FEDERAL COURT OF AUSTRALIA Macquarie Equipment Finance Pty Limited v Macquarie Bank Limited [2012] FCA 1212 Citation: Macquarie Equipment Finance Pty Limited v Macquarie Bank Limited [2012] FCA 1212 Parties: MACQUARIE EQUIPMENT FINANCE PTY LIMITED ACN 124 335 593 v MACQUARIE BANK LIMITED ACN 008 583 542 File number(s): NSD 1583 of 2012 Judge: JAGOT J Date of judgment: 2 November 2012 Legislation: Corporations Act 2001 (Cth) Corporations Regulations 2001 (Cth) Cases cited: AGL Energy Services (Queensland) Pty Limited v AGL Energy Services Pty Limited [2010] FCA 452 Royal Victorian Institute for the Blind Ltd v RBS.RVIB.VAF Ltd (2004) 206 ALR 581 ; [2004] FCA 735 Date of hearing: 2 November 2012 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 12 Counsel for the Plaintiff: Mr M Oakes SC Solicitor for the Plaintiff: Norton Rose Counsel for the Defendant: The defendant did not appear IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1583 of 2012 BETWEEN: MACQUARIE EQUIPMENT FINANCE PTY LIMITED ACN 124 335 593 Plaintiff AND: MACQUARIE BANK LIMITED ACN 008 583 542 Defendant JUDGE: JAGOT J DATE OF ORDER: 2 NOVEMBER 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (Act): (a) The Plaintiff, Macquarie Equipment Finance Pty Limited (MEF) convene a meeting (Scheme Meeting) of the sole shareholder in MEF, MTF Holdings Pty Limited (the MEF Member) for the purpose of considering and, if thought fit, approving a scheme of arrangement (with or without modification) proposed to be made between MEF and the MEF Member, the terms of which form part of Exhibit 1 in this proceeding (the Explanatory Statement); (b) The Explanatory Statement be approved for giving to the MEF Member; (c) The Scheme Meeting shall be convened by a notice of meeting, a copy of which forms part of Exhibit 1 (Notice of Meeting), accompanied by a copy of the Explanatory Statement; (d) Service of the Notice of Meeting and Explanatory Statement may be effected by electronic means or by hand delivery to a person who is a proxy, corporate representative appointed under s 250D of the Act, or attorney under power, of the MEF Member at any time before the Scheme Meeting commences; (e) A proxy, appointment of a corporate representative under s 250D of the Act, or power of attorney to act on behalf of the MEF Member may be delivered to the chairperson of the Scheme Meeting at any time up until the vote is cast on a resolution at that meeting; (f) The Scheme Meeting be held on 5 November 2012 at 10:30am and without limiting the operation of s 249S of the Act, the Scheme Meeting may with the consent of the chairperson and the MEF Member be conducted by telephone without either of them being present at the address stipulated in the Notice of Meeting; (g) In the case of the Scheme Meeting, the MEF Member present by proxy, corporate representative appointed under s 250D of the Act, or attorney under power, shall constitute a quorum. (h) James Russell Pysar or failing him, Phillip Daniel Castro act as chairperson of the Scheme Meeting; and (i) The chairperson of the Scheme Meeting have the power to adjourn the Scheme Meeting for such time that the chairperson considers appropriate. 2. Regulations 5.6.12 and 5.6.14 to 5.6.36A of the Corporations Regulations 2011 (Cth) shall not apply to the Scheme Meeting. 3. Notice of the hearing of any application for an order approving the scheme of arrangement be published once in "The Australian" newspaper by an advertisement substantially in the form of "Annexure A" to these Orders, such advertisement to be published on or before 8 November 2012 and MEF be otherwise exempted from compliance with Rule 3.4 of the Federal Court (Corporations) Rules 2000 (Cth). 4. The proceeding be adjourned to 15 November 2012 at 11:00am before Jagot J for hearing of any application to approve the Scheme. 5. These Orders be entered forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. Annexure A Macquarie Equipment Finance Pty Limited (ACN 124 335 593) (MEF) Notice of hearing to approve scheme of arrangement TO all the creditors and members of MEF: TAKE NOTICE that at 11:00am on 15 November 2012, the Federal Court of Australia at Law Courts Building, Queens Square, Sydney, will hear an application by MEF seeking the approval of a member's scheme of arrangement between the abovenamed company and its sole member (the Scheme). The Scheme effects a solvent reconstruction of MEF and provides for: (a) the transfer to Macquarie Bank Limited (ACN 008 583 542) (Transferee Company) of all of the assets of MEF; (b) the transfer to Transferee Company of all of the liabilities, including creditors, of MEF; (c) the continuation by Transferee Company of any legal proceedings pending by or against MEF; and (d) the deregistration of MEF by ASIC without winding up. The application will be heard by the Court if a resolution proposing the Scheme has been passed by the sole member of MEF prior to the Court hearing. If you wish to oppose the approval of the compromise or arrangement, you must file and serve on MEF 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 MEF at its address for service at least 1 day before the date fixed for the hearing of the application. The address for service of MEF is: c/o Norton Rose Australia Grosvenor Place, 225 George Street Sydney NSW 2000 (Attention: Tim Woodforde). IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1583 of 2012 BETWEEN: MACQUARIE EQUIPMENT FINANCE PTY LIMITED ACN 124 335 593 Plaintiff AND: MACQUARIE BANK LIMITED ACN 008 583 542 Defendant JUDGE: JAGOT J DATE: 2 NOVEMBER 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is an application under s 411(1) of the Corporations Act 2001 (Cth) (the Act), seeking orders for the convening of a meeting of the holder of ordinary shares in the plaintiff, Macquarie Equipment Finance Pty Limited (MEF), the sole shareholder being MTF Holdings Pty Limited (the MEF Member), to consider a proposed scheme of arrangement between MEF and the MEF Member under which it is proposed that all of the assets and liabilities of MEF will be transferred to the defendant company, Macquarie Bank Limited (Macquarie Bank), pursuant to s 413(1) of the Act. 2 Section 411(1) refers to the circumstances in which a meeting may be convened where a compromise or arrangement is proposed between a Part 5.1 body (here, MEF) and, relevantly, its members. Section 413, which is sought to be invoked in this case, depends upon an application having been made to the Court under Part 5.1 of the Act for the approval of a compromise or arrangement and, in which event, if it is shown to the Court that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for reconstruction of a Part 5.1 body and that, under the scheme, the whole or any part of the undertaking or of the property of a body concerned in the scheme (the transferor body), is to be transferred to a company (the transferee company), the Court may then approve the compromise or arrangement and also provide for any of the matters set out in subsections (a) through to (g) of s 413. These subsections provide for, relevantly, the transfer of assets and liabilities, the continuation of legal proceedings, the deregistration by the Australian Investments and Securities Commission (ASIC) without winding up of the transferor body (as is relevant in this case), and other provisions incidental, consequential or supplemental to those matters. 3 In this case, the scheme of arrangement which is proposed involves a compromise or arrangement between MEF, as defined, and the MEF Member (that is, the holder of the shares in MEF) as set out in cl 5.1 of the scheme. That clause provides for the scheme to bind MEF and the MEF Member and also provides for the MEF Member to approve the scheme and consent to the reconstruction or amalgamation as defined "notwithstanding the diminution in the value of shareholding in the Scheme Company and any rights that it may have in connection with the Reconstruction or Amalgamation…and waives any rights it may otherwise have as against the Scheme Company in connection with the Reconstruction or Amalgamation". As the submissions for the plaintiff disclose, this provision reflects the reasoning of Emmett J in AGL Energy Services (Queensland) Pty Limited v AGL Energy Services Pty Limited [2010] FCA 452 (AGL), in which his Honour noted at [13] that there was a difference "between the compromise or arrangement with members contemplated by s 411, on the one hand, and the scheme for reconstruction or amalgamation contemplated by s 413, on the other hand". It is for this reason that the scheme of arrangement includes the compromise or arrangement with the MEF Member as set out in cl 5.1, consistently with those principles. 4 As the submissions for the plaintiff also disclose, it is appropriate that the defendant being the company into which it is proposed in effect to collapse the plaintiff is joined as a party to this proceeding. I note here the decision of Finkelstein J, referred to in the plaintiff's submissions, in Royal Victorian Institute for the Blind Ltd v RBS.RVIB.VAF Ltd (2004) 206 ALR 581; [2004] FCA 735. 5 The substance of the reconstruction or amalgamation (as it is referred to) is set out in cl 4 of the proposed scheme and by this clause is to occur from what is defined to be the Implementation Time, being the date of 8 December 2012. That clause provides for: – (i) transfer of all of the assets of the scheme company to the defendant, being the transferee company, (ii) transfer of all of the liabilities of the scheme company to the transferee company, (iii) any legal proceedings pending by or against the scheme company are to be continued by or against the transferee company without the need for any further act or deed, other than an amendment of the record of the relevant court or tribunal, and (iv) as I have noted, the deregistration by ASIC of the scheme company without winding up. In this regard, I note that the definition of liabilities in the scheme of arrangement includes not only existing liabilities but "all liabilities however arising and whether present, unascertained, immediate, future or contingent, including any 'liabilities' within the meaning in subsection 413(4) of the [Act]". 6 The explanatory statement discloses the details of the scheme and the fact that the relevant implementation date is 8 December 2012, although the proposed date for the second court hearing, assuming that the MEF Member votes in favour of the scheme, is 15 November 2012. There is also reference to the fact that each of the directors of the scheme company, MEF, has considered the terms of the scheme and believes it to be fair and reasonable and in the best interests of the MEF Member and, importantly, that it will not adversely affect the interests of MEF's creditors. 7 There is a detailed section – section 4.1 of the explanatory statement – which explains the reasons for the directors' view that there will be no adverse effect on the creditors by the implementation of the scheme. The scheme proposes the transfer of all liabilities, as broadly defined, from MEF to the transferee company. The transferee company, Macquarie Bank, is described as a company which is a "much larger and financially stronger company than MEF, with net assets of $8.7 billion" compared with the net assets of MEF of $30,000 as at 31 March 2012. It is also noted that the transferee company is an authorised deposit-taking institution regulated by the Australian Prudential Regulation Authority (APRA) and is subject to the minimum capital requirements of APRA. 8 The explanatory statement also explains that MEF in fact has few and no significant external creditors. It is almost entirely funded by the transferee company and other companies in the Macquarie Group. In addition to that, the directors have confirmed in the explanatory statement, but also in affidavits in support of the application, that MEF has no employees and no existing litigation against it. 9 The application is supported by affidavit material which, amongst other things, verifies the accuracy of the various parts of the explanatory statement, including the corporate structure by which MEF is a wholly owned subsidiary of the defendant, Macquarie Bank, albeit through an intermediate holding company structure which in turn is a wholly owned subsidiary of Macquarie Group Limited, an Australian listed public company. There is otherwise a reference to the fact that there are two ordinary shares in MEF on issue, and both of these are held by the MEF Member. 10 The evidence also includes, relevantly, two letters from ASIC. The first is dated 23 October 2012. It will be noted that the explanatory statement to which I referred does not have an expert report annexed to it. By the letter dated 23 October 2012, in response to an application by MEF, ASIC confirmed pursuant to reg 5.1.01 of the Corporations Regulations 2001 (Cth) (the Regulations) that it allowed MEF to send out the explanatory statement in relation to the scheme without having an expert report annexed to it, as required by cl 8303 of Pt 3 of Schedule 8 to the Regulations. The other ASIC letter is in the usual terms. It is also dated 23 October 2012. In this letter ASIC confirms that, as required, it has been given more than 14 days' notice of the hearing of this application, as referred to in s 411(2)(a) of the Act, and has had a reasonable opportunity to view the explanatory statement and does not propose to currently appear to make submissions, intervene or to oppose the scheme at this first court hearing; and indeed, ASIC has not done so. 11 Otherwise, as set out in the written submissions, I accept that this scheme is appropriately propounded as a members' scheme only, consistent with the authorities to which reference has been made in [12] of the written submissions for the plaintiff. I also accept that in terms of s 413 the important issue is the potential effect on third parties, being existing or contingent creditors. I have referred to the details of the scheme and the explanatory statement which provide the basis for the opinion that the directors have reached. I have also referred to the decision in AGL and note that I am satisfied that the powers in both ss 411 and 413 of the Act are appropriately invoked in this case. 12 There are no other matters of concern and, accordingly, I am satisfied that orders in accordance with the short minutes of order handed up in Court today should be made. I make orders 1 through to 5 of those short minutes of order. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate: Dated: 6 November 2012