In the matter of Flinders Ports Pty Limited (ACN 097 377 172) (No 2) [2008] FCA 384

FEDERAL COURT OF AUSTRALIA

In the matter of Flinders Ports Pty Limited (ACN 097 377 172) (No 2) [2008] FCA 384

IN THE MATTER OF FLINDERS PORTS PTY LIMITED (ACN 097 377 172) No SAD 184 of 2007

FINN J

13 MARCH 2008

ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY SAD 184 OF 2007

IN THE MATTER OF FLINDERS PORTS PTY LIMITED (ACN 097 377 172) ON THE APPLICATION OF: FLINDERS PORTS PTY LIMITED

ACN 097 377 172

Plaintiff

JUDGE: FINN J

DATE OF ORDER: 13 MARCH 2008

WHERE MADE: ADELAIDE

THE COURT ORDERS THAT:

1. Pursuant to s 411(4) of the Corporations Act 2001 (Cth) the Court approves the Scheme of Arrangement between the plaintiff and its shareholders as described in the Scheme Booklet which forms Schedule A to the order of this Court dated 8 February 2008. 2. Pursuant to s 411(12) of the Corporations Act 2001 (Cth) the Court exempts Flinders Ports Pty Limited from compliance with s 411(11) of the Corporations Act 2001 (Cth). Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY SAD 184 OF 2007

IN THE MATTER OF FLINDERS PORTS PTY LIMITED (ACN 097 377 172) ON THE APPLICATION OF: FLINDERS PORTS PTY LIMITED

ACN 097 377 172

Plaintiff

JUDGE: FINN J

DATE: 13 MARCH 2008

PLACE: ADELAIDE

REASONS FOR JUDGMENT 1 Flinders Ports Pty Limited, the company the subject of the Scheme of Arrangement which I am now asked to approve under s 411(4)(b) of the Corporations Act 2001 (Cth) was the preferred bidder in the State of South Australia's privatisation of seven ports across the State. The initial five shareholders in Flinders Ports are, or were, subsidiaries of substantial national or international corporations, four of which have a representative, or representatives, on the board of directors. 2 The genesis of the scheme lay in a perceived need by Flinders Ports to establish a more flexible corporate structure intended to accommodate the company's ongoing commercial objectives. The shareholders incorporated Flinders Port Holdings Pty Ltd. The object of the scheme itself, which had previously been agreed both by the shareholders in a shareholders' agreement and by Flinders Ports and Flinders Holdings in a Memorandum of Understanding, was to convert Flinders Ports into a wholly owned subsidiary of Flinders Holdings. Flinders Holdings was issued with one share in Flinders Ports. The directors of Flinders Holdings are the same persons as who are the directors of Flinders Ports. 3 The effect of the scheme, if approved, will constitute the initial shareholders in Flinders Ports shareholders in Flinders Holdings in proportion to the number of Flinders Ports shares previously held by those shareholders respectively. The scheme itself is to be undertaken inter-dependently with a Selective Reduction of Capital under which all of the shareholders save Flinders Holdings will have their shares in Flinders Ports cancelled in exchange for shares in Flinders Holdings (noted above) which will be issued under the scheme. 4 I previously ordered under s 411(1) of the Corporations Act that a meeting of shareholders be held for the purpose of considering and, if thought fit, approving the scheme: see In the matter of Flinders Ports Pty Limited [2008] FCA 82. That meeting was held. All of the members of Flinders Ports attended by proxy and voted unanimously to approve the scheme. I have affidavit evidence from the Chairman of Flinders Ports who acted as chairman of the meeting, to this effect. No member of Flinders Ports, nor any other person, opposes the Court's approval of the scheme. An independent expert, Ernst & Young, provided a report in which it expressed the opinion that the proposed scheme was fair and reasonable to the shareholders of Flinders Ports as a whole and was in their best interests and does not materially prejudice the company's ability to pay its creditors as the scheme does not involve any change to the debt structure or paid up capital of Flinders Ports. The scheme documentation recommended to the shareholders that they obtain independent taxation advice. I would expect that such occurred and also that the individual shareholders were well advised as to their own interests in respect of the scheme. 5 The principles to be applied at this stage in the s 411 process are well accepted and have been conveniently crystallised in the decision of Emmett J in Central Pacific Minerals NL [2002] FCA 239 at [12]-[14]; see eg Re Solution 6 Holdings Ltd (2004) 50 ACSR 113 at [18]-[19]. While the function of the Court is supervisory in that it needs to be satisfied there has been no irregularity or oppression and that the arrangement is one capable of being accepted, it nonetheless will generally take the view in a members' scheme that members are the just judges of their own interests and hence the Court should be reluctant to make decisions contrary to their views. This said, as Emmett J noted, the Court is not a mere rubber stamp and will look at the arrangement to ensure that it is reasonable: "The Court must be satisfied that the proposal is at least so fair and reasonable that an intelligent and honest person, who is a member of the class of security holders bound by the arrangement acting alone in respect of his or her interests … might approve it": [19].