GIO Australia Holdings Limited (Application of) [1999] NSWSC 1276

Reported Decision : [1999] 33 ACSR 283

New South Wales Supreme Court CITATION : GIO Australia Holdings Limited (Application of) [1999] NSWSC 1276 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 4452/99 HEARING DATE(S) : 20/12/1999 JUDGMENT DATE : 20 December 1999

PARTIES : GIO Australia Holdings Limited (ACN 054 573 401) (Plaintiff) JUDGMENT OF : Santow J

M B Oakes, SC (Plaintiff) COUNSEL : T F Bathurst, QC/ R J Weber (AMP) G A Palmer, QC (GPG) T D Castle (ASIC) Allen Allen & Hemsley (Plaintiff) SOLICITORS : Mallesons Stephen Jaques (AMP) Jan Redfern (ASIC) CATCHWORDS : CORPORATIONS — Scheme of Arrangement — Nature of enquiry and of matters to be considered by the Court under s411(6) in considering adequacy of disclosure and fairness — Continuing disclosure where adverse deterioration in financial position of scheme company — Compulsory acquisition of scheme shareholders' shares not contrary to Gambotto principles. ACTS CITED : Corporations Law s411(6); s411(17)(b) and (a) CASES CITED : Cleary & Anor v Australian Co-opertive Foods Limited (1999) 52 ACSR 701 Gambotto v WCP Limited (1995) 182 CLR 432 DECISION : Scheme approved

REVISED — 21 December, 1999 IN THE SUPREME COURT OF NEW SOUTH WALES IN EQUITY

SANTOW J

No. 4452/99

GIO AUSTRALIA HOLDINGS LIMITED (ACN 054 573 401) and the Corporations Law The application of GIO AUSTRALIA HOLDINGS LIMITED (ACN 054 573 401) Plaintiff

JUDGMENT — ex tempore 20 December 1999

1 It remains for me to give brief reasons in relation to the orders I have earlier made approving the scheme of arrangement whereby GIO Australia Holdings Limited ("GIO") will become a wholly owned subsidiary of AMP Insurance Investment Holdings Pty Limited ("AMP"). The consideration will be provided by a company in the AMP group conveniently referred to as AMPII, being AMP Group Finance Services Limited. It is not necessary that I recite the key features of the scheme for present purposes, as that is sufficiently set forth in the scheme documents. 2 The scheme meetings have taken place and the result is an overwhelming majority in favour of the scheme. By number of shares, the percentage in favour is 97.27% of those present and voting and by number of shareholders 95.75% of those present and voting. Furthermore, there has been a substantial participation of shareholders in that the shares voted represent 51.28% of the minority shares on issue. The other necessary formalities to enable the scheme to be approved have been the subject of extensive affidavit material and based on that material can be taken to have been satisfied. 3 The holder of some 2.5% of the total issued capital, GPG Australia Nominees Limited ("GPG"), has attended Court to-day having previously foreshadowed opposition to the Scheme. No vote was cast in respect of these shares at the relevant scheme meetings either for or against. Whilst through Counsel GPG stated that it was not satisfied in relation to many of its concerns, and as to unspecified conduct of AMP and GIO in the course of implementing the scheme proposal which it considered not justified and possibly illegal, GPG expressly confirmed two things. First was that it did not wish to deprive other minority shareholders of realising the shares under the only practicable and sensible alternative. Second, that none of their concerns were such as should be put to this Court as going to the fairness of the Scheme for the purpose of its approval to-day. 4 The Scheme has been the subject of a letter from ASIC dated 17 December 1999 in the usual terms indicating no objection to the Scheme. I am satisfied that such letter is in accordance with s411(17)(b) of the Corporations Law such that I do not need to consider whether s411(17)(a) would in the circumstances preclude this Court approving the Scheme. That of course does not remove the Court's discretion insofar as it arises in considering whether or not to approve the Scheme pursuant to s411(6) of the Corporations Law. 5 Prior to to-day's hearing affidavit material was provided to the Court both by GIO and AMP from the relevant responsible officers as to the circumstances in which the announced original terms of the Scheme were varied downwards so as to become the Scheme presently before me. GPG disavowed any submission that that material or any other matter bearing on the downward variation should, in the circumstances, have led either to the earlier revocation of my orders convening the scheme meetings or now to denial of approval to the scheme at this hearing. That affidavit material is part of the Court file and was also made available at the request of GPG to GPG. No submission was put to me that the terms upon which it was made available were in any way objectionable. Certain of that material was only made available to Counsel and Solicitors for GPG under obligations of confidentiality. 6 In order to allay any concern that GPG may have been placed in any preferred position, I have asked and this has been agreed, that such material be made available for inspection to any other shareholder of GIO via the solicitors for GIO and AMP, upon a similar basis mutatis mutandis as applied to GPG. 7 One particular feature of this Scheme has been that the financial situation of GIO particularly as regards its reinsurance business, has not remained static. It has varied but only adversely from that set out in the Scheme documents, though it is fair to say that the Scheme documents had foreshadowed that possibility quite explicitly. 8 Under the arrangements set out in the Merger Implementation Agreement with AMP and reflected in conditions of the Scheme itself, AMP has been engaged in a continuing due diligence exercise in relation to GIO having regard to its capacity to terminate its involvement if certain specified trigger events occur. (In the events that happened, the relevant termination was not triggered.) 9 That circumstances of a foreshadowed prospect of an adverse change of circumstances in relation to GIO poses this question. What steps if any should the Court take in the approval process to ensure that shareholders are properly informed of matters material to the members' decision, in terms of Schedule 8 of the Regulations to the Corporations Law; compare Cleary & Anor v Australian Co-opertive Foods Limited (1999) 52 ACSR 701 per Austin J. 10 Clearly participants in a scheme of arrangement should not be placed in a worse position as regards disclosure than offerees under a conventional takeover offer within the broad notion of materiality. 11 In order to meet these concerns, whilst recognising the intrinsic confidentiality of some of this information (though I was assured not such as to require to be disclosed under the ASX continuing disclosure obligations) both GIO and AMP through the relevant responsible officers have agreed to provide by way of further affidavit the following confirmation. That confirmation covers two matters: