Village Roadshow Broadcasting Pty Ltd v Austereo Ltd
[1997] FCA 572
•24 JUNE 1997
FEDERAL COURT OF AUSTRALIA
CORPORATIONS LAW - take-over offers - compulsory acquisition of minority shareholdings - rights of dissenting offerees - application by company for an order under s 1322(4)(d) of the Corporations Law to abridge period by which dissenting offerees may make application under s 701(6) with respect to notices given by the company under s 701(2) - whether “substantial injustice has been or is likely to be caused to any person” for the purposes of s 1322(6)(c) - consideration of the principles applicable to determining whether it is appropriate to abridge time periods to enable the compulsory acquisition to be completed earlier than otherwise would have occurred.
Corporations Law ss 701(2), 701(6), 701(9), 701(10), 1322(4)(d), 1322(6)
Corporations Regulations reg 602A
Elderslie Finance Corporation Ltd v Australian Securities Commission (1993) 11 ACSR 157
David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265
Gambotto v WCP Limited (1995) 182 CLR 432
Elkington v Shell Australia Ltd (1993) 32 NSWLR 11
Re Hoare & Co Ltd [1933] All ER Rep 105
Elkington v Vockbay Pty Ltd (1993) 10 ACSR 785
VILLAGE ROADSHOW BROADCASTING PTY LTD v AUSTEREO LIMITED
VG 3174 of 1997
GOLDBERG J
MELBOURNE
24 JUNE 1997
IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIAN DISTRICT REGISTRY ) VG 3174 of 1997 ) GENERAL DIVISION )
BETWEEN: VILLAGE ROADSHOW BROADCASTING PTY LTD
ApplicantAND: AUSTEREO LIMITED
Respondent
JUDGE: GOLDBERG J PLACE: MELBOURNE DATE: 24 JUNE 1997
MINUTES OF ORDER
THE COURT ORDERS THAT:
Pursuant to s 1322(4)(d) of the Corporations Law the time after which the applicant shall serve a copy of the notice given by the applicant on or about 23 May 1997 under s 701(2) of the Corporations Law on the respondent Austereo Limited pursuant to s 701(10) of the Corporations Law and otherwise comply with such subsection shall be abridged to 4.15 pm on Tuesday 24 June 1997.
The applicant serve a copy of this order on the Australian Securities Commission.
A copy of this order be sent by post to each person listed in Schedule A to the order of the Court dated 20 June 1997.
The applicant pay the costs of the respondent, Austereo Limited of and incidental to this application including any reserved costs.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIAN DISTRICT REGISTRY ) VG 3174 of 1997 ) GENERAL DIVISION )
BETWEEN: VILLAGE ROADSHOW BROADCASTING PTY LTD
ApplicantAND: AUSTEREO LIMITED
Respondent
JUDGE: GOLDBERG J PLACE: MELBOURNE DATE: 24 JUNE 1997
REASONS FOR JUDGMENT
GOLDBERG J:
On 13 March 1997 the applicant, Village Roadshow Broadcasting Pty Ltd (“Village Roadshow”), a wholly owned subsidiary of Village Roadshow Limited, announced a takeover offer for the whole of the issued capital in Austereo Limited (“Austereo”), to which it was not entitled, at $2.35 per share. On 20 March 1997, a Part A statement was registered with the Australian Securities Commission (“the Commission”) which provided that the offer would close on 4 May 1997. On 10 April 1997 the offer was varied by increasing the offer price to $2.55 and extending the closing date to 9 May 1997. On 11 April 1997, Austereo issued a Part B statement in which the independent directors unanimously recommended that shareholders accept the offer in the absence of a higher offer and they set out a number of factors they considered in formulating their recommendation.
On 29 April 1997 the closing date was extended to 23 May 1997 and on that day the takeover offer closed. By that date, Village Roadshow had received acceptances from approximately 83.91% of the offerees and was entitled to approximately 99.22% of the issued share capital of Austereo. It gave notice on that day that it intended to proceed to compulsory acquisition of all the outstanding shares in Austereo to which it was not then entitled and later that day it despatched notices in the form of reg 602A of the Corporations Regulations to dissenting offerees in accordance with the provisions of s 701(2) of the Corporations Law.
On 5 June 1997, in accordance with its articles, Austereo closed its register of members and since that time there has only been one change in the register which was a transfer of shares from one shareholder to an existing shareholder. At the time of the close of the register, there were 137 dissenting shareholders which included a number of major shareholders and a list of those shareholders is in evidence before the Court.
On 10 June 1997 Village Roadshow wrote to all the shareholders whose shares had not then been acquired (for convenience, I will call them “the dissenting offerees”) and advised them that their shares would be compulsorily acquired by 30 June 1997 for $2.55 per share. For the purpose of seeking to comply in anticipation with s 701(9) of the Corporations Law, that letter enclosed a statement of the names and addresses of all dissenting offerees under the takeover offer and stated that any questions regarding the compulsory acquisition should be directed to Village Roadshow.
Apart from two persons there has been no complaint or issue raised by any of the dissenting offerees about the compulsory acquisition as a result of receiving the letter of 10 June 1997. One shareholder, Linda Stock, who held 3,400 shares, in a letter dated 19 June 1997 drew attention to the fact that the list of dissenting offerees sent on 10 June 1997 was incorrect because it included Village Roadshow’s shareholding in Austereo of 182,180,812 shares and she sought a list containing only dissenting offerees as at 20 or 23 June 1997. It is apparent from the letter that the shareholder was well aware that Village Roadshow was the acquiring shareholder and not a dissenting offeree.
Another dissenting offeree on the list sent to all the dissenting offerees was Robert John Charles Catto who had been registered as the holder of 100 shares on 29 May 1997. In the affidavit material placed before me there are hearsay references to other corporations in respect of which Mr Catto is said to have been involved where there have been compulsory acquisition procedures adopted. However, for the purposes of this application I regard what happened in relation to those other corporations as irrelevant. Mr Catto was at the relevant time registered as a shareholder of Austereo and is entitled to all the benefits of that shareholding, but at the same time is liable to the same procedures which would apply to any shareholding in existence at the relevant time. Apparently in response to the letter of 10 June 1997 Village Roadshow received a handwritten note from Mr Catto on 13 June 1997 in the following terms:
“Dear Secretary
Thank you but I look forward to applying for and receiving an appropriate list at the end of next week as is my right to request under s 701(9).”
That was obviously a reference to s 701(9) of the Corporations Law. It is not clear why he looked “forward to applying for and receiving an appropriate list”. He already had a list and one can only hypothesise that what he was seeking to do was to provide for the possibility of a procedure which might delay the progression of such compulsory acquisition procedure as the applicant wished to undertake. However, I approach the matter before me according to the principles which apply under the relevant statutory provisions.
Section 701(10) provides for alternative dates, including the date of the giving of a written statement of the names and address of dissenting offerees in response to a request by a dissenting offeree, before which an offeree cannot compulsory acquire shares outstanding under a takeover offer. It is in the following terms:
“Unless the Court, on an application made under subsection (6), has ordered to the contrary, the offeror shall, before the end of 14 days after:
(a)the end of one month after the day on which the notice under subsection (2) was given;
(b)the end of 14 days after the last day on which a statement under subsection (9) was given; or
(c)where an application has been made to the Court under subsection (6) - the day on which the application has been disposed of;
whichever last happens, serve a copy of the notice under subsection (2) on the company that issued the shares, together with an instrument of transfer of the shares signed on behalf of the holder of the shares by a person appointed by the offeror and also signed by the offeror, and pay, allot or transfer to the target company the consideration for the transfer, and the target company shall thereupon register the offeror as the holder of those shares.”
In the events which occurred Mr Catto has not applied for a further list and according to the evidence all dissenting offerees received a statement under s 701(9) of the Corporations Law.
The applicant has indicated that it desires to complete the compulsory acquisition by 30 June 1997 because the group of which it is a member can derive significant taxation benefits if completion so occurs and if Austereo is 100% owned by it prior to 30 June 1997. According to the evidence those benefits are not otherwise open to Austereo or its shareholders other than Village Roadshow. However in order to achieve that objective Village Roadshow needs to abridge times provided by the Corporations Law. First, the time within which a dissenting offeree can bring an application under s 701(6) of the Corporations Law. Secondly, the time after which it must serve a notice on Austereo under s 701(10) of the Corporations Law.
Accordingly Village Roadshow applied to the Court by application filed on 19 June 1997 for an order pursuant to s 1322(4)(d) of the Corporations Law abridging the period by which Mr Catto and any other dissenting offeree may make application under s 701(6) of the Corporations Law in respect of notices given by Village Roadshow on or about 23 May 1997 under s 701(2) of the Corporations Law to 10.00 am Tuesday 24 June 1997. Village Roadshow also sought an order that any such application be heard on 24 June 1997 at 2.15 pm and an order abridging the time after which it was obliged to serve a copy of the notice under s 701(2) of the Corporations Law and otherwise comply with s 701(10) until 4.15 pm on Wednesday 25 June 1997 subject to such conditions as the Court imposed.
When that application first came before me on 20 June 1997, I made orders pursuant to s 1322(4)(d) of the Corporations Law that the period within which any of the persons identified as dissenting offerees might make and file an application to the Court pursuant to s 701(6) of the Corporations Law in respect of notices given to them by the applicant on 23 May 1997 under s 701(2) of the Corporations Law be abridged to 10.30 am this day (24 June 1997) unless the Court otherwise ordered. I was satisfied that no substantial injustice would occur as a result of such order. I also gave consequential directions in relation to the filing of any such applications, the time of the directions hearing for any such applications and I also gave consequential orders in relation to service of a notice on all dissenting offerees explaining the application. In the events which occurred no application has been filed in any registry of the Court seeking orders pursuant to s 701(6) of the Corporations Law.
The power of the Court under s 1322(4)(d) is expressed in extremely broad terms and is only circumscribed by the requirement in s 1322(6)(c) that the Court is not to make an order under s 1322(4) unless it is satisfied that “no substantial injustice has been or is likely to be caused to any person”. I would also imply a limitation on subpara (4)(d) that any order made under that subsection must be consistent with the policy of the Corporations Law in relation to the subject‑matter of any particular abridgment sought. As was pointed out by Owen J in Elderslie Finance Corporation Ltd v Australian Securities Commission (1993) 11 ACSR 157, 160, s 1322(4) is a remedial section but in my opinion subparagraph (d), in particular, not only enables the Court to extend the period for doing any act, it also allows the Court to accelerate the time by which an act must be done or a proceeding instituted by abridging the period for doing such act or instituting such proceeding. However it incumbent upon any applicant affirmatively to satisfy the Court that no substantial injustice will be occasioned by such an order and as Owen J said in Elderslie Finance Corporation Ltd v Australian Securities Commission this requires the Court to consider “real, and not merely insubstantial or theoretical prejudice”. The subsection was touched on by the High Court in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265, 274 - 276, 278 but not in any context relevant to the issues now before this Court.
In compliance with my order of 20 June 1997 a notice was given to all dissenting offerees in the form of a notice annexed to my order which explained the history of the matter in general terms and set out in substance the order which I made on 20 June 1997. No application was filed in any of the registries of the Federal Court by 10.30 am this morning and there is no opposition to the application. Mr Levy who appeared for Austereo said that Austereo had no opposition to the application. I had also directed that the papers be served on the Commission and Mr Hiland, who appeared for the Commission, has provided the Court with written and oral submissions.
Mr Hiland said that the material which had been placed before the Court, as far as the Commission could see, did not involve any substantial injustice to any of the dissenting offerees, the remaining shareholders in Austereo, if the relief was granted. He noted, as was the fact, that notice and information had been given to the dissenting offerees and they had been given the opportunity to take remedial action but none had been taken under s 701(6). The difficulty which has arisen is that having regard to the time at which the takeover offer had been announced and then carried into effect, there is little time left before the end of the current financial year within which to implement and complete the compulsory acquisition. It was presumably for that reason that Village Roadshow acted uninvited and voluntarily by sending to the dissenting offerees a statement of the names and addresses of all the other dissenting offerees thereby seeking to comply in advance with s 701(9) of the Corporations Law. By doing so Village Roadshow has sought to bring forward the date by which any dissenting offeree must make an application to the Court under s 701(6) to deny Village Roadshow the right to acquire compulsorily the outstanding shares in Austereo.
However I do not consider this purpose is an inappropriate purpose such as to prevent an abridgment of time under s 1322(4)(d). The whole purpose of s 701, insofar as its procedure is concerned, is to give dissenting offerees full information and an opportunity to challenge a compulsory acquisition. The notice under s 701(2) was given on 23 May 1997 and a statement of the names and addresses of all dissenting offerees was given on 10 June 1997. Ms Stock sought a further statement of the names and addresses of all dissenting offerees as at close of business on 20 June 1997 or 23 June 1997. Mr Catto indicated he was going to request a further statement but he never did. However in the events which occurred the shareholders were given the required information and I consider that if a company sends a statement of the names and addresses of dissenting offerees to a dissenting offeree and then that person requests a statement the company is entitled to say the statement you have received is in compliance with the requirement of s 701(9) that you be provided with the statement. This proposition is, of course subject to there having been no subsequent change by way of addition to the dissenting offerees.
The purpose of the application is to enable Village Roadshow to gain taxation and financial advantages by Austereo becoming 100% owned before the end of the financial year. Is this a purpose which justifies the Court in abridging times laid down in the Corporations Law? The matter before me discloses the operation of two policies found in the Corporations Law. As Mr Hiland noted there is a legislative policy in favour of compulsory acquisition if certain pre‑conditions are met. On the other hand the interests of shareholders must be considered and balanced because if private rights are to be extinguished they should only be extinguished in the clearest of cases in the manner allowed by the Corporations Law and by having the proper procedure laid down in the legislation followed.
In Gambotto v WCP Limited (1995) 182 CLR 432 the High Court had to consider circumstances where articles were altered so as to enable a shareholder holding more than 90% of the issued shares in a company to acquire compulsorily shares held by minority shareholders for a stipulated price. The shareholding of the company was such that the majority shareholder could not have acquired the shares compulsorily under the Corporations Law. There were considerable taxation advantages and administrative benefits available if the company had become a wholly owned subsidiary of the majority shareholder. The High Court did not regard that as a proper reason justifying altering the articles to enable expropriation of the minority shareholders. The amendment to the articles was held invalid. The majority of the Court said (448):
“The immediate purpose of the amendment was to allow the expropriation by the majority shareholder of the shares held by the minority, including shares held by the appellants. There is no suggestion that the appellants’ continued presence as members puts W.C.P.'s business activities at risk or that the appellants have in some way acted to W.C.P.'s detriment. Nor is there any suggestion that W.C.P. sought 100 per cent ownership in order to comply with the regulatory regime. All that is suggested is that taxation advantages and administrative benefits would flow to W.C.P. if minority shareholdings were expropriated and W.C.P. were to become a wholly owned subsidiary of I.E.L. In our view, however, that cannot by itself constitute a proper purpose for a resolution altering the articles to allow for the expropriation of minority shareholder’s shares.”
However, that is not the situation which is before the Court. Village Roadshow has an entitlement under s 701, subject to following the required procedures and subject to any order of the Court to the contrary, to acquire compulsorily the shares of dissenting offerees. Indeed having given notice to dissenting offerees on 23 May 1997 under s 701(2), Village Roadshow became obliged to acquire the shares owned by dissenting offerees unless a successful application was made within the prescribed time by a dissenting offeree for an order that it not be entitled to acquire the shares. Further in the context of the s 701 procedure, it seems to me that the existence of taxation and financial advantages and their availability to a company in a compulsory acquisition regime is not a disentitling factor on an application to abridge time (Elkington v Shell Australia Ltd (1993) 32 NSWLR 11, 16,18) so long as what occurs in all the circumstances does not result in an injustice and is otherwise fair to the dissenting offerees. Although no application has been made to the Court under s 701(6) the principles which the Court would apply on such an application are relevant in considering whether the time by which the compulsory acquisition can occur should be brought forward. The relevant principles were considered by the New South Wales Court of Appeal in Elkington v Shell Australia Ltd (supra) at 18 and 19 where the majority of the court (Sheller JA, Meagher JA agreed) said:
“... the evident purpose of authorising the Court to interfere with compulsory acquisition is to provide relief in cases where injustice would otherwise ensue.”
Although the proceeding before the Court is unopposed there does not appear to be any basis for suggesting there would be any injustice if the compulsory acquisition proceeds. In Elkington v Shell Australia Ltd (supra) the Court of Appeal affirmed the decision at first instance of McLelland J in (1992) 10 ACSR 568 where at 570 his Honour noted the numerous authorities on provisions equivalent to s 701 which commenced with what he called “the still influential decision” in Re Hoare and Co Ltd [1933] All ER Rep 105. The majority of the Court of Appeal regarded the approach in Re Hoare and Co Ltd (supra) as appropriate and cited the following passage from that decision (at 20):
“... I think .... the view of the legislature is that where not less than nine‑tenths of the shareholders in the transferor company [meaning the target company] approve the scheme or accept the offer, prima facie, at any rate, the offer must be taken to be a proper one, and in default of an application by the dissenting shareholders, which includes those who do not assent, the shares of the dissentients may be acquired on the original terms by the transferee company. Accordingly, I think it is manifest that the reasons for inducing the court to ‘order otherwise’ are reasons which must be supplied by the dissentients who take the step of making an application to the court, and that the onus is on them of giving a reason why their shares should not be acquired by the transferee company.
One conclusion which I draw from that fact is that the mere circumstance that the sale or exchange is compulsory is one which ought not to influence the court.”
There is nothing in the material before the Court which gives rise to any suggestion that the compulsory acquisition should not proceed.
I also refer in passing to Elkington v Vockbay Pty Ltd (1993) 10 ACSR 785 where Owen J noted that the essential question to be asked in relation to an application under s 701 is whether the offer is fair and reasonable. His Honour (at 793 - 794) set out seven principles to be considered in determining whether an offer is fair and reasonable for the purposes of s 701:
“First, the onus is on the dissenting shareholder to establish that the offer is unfair ...
Secondly, the test of whether an offer is fair is whether it is fair to the body of shareholders as a whole rather than whether it is fair to the particular shareholder in the peculiar circumstances of his case ...
Thirdly, although in some cases such an onus may be discharged with ease, the evidentiary burden to show that the offer is unfair will be greater where it is the fact that the offeror has already received acceptances from a large proportion of the shareholders holding a large proportion of the issued capital ... On the other hand it must always be borne in mind that the compulsory acquisition procedure involves an exceptional interference with rights of individual ownership and a degree of circumspection is required ...
Fourthly, it is not sufficient to demonstrate that the offer is open to criticism or could be improved upon ...
Fifthly, in the absence of very strong grounds, the court should be guided by what commercial people, who are concerned with the transaction, think about the offer and should be slow to substitute its own view of the fairness of the scheme in opposition to the stance apparently taken by the majority of those who are more directly involved ...
Sixthly, the degree of compliance with statutory formalities is a factor which could impinge on notions of fairness ...Finally, in determining whether the offer is fair, the court is not restricted to examining the amount of the consideration offered, but may investigate the conduct of the offeror in the period preceding the making of the offer ...”
Although it is not strictly necessary to apply these principles in relation to the application before the Court, no application under s 701(6) having been made, I have given consideration to them in determining whether it is appropriate to abridge times to enable the compulsory acquisition to be completed some days earlier than otherwise would have occurred had the application not been made. In this respect I have taken into account the submissions of the Commission and the recommendations of the independent directors in the Part B statement. I have noted in particular that the Commission submitted that in considering the interests of all shareholders generally and in particular in relation to this proceeding, the Commission in determining not to oppose the orders sought was mindful of four matters:
(a)the commercial advantages to be derived by the applicant in abridging the time;
(b)the fact that a dissenting shareholder wishing to make an application under s 701(6), has had in his or her possession a list of all other dissenting shareholders from as early as 11 June 1997;
(c)that it is not apparent to the Commission on the material available to it that any substantial injustice will result to a dissenting shareholder if the time is abridged; and
(d)that it is generally desirable that the legitimate commercial objectives of offerees are not frustrated by reliance upon “black letter law”.
In all the circumstances, and on the material before the Court, I am satisfied that no substantial injustice has been or is likely to be caused to any person by the making of the orders sought. However, I should point out that my reasoning in this case is limited to the particular circumstances before me. Mr Hiland submitted that each case where abridgment of time is sought must be dealt with by reference to its particular circumstances. That is a self evident proposition but it needs to be made clear because a case such as the case before the Court does not necessarily become a precedent for future cases. Section 701(9) is part of a statutory regime which enables dissenting offerees to request statements of names and addresses of other dissenting offerees and then requires the offeree to respond to that request. It should not be thought that it would always be the situation that an anticipation by a company of a request under s 701(9) would always obviate the necessity to comply with the request, much would depend upon the particular circumstances at the particular time. Accordingly I am disposed to make the order sought, namely that pursuant to s 1322(4)(d) of the Corporations Law the time after which the applicant shall serve a copy of the notice given by the applicant on or about 23 May 1997 under s 701(2) of the Corporations Law on the respondent Austereo Limited pursuant to s 701(10) of the Corporations Law and otherwise comply with such subsection shall be abridged to 4.15 pm on Tuesday 24 June 1997.
I certify that this and the preceding twelve (12) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg
Associate:
Dated: June 1997
Counsel for the Applicant: Mr R McK Robson QC & Mr J Delany Solicitor for the Applicant: Herbert Geer & Rundle Counsel for the Respondent: Mr L M Levy Solicitor for the Respondent: Freehill, Hollingdale & Page Counsel for the Australian Securities Commission Mr P Hiland Solicitor for the Australian Securities Commission Ms J Frawley Dates of Hearing: 24 June 1997
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