Re Auckland International Airport

[2014] NZHC 405

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-5024 [2014] NZHC 405

IN THE MATTER OF       Part XV of the Companies Act 1993

BETWEEN  AUCKLAND INTERNATIONAL AIRPORT

Applicant

Hearing:                   On the papers

Judgment:                7 March 2014

JUDGMENT OF WINKELMANN J

This judgment was delivered by me on 7 March 2014 at  3.00 pm pursuant to

Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Solicitors:

Russell McVeagh, Auckland

Auckland International Airport [2014] NZHC 405 [7 March 2014]

[1]      The Auckland International Airport (the Airport) seeks to implement a return of capital to its shareholders by scheme of arrangement pursuant to part 15 of the Companies Act 1993.  It is to be effected by a pro-rata cancellation of one in every

10 shares held by the Airport shareholders.   Shareholders will be paid $3.43 for every share cancelled.  The arrangement is intended to return $454 million in excess capital to shareholders, with the effect of increasing the efficiency of the Airport’s balance sheet by improving its balance of equity and debt.  The Airport requires the sanction of this Court of the arrangement under s 236(1) of the Companies Act 1993.

[2]      On 29 November 2013 the Airport applied for initial orders convening a special meeting of shareholders to consider, and if thought fit, approve the arrangement.   It also applied for directions as to information that all shareholders were entitled to receive before the meeting.  The Airport applied on a without notice basis for orders dispensing with service of the application for both the initial and final orders.   Finally the Airport applied for orders dispensing with representation concerning the initial orders only.   I made those orders as sought by minute dated

11 December 2013.

[3]      On 12 December 2013 the Airport announced on the NZX and ASX that a special meeting had been ordered, and would take place in mid-February 2014.  In accordance with the orders made, shareholders were provided in advance of that meeting with a notice of special meeting, which included the resolution to be put approving the arrangement and accompanying explanatory notes.  Shareholders were also provided with the form of admission card and proxy form for use at the meeting, a letter from the Chair of the Airport and a copy of the application for final court orders.    These  materials  were  also  made  available  on  the Airport’s  website  12 working days before the meeting.

[4]      The meeting took place on 12 February 2014.  99.34% of votes supported the arrangement resolution, totalling 814,125,795 in favour out of 819,567,954 total

votes.1   The 75% threshold required of special resolutions was accordingly satisfied

1      The total votes cast was 819,567,954; the total votes cast for was 814,125,795; the total votes cast against was 5,442,159; 13,001,882 votes abstained; and 99.34% of votes cast by those shareholders entitled to vote and voting on the Arrangement Resolution (whether in person or by proxy) were cast in favour of the Arrangement Resolution.

by a comfortable margin.  Sir Henry Van Der Heyden, chair of the Airport’s board of directors, has filed an affidavit in support of final orders.  Sir Henry attests that the meeting was conducted in compliance with the Companies Act, NZX Main Board Listing Rules, ASX Listing Rules and the Airport’s constitution.

[5]      The Chairman explains in his affidavit that at the meeting, the Airport’s chief executive and chief financial officer outlined the reasons for the proposal.   Both noted  the  proposal’s  aim  of  rebalancing  the Airport’s  equity  and  debt  totals  to achieve a more efficient capital structure.  The return of capital mechanism was put to shareholders as a tax efficient means to return excess capital while maintaining proportionate shareholding.  The Airport emphasised that notwithstanding the return of capital to investors, the company’s management believed the company was in a good position to deliver on its future growth strategies.

[6]      Shareholders  were  given  the opportunity to  express  any concerns, and  a number of shareholders spoke in favour and against the resolution.  Sir Henry says that those who spoke against the resolution largely sought further clarification of the proposal and its effect on shareholders and/or expressed views about how the available capital might be better utilised by the Airport.  The chief executive, chief financial officer, chair and other management responded to any queries raised.  Sir Henry says that no shareholder indicated that they would oppose the Airport seeking the final orders requested in the current application, nor has any formal opposition been received.

[7]      The Airport now applies again on a without notice basis for final orders of this Court sanctioning the arrangement under part 15 of the Companies Act 1993.  It also applies for an order dispensing with service on and representation by any person in respect of this proceeding.

Test for granting final orders

[8]      The principles to be applied to an application for sanction of arrangement under part 15 of the Act are as stated in the decision of Smith J in Re CM Banks Ltd2

2      Re CM Banks Limited [1944] NZLR 248 (SC).

now as supplemented by Weatherston v Waltus Property Investment Ltd.3    In CM Banks Ltd Smith J formulated a four step test as follows:4

(a)      that there has there been compliance with the statutory provisions as to meetings, resolutions, the application to the Court, and the like;

(b)that the arrangement has been fairly put before the class or classes concerned, and that if a circular or circulars have been sent out, the circular gave all the information reasonably necessary to allow the recipients to judge and vote upon the proposals;

(c)      that  the  class  was  fairly  represented  by  those  who  attended  the meeting, and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and

(d)that the arrangement is such that an intelligent and honest person of business, a member of the class concerned and acting in respect of his or her interests, might reasonably approve.

[9]      In Weatherston v Waltus Property Investment Ltd the Court of Appeal held that it was appropriate to supplement the test of an intelligent and honest business person by consideration of whether the arrangement is fair and equitable, because it was implicit in the test of the intelligent and honest business person that the arrangement was also fair and equitable.5

[10]     In this case there has been compliance with the relevant statutory provisions and with the initial orders made.  As the Chairman has stated, the meeting was held in accordance with the Companies Act, the NZX Main Board Listing Rules, the ASX

Listing Rules and also with the constitution of the Airport.

3      Weatherston v Waltus Property Investment Limited [2001] 2 NZLR 103.

4      Re CM, above n 2, at 253

5      Weatherston, above n 3, at [35].

[11]     I am satisfied that the information provided to shareholders fairly and fully explained what was proposed, its intended effect and the reason why the Airport proposed to implement a return of capital.

[12]     There is only one class affected by this, the ordinary shareholders, whose interests  can  be  expected  to  be  homogenous.    There  is  no  suggestion  of  an oppression of a minority.

[13]     Although there was some expression of opposition by a small number of shareholders  at the meeting, there was no reason articulated for that  other than according to the Chair, a wish to seek more clarification or the suggestion the capital could be otherwise better employed.  There is no evidence of any prejudice to any particular shareholder.  Of the votes cast, 99.34% were in favour of the arrangement resolution.   No shareholder indicated at the meeting that they would oppose the granting of final court orders if the arrangement met with shareholder approval.

[14]     Counsel for the Airport advises that prior to the meeting on 3 February 2014, counsel for the Airport received one piece of direct correspondence from a shareholder indicating that the shareholder did not approve of the transactions.  This correspondence took the form of a copy of the application for final court orders marked up by hand as follows:

Not been reasonable at this time.  DO NOT approve.

Counsel confirms that no further correspondence has been received from the shareholder.

[15]     Having taken these matters into account, I am satisfied that the test in CM Banks, as supplemented by the later Weatherston decision, is satisfied in this case. There is only one class of shareholder, so there is no risk of one class oppressing another.  Nearly all shareholders voted in favour of the resolution, with only a small minority voting against.  There has been no articulation at any point of any reasons why the arrangement will prejudice any shareholder unfairly or otherwise.   The arrangement is such that an intelligent and honest person of business would reasonably approve it.   The proposal is fair and equitable because the Airport’s

shareholders remain in the same economic position following the implementation of the arrangement and their rights will be unaffected.

[16]     There is also no suggestion of prejudice to creditors.  On 19 February 2014 the directors of the Airport completed a solvency certificate stating that in their opinion, the company will satisfy the solvency test immediately after payment to each shareholder of $3.43 for each share cancelled, and the grounds of that opinion.

[17]     I am also satisfied that there is no need to serve the application for these final orders, nor to order representation for shareholders in general or any group or groups of shareholders in respect of them.  No shareholder has indicated they will oppose granting of the final order if the arrangement met with shareholder approval.  Nor has the company received notice of intended opposition in the face of shareholder approval.  I therefore proceed on the basis that there is no shareholder who wishes to oppose the return of capital in circumstances where that return has been approved by the required majority.

[18]     I therefore make orders in the terms sought as follows:

1.Sanctioning the Arrangement set out in the Arrangement Document (a copy of which is annexed).

2.Declaring the Arrangement to be binding upon Auckland International Airport Limited (Auckland Airport), all its shareholders and all such other persons necessary with, inter alia, the effect that:

(a)      One ordinary share (share) for every 10 shares in Auckland Airport registered in the name of each Shareholder (as defined in the Arrangement Document) at 5.00 pm on the Record Date (as determined pursuant to the Arrangement Document), together with all the rights attaching to those Shares, shall be cancelled.   Fractions of a Share shall be rounded up to the nearest whole share.

(b)Within  10  business  days  after  the  Record  Date, Auckland Airport shall pay to each Shareholder $3.43 for each share registered  in  the name  of the Shareholder which  has  been cancelled in accordance with paragraph (a) above.

3.Dispensing with any further formal service on, and representation by, any person in respect of this proceeding.