New South Wales Supreme Court CITATION : Prime Infrastructure Holdings Ltd [2010] NSWSC 1337 HEARING DATE(S) : 24/09/10, 15/11/10 JUDGMENT DATE : 18 November 2010 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Order approving Part 5.1 scheme subject to amendment CATCHWORDS : CORPORATIONS - arrangements and reconstructions - scheme of arrangement between a company and its members other than acquirer, a named associate of acquirer, any "subsidiary" of acquirer and anyone holding securities on behalf of or for the benefit of acquirer, its named associate or any "subsidiary" of acquirer - application for approval of scheme - need for amendment to define with precision members not bound - such amendment within s 411(6) power to approve subject to amendment LEGISLATION CITED : Corporations Act 2001 (Cth), Part 5.1, ss 411(4)(b), 411(6) CATEGORY : Principal judgment CASES CITED : Re Investorinfo Ltd [2005] FCA 1848; (2005) 24 ACLC 44 Re Prime Infrastructure Holdings Ltd [2010] NSWSC 1104 Prime Infrastructure Holdings Limited - First Plaintiff PARTIES : Prime Infrastructure Re Limited - Second Plaintiff Prime Infrastructure Re Limited - Third Plaintiff FILE NUMBER(S) : SC 2010/299154 COUNSEL : Mr T F Bathurst QC - Plaintiffs Mr A J Meagher SC - Brookfield Infrastructure Partners Ltd by leave SOLICITORS : Freehills - Plaintiffs Mallesons Stephen Jaques - Brookfield Infrastructure Partners Ltd IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONSLIST BARRETT J THURSDAY 18 NOVEMBER 2010 2010/299154 PRIME INFRASTRUCTURE HOLDINGS LIMITED & 2 ORS JUDGMENT 1 On 17 November 2010, orders were made to bring into operation the acquisition mechanism in respect of Prime Infrastructure stapled securities that was the subject of reasons published on 24 September 2010: Re Prime Infrastructure Holdings Ltd [2010] NSWSC 1104. 2 One matter that arose calls for comment. 3 The element of the acquisition mechanism consisting of a compromise or arrangement under Part 5.1 of the Corporations Act 2001 (Cth) was expressed to be a scheme of arrangement between the company (called "PIHL") and the "holders of fully paid ordinary shares in PIHL (other than the Excluded Security Holder"). 4 There was a definition of "Excluded Securityholder" as follows: " Excluded Securityholder: any Prime Stapled Securityholder who is BIP, BIP Bermuda Holdings IV Limited, a Bermuda exempt limited company (registration number 43696) or a Subsidiary of BIP or any Prime Stapled Securityholder who holds any Prime Stapled Securities on behalf of, or for the benefit of BIP, BIP Bermuda Holdings IV Limited or a Subsidiary of BIP." 5 Other definitions elucidated the meaning of "BIP", "Prime Stapled Securities" and "Subsidiary" in ways to which it is not necessary to refer. 6 It seemed to me undesirable to make an order under s 411(4)(b) of the Corporations Act approving the scheme of arrangement until it had been amended to identify with clarity and precision each "Excluded Securityholder". 7 Without such an amendment, one would never know whether or not a particular holder of securities was bound by the scheme. At least two possibilities would exist in relation to every holder that was a corporation: that it was a "Subsidiary" of BIP or that it held securities "on behalf of, or for the benefit of" BIP, BIP Bermuda Holdings IV Limited or a "Subsidiary" of BIP. The latter possibility would also exist in relation to every holder that was not a corporation. 8 In addition, the fact that a particular holder held a number of Prime Stapled Securities "on behalf of, or for the benefit of", say, BIP and, at the same time, held other Prime Stapled Securities "on behalf of, or for the benefit of" persons unconnected with BIP (or for its own benefit and in its own right) would mean that none of the securities held by that holder were dealt with by the scheme. 9 It was eventually made clear that, in fact, all securities intended to be excluded were held by one or other of BIP and BIP Bermuda Holdings IV Limited. The definition of "Excluded Securityholder" was amended accordingly and the court's approval was granted in relation to the amended scheme. 10 Such an amendment introducing clarity and avoiding ambiguity which might be productive of future uncertainty is clearly within the contemplation of s 411(6): see, in particular, the following passage in the judgment of Gyles J in Re Investorinfo Ltd [2005] FCA 1848; (2005) 24 ACLC 44 at [7]: "The following propositions emerge from the cases on s 411(6) and its predecessors, s 315(6) of the Companies Code and s 181(3) of the Uniform Companies Acts: (1) If the alteration is of a minor kind which does not really affect the details of the scheme, then the Court has power to approve the scheme as amended: Re Adelaide Air Conditioning and Domestic Engineers Ltd (In Liq) [1972] 6 SASR 603 at 605 (Zelling J); Re H Craig Pty Ltd (1971-73) CLC 40-026 (Mitchell J); Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [21] (Barrett J). (2) The discretion under the section has to be exercised at the time the scheme is approved and cannot be exercised once the approval order has been made: Re BTS Bearings and Transmission Supplies Pty Ltd (1983) 8l ACLR 287 (Needham J). (3) The discretion under the section may be exercised to omit wording in a scheme which is not appropriate for inclusion in a scheme: Re Homemaker Retail Management Ltd (Barrett J). (4) The discretion under the section may be exercised, with the consent of the creditors at the scheme meeting and a priority creditor, to omit a priority creditor from the definition of "creditor" in the scheme, thereby maintaining the priority of the omitted priority creditor: Re V & M Diagnostic Services Pty Ltd (1985) 9 ACLR 663 (Cohen J). (5) The discretion may be exercised where the amendment improves the smooth working of the scheme without affecting its substance: Re Evandale Estates Ltd 1962 VSC unreported (Adam J), noted in WE Paterson & HH Ednie, Australian Company Law, 2nd edn, Butterworths, Sydney, 1971- at para 181/43; Re H Craig Pty Ltd (1971-73) CLC 40-026 (Mitchell J); Re Permanent Trustee Co Ltd (2002) at [21] (Barrett J)." 11 Section 411, as it relates to an arrangement between a Part 5.1 body and "its members or any class of them", contemplates that, where some group other than the totality of the members is to be bound, the precise constitution of that group must be certain on the face of the arrangement itself or, at the least, by reference to the terms of the arrangement read together with readily available and accessible records of an official kind (such as a register of members maintained under the Corporations Act). ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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