RJL Investments Pty Ltd v Oceania Healthcare Technology Investments Pty Ltd
[2011] NSWSC 483
•20 May 2011
Supreme Court
New South Wales
Medium Neutral Citation: RJL Investments Pty Ltd v Oceania Healthcare Technology Investments Pty Ltd [2011] NSWSC 483 Hearing dates: 20 May 2011 Decision date: 20 May 2011 Jurisdiction: Equity Division Before: Windeyer AJ Decision: Summons be dismissed with costs
Catchwords: CORPORATIONS - pre-emption agreement requiring defendant to offer shares in a company to the plaintiff if the defendant proposes to transfer the shares - scheme to be proposed under s 411 of the Corporations Act 2001 (Cth) - defendant expected to vote in favour of scheme - whether this amounts to proposal to transfer Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: Lionsgate Australia Pty Ltd v Macquarie Private Portfolio Management Ltd [2007] NSWSC 371; (2007) 62 ACSR 522 Category: Principal judgment Parties: RJL Investments Pty Ltd (plaintiff)
Oceania Healthcare Technology Investments Pty Ltd (defendant)Representation: J Sheahan SC; R Scruby (plaintiff)
N Hutley SC; D Sulan (defendant)
Kemp Strang (plaintiff)
Johnson Winter & Slattery (defendant)
File Number(s): SC 2011/123182
EX TEMPORE Judgment
The plaintiff, RJL Investments Pty Ltd, seeks an order by way of specific performance against the defendant, Oceania Health Care Technology Investments Pty Ltd ( "Oceania" ), requiring the defendant to comply with the terms of a pre-emption clause in a pre-emptive rights agreement dated 31 October 2007 ( the "Agreement" ), to which the plaintiff and defendant are parties. At the time of that deed, the defendant in this case was called AEP Financial Services Holdings Pty Ltd. The right of pre-emption concerned shares in a company then called IBA Health Ltd but now called iSOFT Group Ltd ( "iSOFT" ). The pre-emptive right is restricted to such number of shares in iSOFT as would not cause the total holding of the acquiring company to go above 20% of the issued shares in iSOFT.
Clause 2.1 of the Agreement provides:
"Subject to clauses 2.6, 2.8 and 3, if a Seller proposes to transfer any IBA Shares of which it is the registered or beneficial holder, otherwise than by a Permitted Transfer, it must first give a Transfer Notice to the Offeree."
Under the definition clause in the Agreement, "Transfer" means:
"sell or otherwise transfer an IBA Share."
Clauses 2.2 to 2.5 of the Agreement provide as follows:
" Transfer Notice
2.2 A Transfer Notice must state:
(a) the total number of IBA Shares proposed to be Transferred;
(b) that the Pre-emption IBA Shares are offered for sale to the Offeree;
(c) the Sale Price and any other terms of the proposed Transfer;
(d) the Offer Period, which (unless otherwise agreed) may not be less than 15 Business Days (and such period ends at 5:00pm on the last Business Day of the Offer Period);
(e) the settlement date for completion of the sale, which (unless otherwise agreed) may not be more than 5 Business Days after the day when the Offer Period has expired; and
(f) if applicable, the name of any proposed Transferee of the IBA Shares.
Exercise of right
2.3 The Offeree may purchase all (but not les than all) of the Pre-emption IBA Shares at the Sale Price and otherwise on any other terms of the proposed Transfer set out in the Transfer Notice. If the Offeree intends to do so, then the Offeree must provide written notice to that effect to the Seller before expiry of the Offer Period.
2.4 If the Offeree provides written notice of its intention to purchase the Pre-emption IBA Shares under clause 2.3 then, on the settlement date specified in the Transfer Notice:
(a) the Seller and the Offeree must enter into the IBA Share Sale Agreement; and
(b) the Offeree must provide the Sale Price in immediately available funds.
2.5 If the Offeree does not provide written notice of its intention to purchase the Pre-emption IBA Shares under clause 2.3, then the Seller is free to Transfer the IBA Shares the subject of the Transfer Notice on terms and conditions no more favourable (including the Sale Price) as set out in the Transfer Notice within 2 months of giving a transfer Notice pursuant to clause 2.1."
The events which have brought about this litigation can be summarised as follows. There is an application before the Federal Court of Australia next week seeking an order for the convening of a meeting of members of iSOFT pursuant to s 411(1) of the Corporations Act 2001 (Cth) ("the Act") to consider a scheme, which if approved by the members of that company in accordance with s 411(4)(a)(ii) of the Act, will result in the shares in iSOFT held by the plaintiff and the defendant, together with all other shares in iSOFT, being transferred to a company, CSC Computer Sciences Australia Holdings Pty Ltd, at a price of 17 cents per share; and at the same time the convertible notes in iSOFT, all of which, so far as they have been issued, are held by the defendant, will be repaid. The shares will be transferred by iSOFT pursuant to its appointment as agent for each shareholder under clause 7 of the scheme of arrangement to be put before the meeting. No action by the shareholders is required to effect the transfer if the scheme is approved by the shareholders meeting and the Federal Court.
The defendant, which holds about 24% of the capital in iSOFT, can be assumed, at least at the present time, to have the intention of voting in favour of the proposed scheme, but its support for this scheme has always been stated to be conditional upon a better offer or proposal not being made available to the shareholders in iSOFT.
The plaintiff, which presumably does not wish this scheme to go ahead, claims it is entitled, pursuant to the rights of pre-emption, to require the defendant to issue to it a transfer notice which would then have the effect of giving it the right to acquire the pre-emption shares at the figure of 17 cents per share, being the same amount as would be obtained under the scheme. Whether or not the transfer notice could include as a term repayment of the convertible notes was the subject of argument but need not be decided.
The question for decision is whether or not the right of pre-emption is activated. That depends on whether there is a proposal by the defendant to sell or otherwise transfer iSOFT shares. The reference to pre-emption shares is there so that the company which proposes to exercise the pre-emptive rights does not acquire more shares than it would be entitled to hold pursuant to the Act.
The question, then, is whether the facts (a) there is a proposal before the Federal Court of iSOFT for an order convening a meeting of its members; (b) assuming that order is made, then, at a meeting of the members of iSOFT the scheme may be approved; (c) the Federal Court may approve the arrangement under s 411(4)(b) of the Act; and (d) the court order is then lodged with the Australian Securities and Investments Commission, together or some or any of them amount to a proposal by Oceania to transfer or sell or otherwise transfer iSOFT shares.
In my view, the matter can be determined by deciding that issue without the need to consider the other interesting problems arising under clauses 2.2 and 2.5 of the Agreement. I do not consider that it could be said that something which may take place as a result of a proposal by another entity for a scheme could amount to a proposal by Oceania to transfer a share. It is true that the defendant company proposes at present to vote in favour of the scheme. If it does so propose then it may be likely that the scheme would be approved by the members and it may then be likely that the Federal Court would approve the scheme. But all that is a result not of a proposal by the defendant company to transfer iSOFT shares, but is a result, first, of a vote of members at a company meeting, second, by operation of court order and third, by operation of the provisions of s 411 of the Act. A proposed vote is not a proposal to transfer even if by operation and implementation of a scheme the shares in question become subject of a transfer: see Lionsgate Australia Pty Ltd v Macquarie Private Portfolio Management Ltd [2007] NSWSC 371; (2007) 62 ACSR 522 at [28].
Having come to this conclusion, it does not seem to me to be necessary to deal with any of the other matters which have been referred to in the submissions by counsel, particularly those relating to the contents of the transfer notice and problems raised by clause 2.5 of the Agreement.
Order
The summons be dismissed with costs.
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Decision last updated: 24 May 2011
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