Westfield Holdings Limited & Ors [2004] NSWSC 602

Reported Decision : 49 ACSR 741

New South Wales Supreme Court

CITATION : Westfield Holdings Limited & Ors [2004] NSWSC 602 HEARING DATE(S) : 01/07/04 JUDGMENT DATE : 1 July 2004

JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Orders approving scheme of arrangement under Corporations Act s.411(4)(b). Judicial advice that responsible entities justified in giving effect to merger.

CATCHWORDS : CORPORATIONS - composite merger proposal involving scheme of arrangement between company and members and alteration of constitutions of managed investment schemes - whether court should make order approving scheme when a condition precedent within control of company or controlled entity remains unsatisfied LEGISLATION CITED : Corporations Act 2001 (Cth), ss.411(4)(b), 601GC(2) Trustee Act 1925, s.63 CASES CITED : Re Westfield Holdings Ltd [2004] NSWSC 458 Westfield Holdings Limited - Plaintiff (1) PARTIES : Westfield Management Limited - Plaintiff (2) Westfield America Management Limited - Plaintiff (3)

FILE NUMBER(S) : SC 2901/04 (1); 2900/04 (2); 2899/04 (3) COUNSEL : Mr I M Jackman SC - Plaintiffs Mallesons Stephen Jaques - Plaintiff (1) SOLICITORS : Speed & Stracey Lawyers Pty Limited - Plaintiff (2) Minter Ellison - Plaintiff (3)

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

BARRETT J

THURSDAY 1 JULY 2004

2899/04 - WESTFIELD AMERICA MANAGEMENT LTD 2900/04 - WESTFIELD MANAGEMENT LTD 2901/04 - WESTFIELD HOLDINGS LTD

JUDGMENT

1 Before the Court is an application by Westfield Holdings Ltd for an order under s.411(4)(b) of the Corporations Act 2001 (Cth) approving a compromise or arrangement between that company and its members, together with applications by Westfield Management Limited and Westfield America Management Limited in their capacity as responsible entities of registered managed investment schemes (respectively, the Westfield Trust and the Westfield America Trust), the latter applications being applications under s.63 of the Trustee Act 1925. The circumstances giving rise to these applications appear in part from my judgment in Re Westfield Holdings Ltd [2004] NSWSC 458 (25 May 2004). 2 This hearing has been duly advertised. The matter has been called outside the court. There is no appearance except for the three applicants. 3 The evidence shows that all procedural steps necessary to justify the making of the orders now sought have been taken. I refer principally to steps involved in the convening and holding of meetings of members of Westfield Holdings Ltd and meetings of the members of the two managed investment schemes and the dispatch of documents to members, as contemplated by the orders made on 25 May 2004. 4 The affidavit of Mr Lowy, the chairman of each such meeting, and the affidavit of Mr Tuxen, the secretary of all three companies, report the results of voting on the motions for all relevant resolutions. On the resolution to approve the Part 5.1 scheme of arrangement, 98.88 per cent of members voting in person or by proxy voted in favour and those members accounted for 99.74 per cent of the shares of members voting. In the case of the general meeting of Westfield Holdings Ltd, 99.75 per cent of total votes cast were in favour of the resolutions. At the meeting of the members of the Westfield Trust, each resolution was supported by more than 98 per cent of the votes cast. In the case of the Westfield America Trust, the percentage of total votes cast that was in favour of each resolution exceeded 95 per cent. Members at all three levels have thus indicated overwhelming support for the composite proposal. 5 There has been produced to the court, in connection with the Part 5.1 scheme, a letter from ASIC referring to s.411(17)(b) and stating 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 Act. In terms of s.411(17), that letter relieves the court of the task of addressing the question whether the scheme has such a purpose. 6 Another matter to which I should refer concerns the execution of deeds poll, that being a matter which reference was made in my judgment of 25 May 2004. There has been tendered to the court a copy of each of the three deeds poll dated 30 June 2004, one executed by Westfield Holdings Ltd, another by Westfield Management Ltd and the third by Westfield America Management Ltd. These serve the purpose outlined in my earlier judgment. 7 When the matter was before me at the convening stage, I referred to the existence of options to subscribe for shares in Westfield Holdings Ltd which, if left in their original state, would be at odds with the full effectuation of the stapling plan. I now have before me evidence of steps taken (in part by contract with the holders of options) to ensure that the options will no longer be exercisable in respect of Westfield Holdings Ltd shares alone and will be capable of being exercised only in respect of stapled securities. That matter has thus been satisfactorily resolved. 8 I am satisfied, on the evidence that has been adduced this morning, that all conditions precedent to the operation of the s.411 scheme have been satisfied with one exception. By clause 2.1(e), the scheme is subject to a condition precedent that the constitution of each of the managed investment schemes be altered. The necessary actions have been taken within each managed investment scheme but, under s.601GC(2), modification, repeal or replacement of a provision of the constitution of a registered managed investment scheme "cannot take effect until the copy has been lodged". The expression "lodged" refers, of course, to lodgment with ASIC (see the s.9 definition of "lodge"). For good reason, lodgment in respect of the amendments to the two constitutions has not yet been effected. This is because the amendments will be appropriate only if the s.411 scheme and the wider proposal become effective. 9 It is undesirable that the court approve a scheme where there remains unsatisfied some expressed condition precedent to its operation (other than the making of the approval order and lodgment of an office copy of it), particularly where fulfilment of the condition lies in the hands of the scheme company or a controlled entity. Neither the company nor a controlled entity should, except perhaps under some clearly expressed provision specifically brought to members' advance attention, retain any unilateral ability to defeat the scheme after the court has granted its approval. Part of the court's function in exercising the discretion conferred by s.411(4)(b) is to see that the way is clear in all respects, except lodgment of its own order, for effectuation of the proposal to which members have agreed and which the court has otherwise found acceptable. 10 Where, as here, the condition in question involves alteration of the constitution of a company or a managed investment scheme in ways that will be inapt unless and until the s.411 compromise or arrangement takes effect, one approach may be for the alteration to be effected by inserting into the constitution a new provision which, while itself having immediate effect, states that relevant (and identified) other provisions of the constitution are to have a particularly described modified operation only from the time a s.411(4)(b) order in relation to an identified compromise or arrangement takes effect pursuant to s.411(10). 11 On the principle that the court ought only to grant its approval in respect of a scheme which is thereafter self sufficient and self-executing, I indicated in the course of submissions that I would prefer to defer making the approval order until after the ASIC lodgments under s.601GC(2) have been completed. 12 I can and do, however, indicate that this is the only matter which I regard as warranting attention. In all other respects, a case has been fully made out for the making of both the s.411(4)(b) order in respect of the scheme between Westfield Holdings Ltd and its members, and the orders giving judicial advice to the responsible entities of the two managed investment schemes. 13 I propose to stand the matter down for a short time so that the ASIC lodgments may be dealt with. I will then formally make the orders in all three matters in the appropriate sequence, that is the orders under the Trustee Act will be made first and the order under the Corporations Act will be made after the Trustee Act orders have been pronounced.