Tower Limited

[2022] NZHC 328

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-002299

[2022] NZHC 328

UNDER

Part 15 of the Companies Act 1993

IN THE MATTER

of an application by TOWER LIMITED a duly incorporated company having its registered office at Level 5, 136 Fanshawe Street, Auckland, and carrying on business as an insurer, for approval of an arrangement.

AND

TOWER LIMITED

Applicant

Hearing:	On the papers
Counsel:	SCDA Gollin and AE Simkiss for Applicant
Judgment:	1 March 2022

JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Tuesday, 1 March 2022 at 4:30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:           MinterEllisonRuddWatts (A Simkiss and S Gollin), Auckland

RE TOWER LIMITED [2022] NZHC 328 [1 March 2022]

[1]                 On 30 November 2021, Tower Limited (Tower) filed an originating application for a High Court order approving an arrangement between Tower and its shareholders for the return of capital (the arrangement). It is proposed that one of every 10 ordinary shares will be cancelled, and shareholders will be paid NZ$0.72 for each share which is cancelled.

[2]                 On 10 December 2021, Associate Judge Sussock made numerous procedural orders which were needed to facilitate consideration of and voting on the arrangement by  Tower’s  shareholders.  Tower  held  its  Annual  General  Meeting  (AGM)  on  2 February 2022. Of the shareholders voting, 99.46 per cent approved the arrangement. The Commissioner of Inland Revenue has also approved the arrangement. Tower now requests the Court to make the substantive orders sought in the originating application.

Compliance with procedural orders

[3]                 Except in one unavoidable respect, Tower has complied with the procedural orders. The one respect in which there was non-compliance arose because of the need for compliance with COVID-19 health restrictions.

[4]Order 3(b) made by Associate Judge Sussock directed:

(b)Tower shall hold an Annual General Meeting of its shareholders (“Meeting”):

(i)at a venue  in Auckland  at  10:00am  NZT  on  Wednesday, 2 February 2022 (or on a date to be determined by Tower and in accordance with Tower’s constitution); and

(ii)livestream the Meeting via an online web platform which shareholders can access using a computer, laptop, tablet or smartphone;

[5]                 On 23 January 2022, New Zealand moved to a COVID-19 red traffic light setting, which would have limited attendance at the AGM to 100. As a result, Tower determined that the AGM should be held on-line only. The change was notified to shareholders via the NZX and ASX and where possible, by e-mail, on 25 January 2022 and the AGM proceeded on that basis.

[6]                 Such a change was foreshadowed in the materials earlier sent to shareholders. I am satisfied that changing the AGM to on-line only was also appropriate and unavoidable given  the  restrictions  on  in-person  meetings  which  applied  from  23 January 2022 and the need to have regard to the health and well-being of potential attendees. Sufficient notice was given of the change and there was no prejudice to shareholders. The non-compliance (in part) with order 3(b) is not material to a consideration of the final orders because of the unavoidability of the change.

The Law

[7]                 Part 15 of the Companies Act 1993 (the Act) deals with the approval of arrangements, amalgamations and compromises by the Courts. Section 236(1) of the Act provides:

236     Approval of arrangements, amalgamations, and compromises

(1) Notwithstanding the provisions of this Act or the constitution of a company, the court may, on the application of a company or any shareholder or creditor of a company, order that an arrangement or amalgamation or compromise shall be binding on the company and on such other persons or classes of persons as the court may specify and any such order may be made on such terms and conditions as the court thinks fit.

[8]                 The principles to be applied by the Court for approval of the arrangement under Part 15 of the Act derive from those stated in the decision of Smith J in Re C M Banks Ltd.1 These principles have been summarised more recently in the decision of Associate Judge Lester in Re PGG Wrightson Ltd, applied in Re Tilt Renewables Ltd, as follows:2

(a)whether there has been, and there will be, compliance with the relevant statutory provisions, including as to the conduct of the Special Meeting and the opportunity given to interested parties to be informed of the Scheme and take steps to oppose it;

1      Re C M Banks Ltd [1944] NZLR 248 (SC).

2      Re PGG Wrightson Ltd [2019] NZHC 1780 at [12]; and Re Tilt Renewables Ltd [2020] NZHC 1398 at [6].

(b)whether the Scheme has been fairly put to the class or classes concerned, including whether the information provided to shareholders fully and fairly explained what was proposed, its intended effect, the reason why it was proposed and the reasons why independent directors recommended it;

(c)whether the classes were fairly represented by those who attended the meeting, and acted bona fide without coercion;

(d)whether the arrangement is such that an intelligent and honest person of business might reasonably approve it, including whether the proposal is “fair and equitable”.

Discussion

Compliance with relevant statutory provisions

[9]                 Notice of the AGM and of the originating application was given in accordance with the procedural orders made by Associate Judge Sussock. I am satisfied that the AGM was otherwise held in accordance with the procedural orders,3 and in accordance with the Act, Tower’s constitution, the NZX Main Board Listing Rules and the ASX Listing Rules. Tower also made all relevant announcements using the NZX and ASX in compliance with the procedural orders, the NZX Main Board Listing Rules and the ASX Listing Rules.

Fairly put to shareholders

[10]              On 22 December 2021, shareholders were provided with the shareholder materials by either post or e-mail. The materials were also posted on the Tower website and the NZX and ASX websites for inspection and download. I am satisfied that the shareholder materials fully and fairly explained the arrangement to shareholders so as to enable them to consider and vote upon the arrangement on an informed basis.  In particular, the shareholder materials explained what was being

3      With the variation noted in [5] above.

proposed, its intended effect and the reason why the Tower Board had decided to recommend a return of capital.

[11]              At the AGM, Tower’s Chairman explained how the arrangement would work, its effect, and reiterated the reasons for the arrangement. Shareholders asked two questions, which were answered by the Chairman and Tower’s Chief Financial Officer.

Shareholders fairly represented

[12]              This Court has previously held that in the case of pro rata returns of capital to one class of shareholder there are unlikely to be any issues.4 The Tower shareholders belong to a single class with the same rights. Each shareholder was fairly represented at the Annual General Meeting either in person or by proxy. There is no suggestion that the shareholders who voted in favour of the special resolution were acting other than bona fide. Additionally, there is no suggestion of bias.

[13]              I am satisfied that shareholders had a sufficient amount of time to take steps to oppose the arrangement if they wished to do so. Tower has not received any opposition documents from any shareholder in the manner set out in the procedural orders.

Reasonable for intelligent and honest persons of business to approve

[14]              Drawing on the approach taken by Muir J in Re Tilt Renewables Ltd,5 I am satisfied that the return of capital is reasonable in the circumstances. As explained by the Chairman of Tower:

(a)Tower has surplus capital above its prudential solvency margin;

(b)Tower’s Board considers that there are no appropriate acquisition opportunities presently available to Tower and the surplus funds are not required for the execution of Tower’s general business strategy;

4      Re Auckland International Airport [2014] NZHC 405 at [15]; Re New Zealand Oil and Gas Ltd

[2017] NZHC 809 at [14]; Re PGG Wrightson Ltd, above n 2, at [15].

5      Re Tilt Renewables Ltd, above n 2.

(c)The arrangement is the fairest and most efficient way to return capital to Tower’s shareholders.

[15]              The arrangement also has the unanimous support of the Board. Further, it has the overwhelming support of participating shareholders, which is an indication that the arrangement is one that an intelligent and honest business person would enter into.

[16]              Finally, I am satisfied that the arrangement does not prejudice any third party. There is no question as to Tower’s ability to pay its debts as they fall due. Tower will continue to satisfy the solvency test prescribed by the Act and the Reserve Bank of New Zealand without difficulty.

Result

[17]              The application for Court approval of the arrangement is granted. The following substantive orders are made:

(a)approving the scheme of arrangement described in the Arrangement Document (a draft of which is attached to the originating application marked “A”) between Tower and its shareholders for the return of capital (the Arrangement);

(b)declaring the Arrangement to be binding upon Tower, all its shareholders, and all such other persons necessary to give effect to the Arrangement, with (amongst other things) the effect that:

(i)One (1) of every ten (10) ordinary shares registered in the name of each shareholder at 7:00pm on either 4 March 2022, or the date that is five business days after the date on which final orders of this Court are made sanctioning the Arrangement, whichever is the latest (Record Date), together with all rights attaching to those shares, will be cancelled.

(ii)Within 10 business days after the Record Date, Tower will make payment by direct credit to each shareholder of NZ$0.72 for

each share registered in the name of the shareholder, which has been cancelled in accordance with paragraph (i) above.

(iii)Shareholders with an address on the register in Australia at 7:00pm on the Record Date will be paid NZ$0.72 converted into Australian dollars at the exchange rate organised by Tower’s share registrar on or about that time as approved by Tower.

(c)dispensing with formal service of this application, or any other application made by Tower in this proceeding, on any person; and

(d)granting leave to apply to this Court for approval of any amendment, modification, or supplement to the Arrangement.

Woolford J