FEDERAL COURT OF AUSTRALIA All Star Funds Management Limited v Ventura Investment Management Ltd [2012] FCA 527 Citation: All Star Funds Management Limited v Ventura Investment Management Ltd [2012] FCA 527 Parties: ALL STAR FUNDS MANAGEMENT LIMITED ACN 122 793 855 and PARTIES IN ATTACHED SCHEDULE A v VENTURA INVESTMENT MANAGEMENT LTD ACN 092 375 258 , INVESTMENT DIVERSITY LIMITED ACN 096 137 156, PROFESSIONAL INVESTMENT SERVICES PTY LTD ACN 074 608 558 and CENTREPOINT WEALTH LIMITED ACN 074 949 429 File number(s): NSD 592 of 2012 Judge: JAGOT J Date of judgment: 15 May 2012 Legislation: Corporations Act 2001 (Cth) Cases cited: AGL Energy Services (Queensland) Pty Limited v AGL Energy Services Pty Limited [2010] FCA 452 Stork ICM Australia Pty Ltd v Stork Food Systems Australasia Pty Ltd [2006] FCA 1849 Royal Victorian Institute for the Blind Limited v RBS.RVIB.VAF Limited (2004) 206 ALR 581; [2004] FCA 735 Date of hearing: 15 May 2012 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 15 Counsel for the Plaintiffs: Mr M Oakes SC Solicitor for the Plaintiffs: McCullough Robertson Lawyers Counsel for the Defendants: The defendants did not appear IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 592 of 2012 BETWEEN: ALL STAR FUNDS MANAGEMENT LIMITED ACN 122 793 855 First Plaintiff PARTIES IN ATTACHED SCHEDULE A Second to Eleventh Plaintiffs AND: VENTURA INVESTMENT MANAGEMENT LTD ACN 092 375 258 First Defendant INVESTMENT DIVERSITY LIMITED ACN 096 137 156 Second Defendant PROFESSIONAL INVESTMENT SERVICES PTY LTD ACN 074 608 558 Third Defendant CENTREPOINT WEALTH LIMITED ACN 074 949 429 Fourth Defendant JUDGE: JAGOT J DATE OF ORDER: 15 MAY 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to section 411(1) Corporations Act 2001 (Cth) (Act), there be convened by the First Plaintiff a meeting of its ordinary share member, Centrepoint Wealth Limited, to be held on 16 May 2012, at Crowne Plaza Hotel Hunter Valley, 430 Wine Country Drive, Lovedale in New South Wales, commencing at 10.30am, for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (being the applicable scheme of arrangement set forth in Exhibit 1 in the proceeding (Explanatory Statement)), between the First Plaintiff and its ordinary share member. 2. Pursuant to section 411(1) of the Act, there be convened by the First Plaintiff a meeting of its I class share member, Centrepoint Wealth Limited, to be held on 16 May 2012, at the Crowne Plaza Hotel Hunter Valley, 430 Wine Country Drive, Lovedale in New South Wales, commencing at 10.30am (or as soon after the conclusion of the meeting in Order 1 above as may be practicable), for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (being the applicable scheme of arrangement set forth in the Explanatory Statement), between the First Plaintiff and its I class share member. 3. Pursuant to section 411(1) of the Act, there be convened by the Second Plaintiff a meeting of its member, Centrepoint Wealth Limited, to be held on 16 May 2012, at Crowne Plaza Hotel Hunter Valley, 430 Wine Country Drive, Lovedale in New South Wales, commencing at 10.30am (or as soon after the conclusion of the meeting in Order 2 above as may be practicable), for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (being the applicable scheme of arrangement set forth in the Explanatory Statement), between the Second Plaintiff and its member. 4. Pursuant to section 411(1) of the Act, there be convened by the Third Plaintiff a meeting of its member, Centrepoint Wealth Limited, to be held on 16 May 2012, at Crowne Plaza Hotel Hunter Valley, 430 Wine Country Drive, Lovedale in New South Wales, commencing at 10.30am (or as soon after the conclusion of the meeting in Order 3 above as may be practicable), for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (being the applicable scheme of arrangement set forth in the Explanatory Statement), between the Third Plaintiff and its member. 5. Pursuant to section 411(1) of the Act, there be convened by the Fourth Plaintiff a meeting of its member, Centrepoint Wealth Limited, to be held on 16 May 2012, at Crowne Plaza Hotel Hunter Valley, 430 Wine Country Drive, Lovedale in New South Wales, commencing at 10.30am (or as soon after the conclusion of the meeting in Order 4 above as may be practicable), for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (being the applicable scheme of arrangement set forth in the Explanatory Statement), between the Fourth Plaintiff and its member. 6. Pursuant to section 411(1) of the Act, there be convened by the Fifth Plaintiff a meeting of its member, Insurance & Finance Managers of Australia Pty Ltd, to be held on 16 May 2012, at Crowne Plaza Hotel Hunter Valley, 430 Wine Country Drive, Lovedale in New South Wales, commencing at 10.30am (or as soon after the conclusion of the meeting in Order 5 above as may be practicable), for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (being the applicable scheme of arrangement set forth in the Explanatory Statement), between the Fifth Plaintiff and its member. 7. Pursuant to section 411(1) of the Act, there be convened by the Sixth Plaintiff a meeting of its member, Centrepoint Wealth Limited, to be held on 16 May 2012, at Crowne Plaza Hotel Hunter Valley, 430 Wine Country Drive, Lovedale in New South Wales, commencing at 10.30am (or as soon after the conclusion of the meeting in Order 6 above as may be practicable), for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (being the applicable scheme of arrangement set forth in the Explanatory Statement), between the Sixth Plaintiff and its member. 8. Pursuant to section 411(1) of the Act, there be convened by the Seventh Plaintiff a meeting of its member, Centrepoint Wealth Limited, to be held on 16 May 2012, at Crowne Plaza Hotel Hunter Valley, 430 Wine Country Drive, Lovedale in New South Wales, commencing at 10.30am (or as soon after the conclusion of the meeting in Order 7 above as may be practicable), for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (being the applicable scheme of arrangement set forth in the Explanatory Statement), between the Seventh Plaintiff and its member. 9. Pursuant to section 411(1) of the Act, there be convened by the Eighth Plaintiff a meeting of its member, Centrepoint Wealth Limited, to be held on 16 May 2012, at Crowne Plaza Hotel Hunter Valley, 430 Wine Country Drive, Lovedale in New South Wales, commencing at 10.30am (or as soon after the conclusion of the meeting in Order 8 above as may be practicable), for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (being the applicable scheme of arrangement set forth in the Explanatory Statement), between the Eighth Plaintiff and its member. 10. Pursuant to section 411(1) of the Act, there be convened by the Ninth Plaintiff a meeting of its member, Centrepoint Wealth Limited, to be held on 16 May 2012, at Crowne Plaza Hotel Hunter Valley, 430 Wine Country Drive, Lovedale in New South Wales, commencing at 10.30am (or as soon after the conclusion of the meeting in Order 9 above as may be practicable), for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (being the applicable scheme of arrangement set forth in the Explanatory Statement), between the Ninth Plaintiff and its member. 11. Pursuant to section 411(1) of the Act, there be convened by the Tenth Plaintiff a meeting of its member, Centrepoint Wealth Limited, to be held on 16 May 2012, at Crowne Plaza Hotel Hunter Valley, 430 Wine Country Drive, Lovedale in New South Wales, commencing at 10.30am (or as soon after the conclusion of the meeting in Order 10 above as may be practicable), for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (being the applicable scheme of arrangement set forth in the Explanatory Statement), between the Tenth Plaintiff and its member. 12. Pursuant to section 411(1) of the Act, there be convened by the Eleventh Plaintiff a meeting of its member, Centrepoint Wealth Limited, to be held on 16 May 2012, at Crowne Plaza Hotel Hunter Valley, 430 Wine Country Drive, Lovedale in New South Wales, commencing at 10.30am (or as soon after the conclusion of the meeting in Order 11 above as may be practicable), for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (being the applicable scheme of arrangement set forth in the Explanatory Statement), between the Eleventh Plaintiff and its member. 13. The Explanatory Statement be approved for distribution to the members of each of the Plaintiffs. 14. Each scheme meeting shall be convened by a notice of meeting, a copy of which forms part of Exhibit 1, accompanied by a copy of the Explanatory Statement. 15. Service of each notice of meeting and accompanying Explanatory Statement may be effected by electronic means or by hand delivery to a person who is a proxy, corporate representative appointed under section 250D of the Act, or attorney under power, of each member of the applicable plaintiff at any time before a relevant meeting commences. 16. Antony David Robinson or, in his absence, Grahame David Evans, act as chairperson of each of the said meetings, unless any meeting shall otherwise resolve. 17. The scheme meetings shall be held consecutively. 18. In the case of each meeting, one member present by proxy, corporate representative appointed under section 250D of the Act, or attorney under power, shall constitute a quorum. 19. Notwithstanding Orders 1 to 12 above, and without limiting the operation of section 249S of the Act, each scheme meeting may with the consent of the chairperson and member be conducted by telephone without any of them being present at the address stipulated in those orders. 20. A proxy, appointment of a corporate representative under section 250D of the Act, or power of attorney to act on behalf of a member of any of the First to Eleventh Plaintiffs (Plaintiffs) may be delivered to the chairperson of a meeting at any time up until the vote is cast on a resolution at that meeting. 21. A resolution put to the vote at any of the scheme meetings to approve the proposed schemes of arrangement, or any modification to the proposed schemes of arrangement, must be decided by the member or its representative signing a record of the resolution. 22. The chairperson of each meeting has the power to adjourn any such meeting in his absolute discretion. 23. Regulations 5.6.12 and 5.6.14 to 5.6.36A Corporations Regulations 2001 shall not apply to any scheme meeting. 24. The Plaintiffs publish a notice of hearing of any application to approve the schemes of arrangement on or before Monday, 21 May 2012, in The Australian newspaper by an advertisement substantially in the form of Annexure A to these Orders, and the Plaintiffs shall otherwise be exempted from compliance with Rule 3.4(3)(b) Federal Court (Corporations) Rules 2000 (Cth). 25. The proceeding be stood over to 9.15am on 30 May 2012 before Jagot J for the hearing of any application to approve the schemes of arrangement. 26. Liberty to restore on two days' notice. 27. These orders be entered forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. ANNEXURE 'A' ALL STAR FUNDS MANAGEMENT LIMITED ACN 122 793 855 BLUEPRINT INVESTMENT SERVICES LTD ACN 115 333 223 DISCOVERY INVESTMENT SERVICES CORPORATION LTD ACN 100 299 125 DIVERSIFIED PORTFOLIO MANAGERS LIMITED ACN 093 756 051 IFMA INVESTMENT SERVICES PTY LTD ACN 006 748 349 INSURANCE & FINANCE MANAGERS OF AUSTRALIA PTY LTD ACN 006 230 842 MENTOR INVESTMENT SERVICES LIMITED ACN 098 095 133 PARRAMATTA SITE DEVELOPMENTS PTY LTD ACN 132 461 717 PROFESSIONAL INVESTMENT ASSET MANAGEMENT PTY LTD ACN 120 724 183 STEP BY STEP GUIDE PTY LTD ACN 097 334 908 WEALTHINFONET ADMIN PTY LTD ACN 144 614 460 (collectively, the Companies) NOTICE OF HEARING TO APPROVE COMPROMISE OR ARRANGEMENT TO all the creditors and members of the Companies. TAKE NOTICE that at 9.15am on 30 May 2012, the Federal Court of Australia at Law Courts Building, Queens Square, Sydney, New South Wales will hear an application by the Companies seeking the approval of compromises or arrangements between each of the Companies and its members as proposed by resolutions passed at the meetings of the members of the Companies held on Wednesday, 16 May 2012 (Arrangements). The effect of the Arrangements is the solvent reorganisation of various subsidiaries in the group of companies of which Centrepoint Alliance Ltd is the ultimate holding company (Centrepoint Alliance Group) such that: 1. all of the assets of the Companies will be transferred to certain other companies in the Centrepoint Alliance Group (Transferee Companies); 2. all of the liabilities of the Companies, including creditors, will be transferred to the same Transferee Companies; 3. the continuation by the Transferee Companies of any legal proceedings pending by or against any of the Companies; 4. the deregistration of the Companies without winding up. If you wish to oppose the approval of the Arrangements, you must file and serve on the Plaintiffs (the Companies) a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on the Plaintiffs at their address for service at least 1 day before the date fixed for the hearing of the application. The address for service of the Plaintiffs is McCullough Robertson Lawyers, Level 11, Central Plaza Two, 66 Eagle Street, Brisbane, Queensland 4001. Name of person giving notice or of person's legal practitioner: Peter Stokes, McCullough Robertson Lawyers – 07 3233 8714. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 592 of 2012 BETWEEN: ALL STAR FUNDS MANAGEMENT LIMITED ACN 122 793 855 First Plaintiff PARTIES IN ATTACHED SCHEDULE A Second to Eleventh Plaintiffs AND: VENTURA INVESTMENT MANAGEMENT LTD ACN 092 375 258 First Defendant INVESTMENT DIVERSITY LIMITED ACN 096 137 156 Second Defendant PROFESSIONAL INVESTMENT SERVICES PTY LTD ACN 074 608 558 Third Defendant CENTREPOINT WEALTH LIMITED ACN 074 949 429 Fourth Defendant JUDGE: JAGOT J DATE: 15 MAY 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is the first court hearing in relation to 11 proposed schemes of arrangement involving the internal reorganisation of the Centrepoint Alliance Corporate Group. The scheme companies are the plaintiffs. The four defendant companies, which are members of the same group, are joined as the proposed transferees under s 413 of the Corporations Act 2001 (Cth) (Corporations Act). This is in accordance with the approach adopted by Finkelstein J in Royal Victorian Institute for the Blind Limited v RBS.RVIB.VAF Limited (2004) 206 ALR 581; [2004] FCA 735. 2 The explanatory statement which is in evidence as Exhibit 1 describes the proposed objectives of this reorganisation – namely, that all of the assets and liabilities of each of the scheme companies are to be transferred to another company within the same corporate group, being one or the other of the four defendant companies, the purpose of which is to have the assets and liabilities in respect of particular operations within a logical corporate structure, and the deregistration without winding up by the Australian Securities and Investments Commission (ASIC) of each of the scheme companies. 3 Section 3.3 of the explanatory statement sets out the director's reasons in favour of the reorganisation on the basis that: – (i) the scheme will concentrate the ownership of various business undertakings within the group into a smaller number of companies, (ii) the number of companies in the group will be rationalised, thereby eliminating the duplication of functions across the various companies and freeing capital for more effective use, and (iii) economies in administration, accounting, auditing, reporting and compliance costs are said to be achieved. 4 The structure of the proposed schemes in relation to the 11 companies takes into account the decision of Emmett J in AGL Energy Services (Queensland) Pty Limited v AGL Energy Services Pty Limited [2010] FCA 452 (AGL), in which his Honour said at [11] that there needed to be "…an application to the Court for the approval of a compromise or arrangement within the meaning of s 411 [of the Corporations Act]." At [12], Emmett J stated that: If what has been propounded is not a compromise or an arrangement within s 411, there must be a real question as to whether the Court has jurisdiction to make orders under s 413. 5 His Honour noted that (at [15]): The element of compromise or arrangement that is necessary to satisfy s 411 need not be of any great magnitude or significance, so long as what is proposed can fairly be characterised as a compromise or arrangement between a company, on the one hand, and its members, on the other. That will suffice to enliven the Court's powers under s 413, so long as the compromise or arrangement is proposed for the purposes of, or in connection with, a scheme for the reconstruction or amalgamation. 6 The proposed schemes of arrangement in the present case, in accordance with the steps ultimately taken in relation to the AGL scheme, include a provision in clause 19.2 by which each scheme company approves the scheme and consents to the reconstruction or amalgamation contemplated by the scheme, notwithstanding the diminution of the value of their shareholding in the scheme company in which such member holds shares and any rights such member may have in connection with the reconstruction or amalgamation at law, and each such member waives any rights it might otherwise have. This is consistent with the requirement that there be an element of compromise or arrangement between the scheme companies and their members such as to satisfy s 411 and thereby enliven the Court's powers under s 413. 7 The other matter which comes out of the decision in AGL is that Emmett J also noted that, given the importance of creditors of any scheme company, the advertisement of the application for orders under s 413 should (at [18]): …state specifically the nature of the orders that are being sought, namely, that there will be a transfer by the Company to the Transferee of all of the Company's undertaking and all of its assets, that there will be an assumption by the Transferee of all of the liabilities of the Company and that that will be followed by the deregistration [of] the Company. 8 The importance of creditors was referred to by Emmett J at [23], where his Honour noted that the practical reality of an application such as the present is that whatever compromise or arrangement is proposed will be approved or agreed to by the company members, and accordingly: The only real issue of substance will be whether or not the Court is satisfied that the orders under s 413 are likely to have any prejudicial effect on third parties, namely, creditors of the Company or creditors of the Transferee. And as his Honour noted, that is a matter for another occasion, being the second court hearing. 9 In the present case, the proposed advertisement set out in the draft orders which have been provided includes the specific notice which Emmett J contemplated in AGL, namely that the application will seek approval of compromises or arrangements between each of the companies and its members, the effect of which will be the solvent reorganisation of various subsidiaries in the group such that: – (i) all of the assets of the companies will be transferred to certain other companies, (ii) all of the liabilities of the companies, including creditors, will be transferred to the same transferee companies, (iii) the continuation by the transferee companies of any legal proceedings by or against any of the companies, and (iv) the deregistration of the companies without winding up. 10 In the present case, also in relation to the issue of creditors, paragraph 4.1 of the explanatory statement (which I note has been supported by a process of verification described in the affidavit material read into evidence) sets out that two of the scheme companies are dormant companies which have no balance sheet liabilities, and in relation to the other companies the directors of each scheme company believe that the creditors of each of those companies will not be adversely affected by the relevant scheme because, following the implementation of the scheme, each relevant transferee company will be solvent and have a superior net asset position to that of each scheme company. 11 As explained in the submissions of Mr Oakes SC, who appears on behalf of the plaintiffs, the schemes are appropriately propounded as member schemes, even though creditors will be transferred by the proposed orders under s 413 of the Corporations Act. In terms of the position of creditors, Mr Oakes has pointed not only to the paragraphs of the explanatory statement to which I have referred but also to the evidence identifying the pro forma balance sheets for each of the plaintiffs and the defendants as at 31 March 2012, which supports the unaudited net position of each transferee company following implementation of the schemes, as set out in paragraph 4.2(b) of the explanatory statement. 12 The affidavit material in respect of the process of verification also deals with the position of employees. In short, other than one of the transferee companies, there are no employees of any of the scheme companies. There is no current active litigation in any scheme company, although in this regard the scheme provides for the transfer of legal proceedings in any event in clause 18. There are no known insurance claims, which was an issue addressed in Stork ICM Australia Pty Ltd v Stork Food Systems Australasia Pty Ltd [2006] FCA 1849 (Stork). In addition, no so-called "long tail liabilities" have been identified, nor have any material contracts been identified which may be breached by implementation of the scheme and the scheme proceeding. 13 In addition, and in accordance with the written submissions, the proposed orders under s 413 – namely, the transfer of the assets and liabilities of one company (and in this case, more than one company) in a corporate group to another company (and in this case, other companies) in a corporate group with the transferor company being deregistered – have been held to be within the meaning of a reconstruction and amalgamation as set out in s 413, having regard to the decisions in Stork and AGL. In other words, I am satisfied that what is ultimately proposed does involve an amalgamation or reconstruction within the meaning of that provision. 14 In terms of the other practical matters drawn to my attention, there is evidence satisfying each of the requirements in relation to the making of orders at a first court hearing, including that: – (i) there is evidence as to the status of each of the plaintiffs as a Part 5.1 body, (ii) each of the proposed schemes is an "arrangement" within the meaning of s 411, (iii) there has been proper disclosure to members, (iv) each of the 11 schemes is bona fide and properly proposed, and (v) ASIC has had reasonable opportunity to examine each proposed scheme and explanatory statement, to make submissions, and has had 14 days' notice of the proposed hearing date of the first court hearing. In that regard, the evidence includes the notification to ASIC, as well as responses from ASIC to the effect that it waives compliance with the requirement for an independent expert's report, and that ASIC does not propose to appear, and indeed has not appeared, at this first court hearing. These matters are set out in ASIC's correspondence of 11 May 2012. In addition, ASIC was also notified of the proposed AGL amendment to the schemes of arrangement by the inclusion of clause 19.2. ASIC responded by email on 14 May 2012 to the effect that it had considered the revised versions of the schemes of arrangement document and had no objection to the inclusion of the new clause 19.2. 15 It follows that I have all of the evidence necessary to satisfy me that it is appropriate to make the proposed orders as set out in the document which has been handed up, and accordingly I make orders 1 through to 27. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate: Dated: 21 May 2012 SCHEDULE A BLUEPRINT INVESTMENT SERVICES LTD ACN 115 333 223 Second Plaintiff DISCOVERY INVESTMENT SERVICES CORPORATION LTD ACN 100 299 125 Third Plaintiff DIVERSIFIED PORTFOLIO MANAGERS LIMITED ACN 093 756 051 Fourth Plaintiff IFMA INVESTMENT SERVICES PTY LTD ACN 006 748 349 Fifth Plaintiff INSURANCE & FINANCE MANAGERS OF AUSTRALIA PTY LTD ACN 006 230 842 Sixth Plaintiff MENTOR INVESTMENT SERVICES LIMITED ACN 098 095 133 Seventh Plaintiff PARRAMATTA SITE DEVELOPMENTS PTY LTD ACN 132 461 717 Eighth Plaintiff PROFESSIONAL INVESTMENT ASSET MANAGEMENT PTY LTD ACN 120 724 183 Ninth Plaintiff STEP BY STEP GUIDE PTY LTD ACN 097 334 908 Tenth Plaintiff WEALTHINFONET ADMIN PTY LTD ACN 144 614 460 Eleventh Plaintiff