4
Trustee Act1925 (ACT) s 63
Cases cited: Chellaram v Chellaram [1985] Ch 409
International Finance Trust Co Ltd v NSW Crime Commission (2009) 240 CLR 319
Permanent Trustee Co Ltd v National Australia Managers Ltd (unreported, Sup Ct, NSW, McLelland CJ in Eq, 3033 of 1994, 5 August 1994)
Re AGL Ltd [2022] NSWSC 576
Re Andean Resources Ltd [2010] FCA 1190
Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400
Re Beyond International Ltd [2022] NSWSC 1649
Re BTA Institutional Services Australia Ltd [2009] NSWSC 1294
Re Central Pacific Minerals NL [2002] FCA 239
Re Centro Retail Ltd [2011] NSWSC 1321
Re Citadel Group Ltd [2020] FCA 1580; (2020) 148 ACSR 598
Re Coates Hire Ltd (No 2) [2007] FCA 2105
Re Constantinou [2012] QSC 332; [2013] 2 Qd R 219
Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358
Re Dion Investments Pty Ltd [2013] NSWSC 1941
Re Dion Investments Pty Ltd [2014] NSWCA 367; (2014) 87 NSWLR 753
Re GetSwift Ltd [2020] FCA 1382
Re Hills Motorway Ltd [2002] NSWSC 897; (2002) 43 ACSR 101
Re Investa Listed Funds Management Ltd [2016] NSWSC 344
Re Isentia Group Ltd [2021] NSWSC 910
Re Isentia Group Ltd [2021] NSWSC 1069
Re Mirvac Ltd [1999] NSWSC 457; (1999) 32 ACSR 107
Re Oz Minerals Ltd [2023] FCA 197
Re Permanent Trustee Co Ltd [2002] NSWSC 1177
Re ResApp Health Ltd [2022] NSWSC 1353
Re RXP Services Ltd [2021]…
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- AGLC
- Re Vita Group Ltd [2023] FCA 400
- Case
- [2023] FCA 400
- Decision Date
CaseChat Overview and Summary
The court addressed the legal issues by emphasizing the importance of aligning court hearings for schemes of arrangement with the overarching purpose of the civil practice and procedure provisions. It found that the evidence provided by the plaintiff was sufficient for the court to convene the scheme meeting and approve the dispatch of the explanatory statement. The court also considered the need for sufficient disclosure to those who would be affected by the arrangement of its details and effect. Furthermore, the court determined that the corporation rules provided a power to override the Default Rule concerning the revocation or suspension of a proxy when the appointing member attends the meeting.
The court issued several orders, including convening and holding a meeting of the ordinary shareholders to consider the proposed scheme of arrangement. It approved the documents to be distributed to the shareholders and specified the method of distribution based on the shareholders' preferences. The court also ordered the scheme meeting to be conducted as a hybrid meeting, with provisions for both physical and online attendance. Additionally, the court appointed the chairperson for the scheme meeting and outlined the voting process.
In summary, the court ruled in favor of the plaintiff, granting the necessary orders to proceed with the scheme of arrangement meeting, while addressing the concerns related to the disenfranchisement of members who appointed a proxy but attended the meeting virtually. The final hearing for approval of the scheme was adjourned to a later date.
Orders
Orders of the court
1. Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Act), the Plaintiff is to convene and hold a meeting of the ordinary shareholders of the Plaintiff (Vita Shareholders) (Scheme Meeting) to consider and, if thought fit, to approve (with or without modification) the scheme of arrangement (Scheme) proposed to be made between the Plaintiff and Vita Shareholders, the terms of which are set out in the document at Appendix 3 of the document comprising Exhibit P1 (Scheme Booklet).
2. The following documents be approved for distribution to Vita Shareholders, with distribution to occur in accordance with order 3:
(a) the Scheme Booklet substantially in the form set out in Exhibit P1; and
(b) the proxy form in respect of the Scheme Meeting (for Electing Postal Shareholders and Non Electing Postal Shareholders only (each as defined in order 3), substantially in the form of Exhibit P2 (Proxy Form)).
3. The documents in order 2 are to be provided to Vita Shareholders by sending on or before 5 May 2023:
(a) in the case of Vita Shareholders who have elected to receive shareholder communications electronically (Email Shareholders), an email which includes access by an embedded link to the following:
(i) an electronic copy of the Scheme Booklet;
(ii) an online portal or website that is accessible by Email Shareholders and which enables Email Shareholders to lodge their proxy for the Scheme Meeting and voting instructions online; and
(b) in the case of Vita Shareholders who have elected to receive hard copy communications (Electing Postal Shareholders) and whose registered address is in Australia, the following documents by pre-paid post addressed to the relevant addresses recorded in the Plaintiff's register:
(i) a letter in respect of the Scheme Meeting (Electing Postal Shareholder Letter), which encloses a printed copy of the Scheme Booklet;
(ii) a personalised single Proxy Form;
(iii) a reply paid envelope for the return of that Vita Shareholder’s Proxy Form; and
(c) in the case of Vita Shareholders who have not elected to receive electronic or hard copy communications (Non Electing Postal Shareholders) and whose registered address is in Australia, the following documents by pre-paid post addressed to the relevant addresses recorded in the Plaintiff's register:
(i) a letter in respect of the Scheme Meeting, which contains the address of a website which enables Non Electing Postal Shareholders to access a copy of the Scheme Booklet (Non Electing Postal Shareholder Letter);
(ii) a personalised single Proxy Form;
(iii) a reply paid envelope for the return of that Vita Shareholder’s Proxy Form; and
(d) in the case of Electing Postal Shareholders and Non Electing Postal Shareholders whose registered address is outside Australia, the following documents by pre-paid airmail post addressed to the relevant addresses recorded in the Plaintiff’s register:
(i) an Electing Postal Shareholder Letter or Non Electing Postal Shareholder Letter (as applicable);
(ii) a printed copy of the Scheme Booklet (for Electing Postal Shareholders only);
(iii) a personalised Proxy Form; and
(iv) a self-addressed envelope for the return of that Vita Shareholder’s Proxy Form.
4. Subject to these orders, the Scheme Meeting is to be convened, held and conducted in accordance with the provisions of:
(a) Part 2G.2 of the Act (save for any applicable replaceable rule) that apply to a meeting of the Plaintiff’s members; and
(b) the Plaintiff's Constitution that apply in relation to meetings of members and that are not inconsistent with Part 2G.2 of the Act.
5. Pursuant to r 3.3(2) of the Federal Court (Corporations) Rules 2000 (Cth) (Rules), notwithstanding s 249Y(3) of the Act, the appointment of a proxy in respect of the Scheme Meeting shall not be revoked or suspended by the appointing ordinary shareholder of Vita (Vita Appointor) attending and taking part in the Scheme Meeting, but if the Vita Appointor votes on a resolution at the Scheme Meeting, the proxy is not entitled to vote as the Vita Appointor's proxy on that resolution and any such vote must not be counted in the results of the relevant poll.
6. The Scheme Meeting is to be held as a hybrid meeting and conducted in two parts simultaneously on Monday, 5 June 2023 commencing at 11.00am (Sydney time) with the physical venue of the Scheme Meeting at MinterEllison's offices at Level 22, Waterfront Place, 1 Eagle Street Brisbane, Queensland, 4000 and via an online platform that allows for remote participation as set out in the Notice of Scheme Meeting.
7. Vita Shareholders may vote at the Scheme Meeting by attending in person or by proxy, attorney or corporate representative (if applicable).
8. Paul Alexander Mirabelle, or failing him Gordon James Towell, be the chairperson of the Scheme Meeting.
9. The chairperson of the Scheme Meeting shall have the power to adjourn the Scheme Meeting to such time, date and place as he considers appropriate.
10. The Plaintiff may provide access to the Scheme Meeting for such other persons as it thinks fit.
11. Voting on the resolution to approve the Scheme is to be conducted by way of a poll.
12. A Proxy Form in respect of the Scheme Meeting will be valid and effective if, and only if, it is completed and received in accordance with its terms by 11.00am (Sydney time) on Saturday, 3 June 2023.
13. Pursuant to r 1.3 of the Rules, compliance with the following requirements of the Rules is dispensed with:
(a) r 2.4(1), to the extent that rule requires the affidavit filed with the Originating Process to state the facts in support of the process;
(b) r 2.15;
(c) r 3.2(b)(ii); and
(d) r 3.4 and Form 6.
14. The Plaintiff is to publish an announcement via the Australian Securities Exchange containing the substance of the matters set out in Form 6 of the Rules by no later than 5 June 2023.
15. The further hearing of the Originating Process in respect of the Plaintiff's application pursuant to s 411(4), and if necessary s 411(6), of the Act for approval of the Scheme, is adjourned to 9.15am (Sydney time) on 8 June 2023.
16. Liberty to apply is reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
There seems to me to be a difficulty in using s 1319 of the Act to override the Default Rule in that the power conferred by s 1319 is expressed to be “subject to this Act”. Accordingly the Default Rule under s 249Y(3) is paramount to the power under s 1319. However, there is an alternative source of power to make the order conferred by r 3.3(2) of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules), which provides relevantly that, unless the court otherwise orders, a meeting of members ordered under s 411 of the Act must be convened, held and conducted in accordance with the provisions of Pt 2G.2 of the Act that apply to the members of a company. Section 249Y(3) falls within Pt 2G.2 of the Act. Accordingly, r 3.3(2) of the Corporations Rules confers a power on the Court to “otherwise order” by making an order which would override the Default Rule. I propose to make that order, so as to prevent the risk of a member inadvertently becoming disenfranchised where a proxy has been appointed by the member who decides to attend the meeting online, but then the member neglects to vote personally. The present application is notable for the efficient approach which has been taken to the evidence for the first court hearing. The legal representatives for Vita and the Bidder have made a fresh start to the approach taken to the preparation of evidence for members’ schemes of arrangement, and it is to that topic that I now turn. The Overarching Purpose Section 37M of the Federal Court of Australia Act1976 (Cth) (Federal Court Act) provides that the overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes according to law, and as quickly, inexpensively and efficiently as possible. Section 37M(3) provides that the civil practice and procedure provisions must be interpreted and applied in the way that best promotes that overarching purpose. The reference to “civil practice and procedure provisions” includes not only the Federal Court Rules2011 (Cth), but also the Corporations Rules. Although scheme of arrangement applications are usually conducted on an ex parte basis, without a contradictor, and thus may not in the typical case be regarded as “disputes”, I regard the overarching purpose identified in s 37M of the Federal Court Act as being equally applicable to the present context. Subsequent to the case management hearing in this matter to which I refer below, the Court has announced that it intends to publish a practice note or other communication concerning scheme of arrangement applications after consultation with various bodies. However, in the meantime, I am bound by s 37M(3) to apply the civil practice and procedure provisions in the way that best promotes the overarching purpose. The obligation in s 37M is expressed in language which is imperative and immediate. Part VB of the Federal Court Act does not contain empty rhetoric: Kumova v Davison (No 2) [2023] FCA 1 at [86] (Lee J).