Fonterra Co-Operative Group Limited - [2023] NZHC 2118

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-1064

[2023] NZHC 2118

UNDER Part 15 of the Companies Act 1993

IN THE MATTER OF

An application for orders approving a scheme of arrangement under part 15 of the Companies Act 1993

BETWEEN

FONTERRA CO-OPERATIVE GROUP LIMTIED

Applicant

Hearing: On the papers

Appearances:

K M Massey and H M Bain for the Applicant

Judgment:

9 August 2023

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 9 August 2023 at 4.30 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:
Russell McVeagh, Auckland
RE FONTERRA CO-OPERATIVE GROUP LTD [2023] NZHC [2118]

Introduction

On 26 May 2023, Fonterra Co-operative Group Limited (Fonterra) filed an originating application for orders approving a scheme of arrangement between Fonterra and its shareholders under part 15 of the Companies Act 1993 (Scheme). The Scheme is intended to return approximately $800 million of capital to shareholders by way of share repurchase and cancellation together with contemporaneous share subdivision so that following the return of capital, the shareholders will still hold the same number of shares.

I made Initial Orders on 9 June 2023 to facilitate service and the consideration of and voting on the Scheme by Fonterra’s Shareholders (9 June Judgment).1 The 9 June Judgment details the background and rationale for the Scheme.

At Fonterra’s request, the Initial Orders were amended in certain respects by my minute dated 11 July 2023. In this judgment references to the Initial Orders are to the Initial Orders as revised on 11 July 2023.

The Initial Orders included orders directing Fonterra to:

(a)convene a special meeting of Shareholders in order for shareholders to consider and vote on the Scheme (Scheme Meeting);

(b)at the Scheme Meeting, put forward for Shareholders’ consideration a resolution approving the Scheme (Resolution); and

(c)in advance of the Scheme Meeting, distribute certain materials to Fonterra’s Shareholders informing them about the Scheme, notifying them of the Scheme Meeting and providing instructions as to how to vote (whether at the Scheme Meeting, online or by post) (Shareholder Materials).

1 Re Fonterra Co-operative Group Ltd [2023] NZHC 1438. See definition of Shareholders at [9]. Other capitalised terms are as defined in this judgment or in the 9 June Judgment.

Fonterra’s Shareholders have now voted on the proposed Scheme with 99.24 per cent of the Shareholders entitled to vote and voting on the Resolution voting in favour of the Scheme, well in excess of the threshold of 75 per cent for approval required by the Initial Orders.

No notice of opposition or appearance has been filed or served in accordance with the timetable set out in the Initial Orders or at all.

Following a request from counsel for Fonterra, I issued a minute on 8 August 2023 vacating the hearing for the Final Orders Application scheduled for today, 9 August 2023, and instead…

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.

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Details

Case: [2023] NZHC 2118
Decision Date: 9 August 2023

CaseChat Overview and Summary

Fonterra Co-operative Group Limited (Fonterra) filed an application for orders approving a scheme of arrangement under part 15 of the Companies Act 1993. The proposed scheme involves a return of approximately $800 million of capital to Fonterra's shareholders by way of share repurchase, cancellation, and share subdivision. The scheme was overwhelmingly supported by the shareholders, with 99.24% of the votes cast in favor. The court examined the scheme under the established four-step test to determine whether the discretion should be exercised in respect of the scheme. The court found that Fonterra complied with all relevant statutory provisions, the scheme was fairly put to shareholders, the shareholders were fairly represented at the meeting, and the scheme was fair and equitable. The court approved the scheme of arrangement, binding it upon Fonterra, its shareholders, and other necessary parties. Fonterra was also granted leave to apply to the court for approval of any amendment, modification, or supplement to the scheme if necessary.

This case demonstrates the court's role in reviewing and approving schemes of arrangement under the Companies Act 1993. The court carefully considered the statutory requirements, fairness, and overall reasonableness of the proposed scheme before granting its approval. The outcome highlights the broad discretion afforded to the court in determining whether to sanction a scheme of arrangement that aims to restructure a company's capital and rights of its shareholders.

Orders