FEDERAL COURT OF AUSTRALIA In the matter of section 664F of the Corporations Act 2001 and in the matter of Optimum Health Care Pty Limited ACN 006 964 343; Symbion Health Limited v Peterson [2008] FCA 195 SYMBION HEALTH LIMITED ACN 004 073 410 v MICHAEL PATRICK PETERSON NSD 1945 OF 2007 GRAHAM J 11 FEBRUARY 2008 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 1945 OF 2007 IN THE MATTER OF SECTION 664F OF THE CORPORATIONS ACT 2001 AND IN THE MATTER OF OPTIMUM HEALTH CARE PTY LIMITED ACN 006 964 343 BETWEEN: SYMBION HEALTH LIMITED ACN 004 073 410 Applicant AND: MICHAEL PATRICK PETERSON Respondent JUDGE: GRAHAM J DATE OF ORDER: 11 FEBRUARY 2008 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Directs that the defendant's Notice of Motion filed 19 October 2007, and plaintiff's Notice of Motion filed 6 February 2008 be heard together. 2. Orders that service of the defendant's Notice of Motion filed 19 October 2007 and the plaintiff's Notice of Motion, filed 6 February 2008 upon Australian Securities and Investments Commission be dispensed with. 3. Notes that the defendant abandons his reliance on the second ground as notified in his objection to the acquisition of his ordinary shares in Optimum Healthcare Pty Limited of 30 August 2007. 4. Orders that the defendant's Notice of Motion filed 19 October 2007 be dismissed. 5. Orders that the plaintiff's Notice of Motion filed 6 February 2008 be dismissed. 6. Order that the costs of the defendant of the plaintiff's motion filed 6 February 2008 be the defendant's costs in the proceedings. 7. Orders that the costs of the defendant's motion filed 19 October 2007 be costs in the proceedings. 8. Directs the defendant to file and serve any further affidavits on or before 14 April 2008. 9. Directs the plaintiff to file and serve any affidavits in reply on or before 10 June 2008. 10. Orders that the matter stand over for directions on 13 June 2008 at 4pm. 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 1945 OF 2007 IN THE MATTER OF SECTION 664F OF THE CORPORATIONS ACT 2001 AND IN THE MATTER OF OPTIMUM HEALTH CARE PTY LIMITED ACN 006 964 343 BETWEEN: SYMBION HEALTH LIMITED ACN 004 073 410 Applicant AND: MICHAEL PATRICK PETERSON Respondent JUDGE: GRAHAM J DATE: 11 FEBRUARY 2008 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The plaintiff, Symbion Health Ltd ACN 004 073 410 claims to have become a 90% holder of the ordinary shares in Optimum Healthcare Pty Ltd. It has since moved to compulsorily acquire the remaining ordinary shares under Part 6A.2 of the Corporations Act 2001 (Cth) ('the Corporations Act'). 2 A 90 per cent holder must prepare a notice in the prescribed form that deals with a series of matters if that 90 per cent holder, in this case Symbion Health Limited, is to compulsorily acquire securities under s 664C of the Corporations Act. 3 One of the requirements of s 664C(2) is that the 90 per cent holder must give each other person who is a holder of securities in the relevant class a series of documents including: '(i) the notice; and (ii) a copy of the expert's report … under 667A; and (iii) an objection form …' 4 The relevant documents would appear to have been given by the plaintiff to Michael Patrick Peterson, the defendant, who, as I understand it, claims to be the owner of 200 ordinary shares in Optimum Healthcare Pty Limited. 5 The objection form which was apparently provided by the plaintiff to the defendant would appear to have been duly completed for the defendant on or about 30 August 2007 and signed on his behalf by Mr Hanlon of Mahons with Yuncken & Yuncken Solicitors, the solicitors for the defendant. The objection form was apparently forwarded by facsimile to the plaintiff on or about 30 August 2007. The form was directed to the plaintiff at Level 7, 5 Queens Road, Melbourne, VIC 3004. It included the following: 'I hereby notify Symbion that I object to the acquisition of the ordinary shares in Optimum Healthcare Pty Limited held by me on the following grounds: Refer attachment' The attachment was expressed in the following terms: '$37.50 per ordinary share is less than the fair value of the ordinary shares held by me because: 1. the 451,995 shares allegedly allotted to Medicine Man Labs Pty Ltd were not validly allotted but the price of $37.50 per share assumes the validity of that allotment; and 2. the amount of $37.50 per ordinary share does not take account of the company's right of action in respect of the consideration for the disposal of its former name, "Twin Labs".' 6 Section 664F of the Corporations Act relevantly provides: '664F(1) If people who hold at least 10% of the securities covered by the compulsory acquisition notice object to the acquisition before the end of the objection period, the 90% holder may apply to the Court for approval of the acquisition of the securities covered by the notice. (2) The 90% holder must apply within 1 month after the end of the objection period. (3) If the 90% holder establishes that the terms set out in the compulsory acquisition notice give a fair value for the securities, the Court must approve the acquisition of the securities on those terms. Otherwise it must confirm that the acquisition will not take place. (4) The 90% holder must bear the costs that a person incurs on legal proceedings in relation to the application unless the Court is satisfied that the person acted improperly, vexatiously or otherwise unreasonably. The 90% holder must bear their own costs.' 7 By an originating process filed 27 September 2007 the plaintiff seeks an order pursuant to s 664F of the Corporations Act approving the acquisition by the plaintiff of the securities covered by the compulsory acquisition notice issued by the plaintiff to the defendant on 1 August 2007 in relation to the ordinary shares in Optimum Healthcare Pty Limited held by the defendant. 8 There are two motions presently before the court. The first in point of time is that of the defendant being a Notice of Motion filed 19 October 2007. The substantive relief sought in that notice of motion was as follows: '1. That these proceedings be transferred from the New South Wales District Registry to the Victorian District Registry. 2. The Plaintiff do pay the Defendant's costs of and incidental to the Application on an indemnity basis.' 9 The second motion is that of the plaintiff filed 6 February 2008. The substantive relief sought in it was as follows: '1. That the Defendant specifies the relief claimed by the Defendant (if any). 2. That if the relief claimed depends on a provision of an Act – the Defendant specifies the Act and the provision. 3. That the Defendant provide a statement in a summary form of the material facts on which he relies (and necessary particulars) in support of the relief (if any) which he claims.' 10 On the hearing of the motions, Mr Robertson of counsel from Melbourne has appeared for the defendant and Mr Oakes SC from Sydney has appeared for the plaintiff. The plaintiff's instructing solicitors are Messrs Clayton Utz, who have offices in both Sydney and Melbourne, although those with the carriage of this particular application would appear to be based in Sydney. The defendant's solicitors, Messrs Mahons with Yuncken & Yuncken, would appear to be Melbourne-based solicitors without any Sydney office. 11 The evidence on the hearing of the motions indicates that Mr Hanlon, who has the conduct of the matter for the defendant, received instructions on or about 10 August 2007. He has consistently pressed for a transfer of the matter from the New South Wales District Registry to the Victorian District Registry of the Court. His requests in that regard have been consistently refused by the plaintiff. Reasons militating in favour of a transfer of registry include the location of Mr Hanlon and his office in Melbourne, the difficult financial circumstances in which the defendant finds himself, his impecuniosity being relieved in part by loans that have been made to him by a personal friend, Mr Garrie Christie. The evidence thus far clearly indicates that the plaintiff is a Victorian based company; the company in which the shares are held is a Victorian-based company; and officers of the plaintiff who have sworn affidavits, or are likely to swear affidavits, are Melbourne based. 12 Notwithstanding the matters to which I have just referred, it seems clear to me that the protection in relation to costs that is afforded to a person in the position of the defendant by s 664F(4) of the Corporations Act is such that the plaintiff ought not to be compelled to have the registry in which it has seen fit to bring its application changed. Unless it transpires that in defending the proceedings Mr Peterson has acted improperly, vexatiously or otherwise unreasonably, he will by force of the statute be protected in relation to the costs that he incurs on the legal proceedings. 13 Mr Robertson draws attention to the fact that the costs contemplated by s 664F(4) may well extend to party and party costs but no more. He has not indicated to me what the Explanatory Memorandum, if any, or the Second Reading Speeches in relation to the Bill which led to the introduction into the Corporations Act of s 664F(4) say about the reach of the words 'the costs that a person incurs on legal proceedings'. It may well be that on its true construction, those words extend to include solicitor and clients costs or perhaps even complete indemnity costs, but that is not a matter which I propose to embark upon on the hearing of the motions presently before the court. 14 The second matter that Mr Robertson raises is the question of cash flow, urging that if the proceedings are heard in Sydney, there will be a greater need for a cash flow to sustain the litigation than would be the case if the matter were to proceed to a hearing in Melbourne. 15 The difference between a hearing in Melbourne and a hearing in Sydney would appear to be really the travelling and accommodation expenses that may be incurred, which may not prove to be of enormous significance when compared to the legal costs which will be incurred whether the matter be heard in Sydney or Melbourne. Mr Oakes SC submits that the question of change of registry is something which ought not properly to be addressed until the ultimate issues are better defined by the evidence which will be put on by one side or the other in support of the relevant grounds of objection. Mr Robertson has made it clear that the defendant abandons his reliance on ground 2, as notified in his objection to the acquisition of his ordinary shares, and that the case which he wishes to mount in opposition to that of the plaintiff is confined to the issue covered by ground 1 in his objection of 30 August 2007. 16 It would seem to me that the matter can be progressed to a stage when it will be ready for trial without the necessity for any change of registry. Video link conference facilities are available, which will permit directions hearings and other interlocutory skirmishes, if there are any, to take place without the necessity for counsel or solicitors travelling from Melbourne to Sydney for that purpose. I do not consider that, at this stage, any order should be made transferring the matter from the New South Wales District Registry of the Court to the Victorian District Registry. Whether the matter is ultimately heard by a judge based in Melbourne or a judge based in Sydney, and whether or not it is heard in Melbourne or Sydney, is a matter for further consideration after the relevant affidavit evidence has been filed. 17 In relation to the plaintiff's claims for directions in its notice of motion, I would not have been inclined to order relief in the form of the proposed orders 1, 2 and 3 indicated in the Notice of Motion filed 6 February 2008, but I certainly would have expected the defendant to identify the bases on which it was said that the terms set out in the compulsory acquisition notice did not give a fair value for the securities in question. Given that Mr Robertson has now clearly indicated the full extent of the case which the defendant wishes to make, it seems to me that it is unnecessary for any further directions to be made requiring the defendant to indicate the case which he proposes to bring. 18 Section 176 of the Corporations Act provides: '176 In the absence of evidence to the contrary, a register kept under this Chapter is proof of the matters shown in the register under this Chapter.' Section 175 relevantly provides: '175(1) A company … or a person aggrieved may apply to the Court to have a register kept by the company … corrected.' 19 At this stage, it is not clear to me whether the defendant proposes to challenge the validity of the allotment of shares in the offeree company to Medicine Man Labs Pty Limited, relying upon the words 'in the absence of evidence to the contrary' in s 176, or whether the defendant contemplates bringing proceedings against Optimum Healthcare Pty Limited under s 175 of the Corporations Act. It may be that there is some other basis on which the defendant proposes to advance his case, but at this stage such a basis is not readily apparent to me. In the foregoing circumstances, I intend to dismiss the defendant's Notice of Motion filed 19 October 2007 and to dismiss the plaintiff's Notice of Motion filed 6 February 2008. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham. Associate: Dated: 29 February 2008 Counsel for the Plaintiff: M B Oakes SC Solicitor for the Plaintiff: Clayton Utz Counsel for the Defendant: D G Robertson Solicitor for the Defendant: Mahons with Yuncken & Yuncken Date of Hearing: 11 February 2008 Date of Judgment: 11 February 2008