Sims Group Ltd [2005] NSWSC 1069

Reported Decision : 55 ACSR 422

New South Wales Supreme Court

CITATION : Sims Group Ltd [2005] NSWSC 1069

HEARING DATE(S) : 02/08/05, 20/10/05

JUDGMENT DATE : 20 October 2005

Equity Division JURISDICTION : Corporations List

JUDGMENT OF : Barrett J

DECISION : Scheme of arrangement approved

CATCHWORDS : CORPORATIONS - arrangements and reconstructions - scheme of arrangement between company and its members - non-compliance with order requiring advertising of scheme meeting - no adverse effect or prejudice - whether such orders of any utility in context of present legislation - scheme approved

Corporations Act 2001 (Cth), s.411(4)(b), Pt 2G.2 LEGISLATION CITED : Supreme Court (Corporations) Rules 1999, r.3.3(2)

CASES CITED : Re NRMA Ltd (2000) 33 ACSR 595

PARTIES : Sims Group Limited - Plaintiff

FILE NUMBER(S) : SC 3983/05

Mr M.B. Oakes SC - Plaintiff COUNSEL : Mr N.J. Mavrakis, Solicitor - Hugo Neu Corporation

Baker & McKenzie - Plaintiff SOLICITORS : Clayton Utz - Hugo Neu Corporation

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BARRETT J

THURSDAY 20 OCTOBER 2005

3983/05 SIMS GROUP LIMITED

JUDGMENT

1 The plaintiff seeks an order under s.411(4)(b) of the Corporations Act 2001 (Cth) approving a scheme arrangement between the plaintiff and its members. The evidence shows that the proposed arrangement was placed before members at a meeting and that that meeting was, subject to one matter to which I shall refer presently, convened in accordance with the orders made by the court on 2 August 2005. 2 Documents were dispatched to members in accordance with the court's orders. At the meeting, the arrangement was approved by an overwhelming majority in terms of both the number of members and the number of votes. To be more specific, 97.81 per cent of members present in person or by proxy voted in favour of the arrangement and the number of votes in favour represented 99.34 per cent of the total votes cast. 3 A letter from ASIC dated 19 October 2005 states that ASIC has no objection to the scheme and is satisfied that the scheme has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Corporations Act. In terms of s.411(17), therefore, the matter of circumvention of Chapter 6 is not one with which the court need concern itself. 4 No member has appeared on the hearing of this application. Nor were the plaintiff's solicitors informed that any member proposed to appear. The application is accordingly unopposed. 5 There is, however, one matter requiring comment. It concerns the convening of the meeting of members. The orders made by the court on 2 August 2005 included, as order 7, an order that the scheme meeting be advertised once in the Sydney Morning Herald newspaper by means of an advertisement in the form annexed to the order, with the advertisement being published not less than 14 days before the date of the meeting. In the events that have happened, that order has not been complied with. 6 The affidavit of Ms O'Brien of Baker & McKenzie makes it clear that the non-compliance was inadvertent. The matter of advertising was simply overlooked. The evidence also makes it clear that documents were sent by post to all members at their registered addresses shown in the register of members and that only 118 letters were returned unclaimed out of a total of some 23,000. Furthermore, had all the members whose letters were returned attended the meeting and voted against the proposal, there would have been no more than a miniscule difference in the number of members and the number of votes favouring the proposal. It cannot be suggested that anyone suffered prejudice by reason of the lack of compliance with order 7. 7 There is no requirement in the Corporations Act, the Corporations Regulations 2001 (Cth) or the Supreme Court (Corporations) Rules 1999 for the advertising of a meeting of this kind in the way that was directed by order 7. The court did not make order 7 for any particular reason or to guard against any particular eventuality brought to its notice. It made the order because it formed part of the system of member notification the plaintiff itself proposed. 8 With the law as it now stands, there is a question whether there is any real utility in an order requiring the advertising in a newspaper of a scheme meeting, where the scheme is a scheme between a company and its members. Since the introduction of Part 2G.2 of the Corporations Law by the Company Law Review Act 1998 (Cth), there have existed detailed statutory provisions about the calling of meetings of members of companies. Division 3 of Part 2G.2 is headed "How to call meetings of members". It deals with the convening of a "meeting of a company's members". Section 249J sets out comprehensive requirements for the giving of notice which, so far as posting is concerned, recognise as the appropriate address that appearing in respect of a member in the register of members. There is also recognition that notice may be given personally or, if the member so wishes, by fax or email. It is also permissible to give notice by any other means the company's constitution allows. These provisions obviously apply to a "meeting of a company's members" convened under and for the purposes of Part 5.1: so much was explicitly recognised by Santow J at paragraph (4) of Appendix B to his judgment in Re NRMA Ltd (2000) 33 ACSR 595 at p.649. 9 Rule 3.3(2) of the Supreme Court (Corporations) Rules requires that a meeting of members ordered under s.411 be convened, held and conducted in accordance with the provisions of Part 2G.2 that apply to the members of a company and such provisions of the company's constitution applying to meetings of members as are not inconsistent with Part 2G.2. There is thus a consolidation of the role of Part 2G.2 in relation to Part 5.1 meetings of members. Rule 3.3(2) begins with the words, "Unless the Court otherwise orders", thus making it clear that the court may fashion a special regime for a special case – although the court could not override any of the express provisions of the Corporations Act. 10 The legislation thus seems to me to deal in a comprehensive way with the matter of the convening of Part 5.1 meetings of members, including the matter of giving notice to members. In those circumstances, I would not expect that it would be appropriate for an order such as order 7 to be made as a routine matter although, of course, particular circumstances in a particular case may indicate a need for such an order. That is something that could and should be addressed if and when the particular need is perceived. Otherwise, as it seems to me, the legislation sufficiently takes care of matters and an order in the form of order 7 is not required. A scheme meeting of members does not, of its nature, differ from any other meeting of members so far as the matter of giving notice to members is concerned. Part 5.1 meetings of creditors obviously stand in an entirely different light. 11 In the particular case before me, the failure to comply with order 7 has not had any effect that should cause the court to pause in the slightest in making its decision to approve the scheme. 12 A case for the grant of approval has been shown. I make the orders in the short minutes of order which I initial and date. The confidential Exhibit FMM 5 tendered on 2 August 2005 is returned to the plaintiff. **********