Case: Re NRMA Ltd [2000] NSWSC 82 ; (2000) 33 ACSR 595
Outcome: referred to
The Court's task when considering the convening of a proposed scheme meeting under s 411(1) of the Act was described by Santow J in Re NRMA Ltd [2000] NSWSC 82 ; (2000) 33 ACSR 595 at [3] as follows: The Court must be satisfied, at least at a prima facie level, as to the legality of what it proposed, that there has been proper disclosure with nothing misleading or deceptive in any material sense and that the scheme will, if and when approved by members, be likely then to be approved by the Court as being "so far fair and reasonable as an intelligent and honest man" may approve. It is not for the Court otherwise to be concerned with the merits of the proposal or to inhibit consideration by members so that they can form their own judgment whether to vote for or against. 19 Obviously, one focus of the Court in fulfilling that task is to ensure that there is sufficient disclosure to those who may be affected by the proposed scheme of its details and effect: see Re Central Pacific Minerals NL [2002] FCA 239. In that case, Emmett J at [9] said that, amongst the factors to which the Court should have regard in exercising its discretion whether to convene a meeting, were the acceptability of the documentation of the proposed scheme; the commercial viability and morality of the proposed scheme; the likely acceptability of the proposed scheme; the bona fides of the proposals; whether the proposal could be achieved by another method; and any objections or submissions by the Australian Securities and Investments Commission (ASIC). Both Conti J in Re CSR Ltd (2003) 45 ACSR 34 at 36-37 and Lander J in Re Adelaide Bank Limited [2007] FCA 1582 at [38] referred to those criteria with approval, and as conforming with the observations of Santow J in Re NRMA Limited [2000] NSWSC 82 ; 33 ACSR 595 referred to. 20 I therefore turn to consider the matters of which I had to be satisfied before making an order convening the proposed scheme meeting. The first is that there has been proper disclosure in the proposed explanatory statement as required by s 411(3) of the Act: see Re NRMA Limited [2000] NSWSC 82 ; 33 ACSR 595 at [15] - [49] . The explanatory statement must explain the effect of the proposed arrangement and set out any information that is material to the making of a decision by a member or members to approve or not to approve the proposed scheme. Section 411(3A) in effect requires a statement of all the main facts which will enable shareholders to exercise their judgment whether to support the proposed scheme. I carefully considered the proposed scheme. In my view, adopting the words in s 411(3)(a), the explanatory statement does explain the effect of the proposed scheme, including in particular stating the material interests of the directors of Hostworks, and the effect on those interests of the proposed scheme. On the material, its effect on them is no different from the effect on other members of Hostworks. 21 Section 411(3) requires the explanatory statement to set out the prescribed information, and other information that is material to the making of a decision by a member of Hostworks whether or not to agree to the proposed scheme. Regulation 5.1.01(1) of the Corporation Regulations 2001 (Cth) (the Regulations) provides that, unless ASIC otherwise allows, the explanatory statement must state the matters set out in Pt 3 of Sch 8 to the Regulations and have annexed to it the reports and copies of the documents mentioned. There is nothing to indicate that ASIC has agreed that less information than that prescribed should be provided. I considered each of the pieces of information prescribed in Pt 3 of Sch 8 to the Regulations to determine whether they are contained within the proposed explanatory statement. I will not go through them seriatim. In my view, they are each apparently covered by material in the explanatory statement. 22 In reaching that view, I was assisted by the schedule provided in the written submissions of counsel for Hostworks in which each of the requirements of ss 411 and 412 and Pt 3 of Sch 8 of the Regulations are set out and cross-referenced to the relevant parts of the explanatory memorandum or other materials. There is also evidence from Hostworks that a process of verification was undertaken in relation to each of those pieces of information to ensure that it is accurately reported in or with the explanatory memorandum.