New South Wales Supreme Court CITATION : In the matter of Lend Lease Primelife Ltd; In the Matter of Lend Lease Village Responsible Entity Ltd [2009] NSWSC 1340 HEARING DATE(S) : 2 December 2009 JUDGMENT DATE : 3 December 2009 JURISDICTION : Equity Corporations List JUDGMENT OF : Austin J DECISION : Order made for the adjournment of the scheme meeting CATCHWORDS : CORPORATIONS - scheme of arrangement - whether court has power to make orders adjourning or otherwise postponing a meeting to approve a scheme of arrangement, after the meeting has been convened pursuant to earlier orders of the court LEGISLATION CITED : Corporations Act 2001 (Cth), ss 411, 1319 CMPS & F Pty Ltd v Crooks Michell Ltd (1997) 24 ACSR 367 Healthscope Ltd v Symbion Health Ltd [2009] NSWCA 191 CASES CITED : Re Baxter & Co Pty Ltd (Supreme Court of New South Wales, unreported, 23 September 1961), Re McCracken's Brewery Co Ltd (1899) VLR 784 Re Park Lane Jewellers Pty Ltd (1985) 10 ACLR 138 5053/09 PARTIES : Lend Lease Primelife Ltd (Plaintiff) 5074/09 Lend Lease Village Responsible Entity Ltd as responsible entity of Lend Lease Primelife Trust (Plaintiff) FILE NUMBER(S) : SC 5053/09; 5064/09 COUNSEL : S Nixon (Plaintiffs) SOLICITORS : Gilbert & Tobin (Plaintiffs) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST AUSTIN J THURSDAY 3 DECEMBER 2009 5053/09 IN THE MATTER OF LEND LEASE PRIMELIFE LTD 5064/09 IN THE MATTER OF LEND LEASE VILLAGES RESPONSIBLE ENTITY LTD AS RESONSIBLE ENTITY OF LEND LEASE PRIMELIFE TRUST JUDGMENT 1 HIS HONOUR: The shares in Lend Lease Primelife Ltd (LLP Co) are stapled to the units in Lend Lease Primelife Trust (LLPT), to form stapled securities (LLP Securities) admitted to quotation on the Australian Securities Exchange. The responsible entity of LLPT is Lend Lease Villages Responsible Entity Pty Ltd (LLVRE). 2 It is proposed that Lend Lease Corporation, through a subsidiary, will acquire for a cash consideration all of the LLP Securities it does not already own. The transaction is to be effectuated by: a scheme of arrangement affecting the holders of LLP Securities, to the extent that they are LLP Co shareholders; and amendments to the constitution of LLPT made by LLVRE after approval by special resolution of holders of LLP Securities, to the extent that they are unit holders in LLPT; and judicial advice to LLVRE as responsible entity that it would be justified in proceeding on the basis that the constitutional amendments are within the powers conferred by the constitution and s 601GC of the Corporations Act. 3 On 2 November 2009 Barrett J made orders for the convening of the scheme meeting and for appropriate preliminary judicial advice. In the result, the scheme meeting and the meeting of unit holders have been convened to be held on 8 December 2009, and the proceedings have been listed for further hearing on 11 December 2009, for orders approving the scheme of arrangement and providing the judicial advice that is sought. That further hearing has been advertised. 4 ASIC has extended the period within which LLP Co must hold its Annual General Meeting (AGM) from 30 November 2009 to the date of the scheme meeting, provided that the scheme meeting occurs before 31 January 2010 and not between 16 December 2009 and 8 January 2010. 5 Yesterday the plaintiffs approached the court by notice of motion to seek orders that would, in substance, defer the meetings of the holders of LLP Securities from 8 December to 14 December 2009 and change the location of the meetings. It is proposed that the hearing of the application for approval of the scheme of arrangement and the application for judicial advice will be on 15 December 2009 and that the new hearing date will be advertised. 6 The postponement of the meeting and hearing are proposed because Lend Lease Corporation has increased its offer from $0.31 to $0.35 per LLP Security, and the plaintiffs wish to give the scheme shareholders sufficient time to consider the revised proposal and lodge proxy forms. The increase was announced to the Australian Securities Exchange on 1 December 2009. The announcement said that the holders of LLP Securities would be sent further information about the revised proposal, including a new timetable and new proxy forms, and it foreshadowed the present application. 7 I am persuaded, for reasons considered below, that there are good grounds for the proposed postponement, and that the court should do what it can to give effect to the proposal. At the hearing of the application I was concerned about two matters: whether the court had the power to postpone the date of the scheme meeting after it had been convened pursuant to the court's orders, and whether the postponement might affect the availability of proxies already lodged for the meeting as originally convened. I received submissions on those matters. The court's power to postpone a scheme meeting 8 One ground for denying that the court can postpone a scheme meeting might be a limitation on the power of the court to vary any order, after the order has been made and entered. In Re McCracken's Brewery Co Ltd (1899) VLR 784, Holroyd J took the view that he had no power to alter an order convening a scheme meeting, once made. His Honour's reasoning seems to be based on the proposition that in 1899, the court had only limited power to vary the orders it had made. In Re Park Lane Jewellers Pty Ltd (1985) 10 ACLR 138, Young J (as his Honour then was) cited McCracken's case and observed that orders have in fact been made from time to time varying orders convening meetings to consider schemes of arrangement (referring to Paterson, Ednie & Ford, Australian Company Law, 3rd edn, Vol 4, para [315/31]). One example, given by Young J, is Re Baxter & Co Pty Ltd (Supreme Court of New South Wales, unreported, 23 September 1961), in which the room originally chosen to hold the meeting was to be renovated, and Taylor J ordered that the meeting be held in another place. Likewise, according to Young J, orders have been made correcting clerical errors in the court's original orders. 9 In Re Park Lane Jewellers, the application was to vary the court's order that the scheme documentation for a creditors' meeting be sent to the creditors by post. The applicants had reliable information that there was about to be a postal strike and so they sought an order that the documentation be delivered to the creditors, rather than posted. Young J made the order. He expressed the opinion that in modern times a less strict view is taken to the variation of orders than was taken in 1899, and he said that McCracken's case no longer represented the law of New South Wales, if it ever did. His Honour has recently reiterated his views, in obiter dicta in Healthscope Ltd v Symbion Health Ltd [2009] NSWCA 191 at [68]-[72]. 10 I respectfully agree with Young JA that the mere fact that an order has been made and entered, requiring the convening of a meeting to be held on a stated date, does not today prevent the court from varying the date of the meeting. Moreover, it seems to me (for reasons set out below) that the correct order to make is an order adjourning the meeting that has been convened, rather than an order cancelling that meeting and requiring the convening of another meeting on a different day. An order for adjournment is not a variation of, or inconsistent with, the earlier order requiring the meeting to be convened. 11 There is another more formidable ground for contending that the court cannot postpone a scheme meeting once it has been convened. This is the idea that the court should not usurp the decision of the shareholders on the question whether they should adjourn their meeting or deal with the proposed resolutions without delay. In Re North Flinders Mines Ltd (1996) 19 ACSR 602, the court made orders for the convening of meetings of shareholders of North Flinders Mines to consider a scheme of arrangement that was conditional upon the shareholders of Posgold approving a scheme in similar terms. The shareholders of Posgold met and did not pass the resolution put to them for approval of their scheme, and subsequently the board of Posgold had under consideration a proposal to re-submit the scheme to the Posgold shareholders. At that stage North Flinders Mines applied to the court for orders revoking the orders for the calling of meetings of shareholders of that company to consider the scheme, or in the alternative, adjourning the meetings. 12 Debelle J observed (at 603): "It is open to serious question whether a meeting which has not only been convened by order of the court but of which notice has been given can be cancelled by the court …". He distinguished Re Park Lane Jewellers on the ground that the variation of the orders in that case was made at a time when notice had not been given (at 603). 13 His Honour acknowledged some factors pointing to the desirability of making an order adjourning the meeting, such as avoidance of unnecessary cost and inconvenience, lack of information for shareholders because of the uncertainty of Posgold's position, and an element of futility in requiring shareholders to attend a meeting when they did not know whether the condition of Posgold approval would be met. But in his Honour's view it was not appropriate for the court to "speculate on the outcome of the meeting", at which the shareholders might make any of a variety of decisions other than to adjourn the meeting forthwith (at 604). 14 Debelle J's reasoning goes partly to matters of discretion, but in the passage quoted his Honour seems to be concerned about the court's power. As to this, in CMPS & F Pty Ltd v Crooks Michell Ltd (1997) 24 ACSR 367 Burchett J noted that Debelle J was apparently not referred to s 1319 of what is now the Corporations Act. That section provides: "Where, under this Act, the Court orders a meeting to be convened, the Court may, subject to this Act, give such directions with respect to the convening, holding or conduct of the meeting, and such ancillary and consequential directions in relation to the meeting, as it thinks fit." 15 In CMPS & F Pty Ltd, orders had been made to convene meetings of shareholders to consider a scheme of arrangement, and the meetings had been convened, but before they were held the company entered into a different transaction, which would require the approval of its shareholders in general meeting. The new proposal was so inconsistent with the proposed scheme as to deprive the proposed scheme of all utility. The question for Burchett J was whether the court had power to revoke its earlier orders so as to cancel the scheme meetings. He held that while an order revoking the convening of a meeting would not be "ancillary" under s 1319, in circumstances where the usefulness of the meeting had been destroyed or very greatly compromised, the word "consequential" was entirely apt. 16 I respectfully agree with Burchett J's construction of s 1319. If, as he held, the section authorises the court to revoke its earlier order for the convening of a scheme meeting, and consequently to cancel the meeting, on the ground that these are consequential directions in relation to the meeting, that it must also be the case that s 1319 authorises the court to adjourn the meeting, in circumstances where an adjournment is called for by events that have happened after the meeting was convened. Such events make an order having the effect of postponing the meeting a "consequential" direction under the section. Moreover, an order for the adjournment of the meeting seems to me to fall directly within the earlier part of s 1319, which speaks about giving directions with respect to, inter alia, the "holding" of the meeting. I therefore conclude that the court has the power to make an order adjourning or otherwise having the effect of postponing a scheme meeting convened under previous orders of the court. The form of the order 17 The other issue that has concerned me relates to the proper orders to be made. It was initially suggested that I should revoke Barrett J's order for the convening of a meeting on 8 December and make a new order for the convening of a meeting on 14 December. It seems to me that orders of that kind might have the unintended effect of rendering inoperative, in respect of the meeting on 14 December, proxies already granted for the meeting on 8 December. 18 Generally speaking, a proxy prepared in respect of a meeting and attached to the notice of meeting is an authority conferred by the shareholder on the proxyholder to attend and vote at that meeting or any adjournment of it. I was not taken to the form of proxy used in the initial notice of meeting in this case, for when I raised the issue, counsel submitted that the proper form of order was not to revoke and replace the earlier orders, as initially proposed, but rather simply to order that the meeting convened for 8 December be adjourned to 14 December. That was the approach taken by Barrett J in Re Citect Corporation Ltd (2006) 56 ACSR 663; [2006] NSWSC 143 at [7], although his Honour did not explore the basis for that order in his published reasons for judgment. 19 I agree that the appropriate form of order is to adjourn the meeting convened for 8 December until 14 December 2009. Proxies given for the meeting on 8 December will presumably apply to the adjourned meeting on 14 December. Discretionary considerations 20 Lend Lease Corporation's increase in the consideration it is offering under the scheme is a development directly affecting the subject matter of the scheme meeting, occurring after the dispatch of the notice of meeting and proxy forms. It is obviously desirable to give the proponents of the scheme time to inform security holders of what has happened, and to give security holders time to consider and, if they wish, respond to that information before the meeting by appointing or revoking proxies. The increase in consideration was announced to the market only two days ago, Tuesday 1 December, and the meeting has been convened for next Tuesday, 8 December. Manifestly there is not enough time for disclosure and consideration to occur, and so the scheme meeting should be postponed. 21 I have considered whether the correct course should be to leave it to the security holders to decide whether the scheme meeting should be adjourned. However, it seems to me that if they were to decide to proceed with the meeting on 8 December, so soon after the change of circumstances has occurred, the court would have some measure of doubt as to whether the decision of the meeting truly reflected the will of fully informed security holders. Since the court must make the final decision to approve or not approve the scheme, having regard to the resolution of the security holders, it is desirable for the court to intervene to remove a potential obstacle to its decision, even though by doing so it deprives the security holders of the opportunity to reject the adjournment of the scheme meeting. 22 In CMPS & F Pty Ltd Burchett J distinguished the North Flinders Mines case on the ground that there, Debelle J was concerned that shareholders who had received notice of a meeting should not have the capacity taken away from them to decide the destiny of their own company; whereas in the CMPS & F case there was really nothing left for shareholders to decide at the scheme meeting, in any practical sense, and further, it would be confusing and useless to provide shareholders with the sort of information they would have to receive in respect of the scheme meeting if it were to go ahead in conjunction with the meeting that had to be called in relation to the new proposal. Those discretionary considerations do not apply in the present case, but nor is this a case where it is important to leave the question of adjournment of the meeting to the security holders for decision. The substantive resolutions to be put to the security holders at the scheme meeting will be the same on 14 December as they would have been on 8 December. The security holders will not be deprived of the opportunity to make their decision about the destiny of their company. The court's order will simply ensure that they have adequate time to consider the matter. Conclusion 23 I have therefore decided to make an order for the adjournment of the scheme meeting from 8 to 14 December 2009. I have also made orders for supplementary disclosure and advertising. I have made orders vacating Barrett J's orders for the court hearing on 11 December 2009 to consider whether to approve the scheme and give judicial advice, and for setting that hearing down on 15 December 2009. 24 There is a meeting of unit holders in LLPT convened under the constitution of that trust, to be held on 8 December 2009. Additionally, LLP Co's AGM is to be held on that day. After consideration of the issues, the plaintiffs did not ask me to make any order for adjournment or other postponement of those meetings. There would be no power to do so under s 1319, because that section only applies where the court orders a meeting to be convened, and those meetings have not been convened under order of the court. I understand that the convened meetings will be held and immediately adjourned to 14 December 2009. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.