FEDERAL COURT OF AUSTRALIA Rebel Sport Limited, in the matter of Rebel Sport Limited (No 2) [2007] FCA 458 IN THE MATTER OF REBEL SPORT LIMITED (ACN 003 382 823) NSD 90 of 2007 LINDGREN J 19 MARCH 2007 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 90 OF 2007 IN THE MATTER OF REBEL SPORT LIMITED (ACN 003 382 823) BETWEEN: REBEL SPORT LIMITED (ACN 003 283 823) Plaintiff JUDGE: LINDGREN J DATE OF ORDER: 19 MARCH 2007 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to subsection 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the Court approves the scheme of arrangement between Rebel Sport Limited ACN 003 283 823 (Rebel) and its ordinary shareholders other than Excluded Shareholders, being Foghorn Holdings Pty Limited ACN 122 558 874 and its related bodies corporate (Scheme), a copy of which is annexed and marked "A". 2. Pursuant to section 411(12) of the Act the plaintiff be exempt from compliance with section 411(11) of the Act in respect of the Scheme. 3. These orders be entered forthwith. 4. The original exhibits be returned to the plaintiff forthwith. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 90 OF 2007 IN THE MATTER OF rebel sport limited (ACN 003 283 823) BETWEEN: REBEL SPORT LIMITED (ACN 003 283 823) Plaintiff JUDGE: LINDGREN J DATE: 19 MARCH 2007 PLACE: SYDNEY REASONS FOR JUDGMENT (No 2) (second court hearing) 1 On 6 February 2007, I made an order pursuant to s 411(1) of the Corporations Act 2001 (Cth) ("the Act"), that the plaintiff Rebel Sport Limited ("Rebel") convene a meeting ("Scheme Meeting") of the holders of ordinary shares in Rebel (other than "Excluded Shareholders", being Foghorn Holdings Pty Limited ("Foghorn") and its related bodies corporate) ("Rebel Shareholders"), for the purpose of considering and, if thought fit, approving a scheme of arrangement (with or without modification) proposed to be made between Rebel and Rebel Shareholders ("the Scheme"). I published reasons for the making of that order (Rebel Sport Limited, in the matter of Rebel Sport Limited [2007] FCA 96). 2 The Scheme Meeting was held on 15 March 2007, when a resolution that the Scheme be agreed to by the Rebel Shareholders was passed by a majority of the Rebel Shareholders present and voting (either in person or by proxy), and when more than 75 percent of the votes cast were in favour of the Scheme. 3 The result of the voting as declared by the Chairman of the Scheme Meeting is shown in the following table: Number of Votes Percentage of Votes Number of Holders Percentage of Holders Votes cast FOR the motion 51,449,874 76.69% 679 87.05% Votes cast AGAINST 15,636,324 23.31% 101 12.95% the motion Total Votes Cast 67,086,198 780 4 The evidence before the Court on this second court hearing satisfies me that the Scheme Meeting was duly convened, and, in particular, that orders 1(g) and 3 of 6 February 2007 were duly observed. 5 The following particular matters are noteworthy. 6 (1) As at 13 March 2007, being the Meeting Record Date, Rebel had 3,121 shareholders who held 80,260,043 shares. Of them, 780 shareholders voted, being a participation rate of 24.99 percent. In all, 67,086,198 shares were voted, being a participation rate of 83.59 percent. 7 (2) According to order 1(e) made on 6 February 2007, at the Scheme Meeting, Rebel Shareholders were to be entitled to one vote for each Rebel share they were registered as holding at 10.00 am on 13 March 2007. Due to inadvertence, the Scheme Meeting proceeded and the votes were counted on the basis of registered holdings at close of business on 13 March 2007. There is evidence that 432,694 shares in Rebel were traded on 13 March 2007. According to affidavit evidence before the Court, an exercise has been carried out on the assumption that all 432,694 shares were in fact voted in favour of the Scheme, and that if they had not been transferred during the course of 13 March 2007, they would all have been voted against the Scheme. In other words, on this hypothesis most unfavourable to Rebel's application for the Court's approval, the number of votes in favour of the Scheme would have been reduced by 432,694, and the number of votes against the Scheme would have been increased by that number. 8 The hypothetical exercise gives the following figures: Number of Shares Percentage of Shares Number of Shareholders Percentage of Shareholders Votes cast FOR the motion 51,017,180 76.05% 671 85.04% Votes cast AGAINST 16,069,018 23.95% 118 14.96% the motion Total Votes Cast 67,086,198 789 As can be seen, the resolution would still have been passed by a majority in number of the Rebel Shareholders voting (in person or by proxy) and by more than 75 percent of the votes cast. 9 (3) There were two late proxy forms, that is to say, proxy forms received after 10.00 am on 13 March 2007, the Meeting Record Date. Those who lodged the late proxies were National Nominees Limited and Invia Custodian Pty Limited. I need not discuss in detail how these two shareholders were treated. It suffices to say that the votes cast by both were counted, and then an exercise was done, in effect, subtracting their votes, in order to ascertain what effect their not being counted would have had. The exercise demonstrates that the resolution approving the meeting would also have been passed by the required majorities if they had not been permitted to vote. 10 (4) On 2 March 2007, Rebel received a letter from Archer Capital Pty Limited advising that there would be no increase in the consideration of $4.60 per share payable by its subsidiary, Foghorn, in the absence of a superior offer. Rebel's solicitors advised the Australian Securities and Investments Commission ("ASIC") of the receipt of the letter. 11 (5) Having reviewed Rebel's half-yearly accounts for the six months ended 30 December 2006 that were released on 26 February 2007, Hall Chadwick Corporate (NSW) Limited has expressed its opinion that the Scheme is still "fair and reasonable and in the best interests of Rebel shareholders" (see my earlier reasons at [12]). 12 (6) Mr Wheeler of ASIC wrote to Mr Stein, of Brown Wright Stein, solicitors for Rebel, on Saturday morning, 17 March 2007, advising that a Rebel shareholder had complained to ASIC that he, she or it had not been permitted to vote at the Scheme Meeting. Rebel does not know the identity of this shareholder, and ASIC did not disclose his, her or its identity. On Sunday morning 18 March 2007, Mr Stein met with Mr Wheeler and placed before him copies of the affidavits that had been forwarded to my Associate on Friday 16 March 2007 in anticipation of the hearing on Monday 19 March 2007. Later in the day, ASIC advised that it did not wish to seek an adjournment to investigate the matter further. I also note that in addition ASIC has provided the "usual letter" to the effect that it does not wish to be heard in opposition to the Court's approving the Scheme. 13 The Scheme Shareholders have had proper opportunity to consider and vote upon the Scheme at a duly convened meeting, and have agreed to it by the majorities identified in s 411(4)(ii) of the Act. In my view the Scheme should be approved by the Court. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 28 March 2007 Counsel for the Plaintiff: Mr R G Forster SC and Mr J Emmett Solicitors for the Plaintiff: Brown Wright Stein Counsel for Foghorn Holdings Pty Ltd Mr F Gleeson SC Solicitors for Foghorn Holdings Pty Ltd Freehills Date of Hearing: 19 March 2007 Date of Judgment: 19 March 2007