Centro Retail Limited and Centro MCS Manager Limited in its capacity as Responsible Entity of Centro Retail Trust [2011] NSWSC 1321

Supreme Court New South Wales

Medium Neutral Citation: Centro Retail Limited and Centro MCS Manager Limited in its capacity as Responsible Entity of Centro Retail Trust [2011] NSWSC 1321 Hearing dates: 4 November 2011 Decision date: 04 November 2011 Jurisdiction: Equity Division - Corporations List Before: Barrett J Decision: See paragraph 17 Catchwords: CORPORATIONS - arrangements and reconstructions - Part 5.1 scheme of arrangement - notice convening meeting and accompanying explanatory statement already sent to members - new circumstances make desirable despatch of updating material - need for court's approval - source of court's power to give approval Legislation Cited: Corporations Act 2001 (Cth), ss 411(1), 412(1)(a), 1319 Cases Cited: CMPS&F Pty Ltd v Crooks Mitchell Ltd (1997) 147 ALR 292 Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 Re Anzon Energy Ltd [2008] FCA 1579 Re BlueFreeway Ltd (No 2) [2009] FCA 708 Re Citect Corporation Ltd [2006] NSWSC 143; (2006) 56 ACSR 663 Re Coates Hire Ltd (No 2) [2007] FCA 2105 Re Felix Resources Pty Ltd (No 2) [2009] FCA 1337 Category: Interlocutory applications Parties: Centro Retail Limited and Centro MCS Manager Limited in its capacity as Responsible Entity of Centro Retail Trust - Plaintiffs Representation: Mr J B Santamaria QC - Plaintiffs Clayton Utz - Plaintiffs File Number(s): 2011/00285738

Judgment 1Orders were made on 5 October 2011 under s 411(1) of the Corporations Act 2001 (Cth) for the convening of a meeting of the members of Centro Retail Limited for the purposes of considering a proposed scheme of arrangement. 2A notice of meeting was subsequently despatched to members together with an explanatory memorandum in respect of which the court had granted approval under s 411(1). That section is in the following terms: "Where a compromise or arrangement is proposed between a Part 5.1 body and its creditors or any class of them or between a Part 5.1 body and its members or any class of them, the Court may, on the application in a summary way of the body or of any creditor or member of the body, or, in the case of a body being wound up, of the liquidator, order a meeting or meetings of the creditors or class of creditors or of the members of the body or class of members to be convened in such manner, and to be held in such place or places (in this jurisdiction or elsewhere), as the Court directs and, where the Court makes such an order, the Court may approve the explanatory statement required by paragraph 412(1)(a) to accompany notices of the meeting or meetings." 3The company now wishes to send further explanatory material to its members for the purposes of the meeting. The proposed new material relates to events that have occurred since 5 October 2011. 4I need not go into great detail. It is sufficient to say that the company has successfully pursued negotiations for an extension of external debt facilities beyond the existing repayment date in December 2011 to dates in August and September 2012. While these arrangements rest, at this point, at the level of in-principle non-binding commercial agreements, they are judged sufficiently concrete that both the extensions and the concessions to be given in return for them should be made known. This is particularly so since the additional time expected to be obtained will be material to the possibility of future negotiation of alternatives to the aggregation proposal of which the proposed scheme of arrangement forms part, if that proposal is eventually not implemented. 5There is also updated information about the financial implications of a stamp duty appeal and a revision of pro forma financial forecasts. 6A report of Grant Samuel was included in the explanatory statement despatched with the notice of meeting. Grant Samuel have considered the new information and have concluded that their initial assessment is not altered by the subsequent developments. A short updating report by Grant Samuel forms part of the supplementary package proposed to be sent to members. 7Where a company, of its own motion through a decision of its directors, convenes a meeting of its members, there is a duty on the company and the directors to ensure that information they put into the hands of members before the meeting is complete as to all material matters and that it fully and fairly informs members of what is to be considered at the meeting at which their attendance in person or by proxy is sought; also that the information is not misleading or deceptive. The scope of the duty was considered by the Full Federal Court in Fraser v NRMA Holdings Ltd (1995) 55 FCR 452. 8If, in such a case, a change in circumstances occurs in the interval between despatch of the notice of meeting and explanatory material and the actual holding of the meeting so as to call into question the continuing completeness or continuing accuracy of the information given, there is, at the least, a strong expectation that the company and its directors will act to communicate updated or correcting information to the members so that there might be, as it were, a restoration of reliability of the basis for decision-making by those pondering whether to attend the meeting and whether to appoint and instruct a proxy. 9In this case, of course, the meeting is a meeting of members convened pursuant to orders made by the court (when I say the meeting has been convened, I mean that notice has been given but the time for the meeting has not yet arrived; the appointed day is 22 November 2011). 10Where the court has ordered the convening of a meeting and has approved an explanatory statement, the company itself should not despatch additional explanatory material without first obtaining court approval. This was made clear by Emmett J in Re Coates Hire Ltd (No 2) [2007] FCA 2105. That was a case in which the explanatory statement approved by the court under s 411(1) was accompanied by additional material when sent to members. Emmett J said (at [6]) "Where the Court orders that a document in a particular form be sent to shareholders, the documents should not be accompanied by any further document that has not itself been approved by the Court. If it is proposed that other documents, such as covering letters, be sent, a draft of those other documents should be put before the Court at the time of the application for the order that the meeting be convened. The other documents can then be incorporated into the Court's order." 11This observation takes account of the function assigned to the court by s 411(1) in relation to the explanatory statement called for by s 412(1)(a) and, although concerned with initial despatch, applies with equal force to any proposal for later supplementation of the approved explanatory statement. Because the meeting is convened in accordance with an order of the court and the court has approved the explanatory statement, the court-approved "message" should not be interfered with by unilateral supplementation by the company. 12The merits of the present case are not in doubt. It is appropriate and desirable that the members be given the supplementary material. They should be given the material because it is of such a quality as may assist informed decision-making as to the course members should take with respect to the meeting - whether to attend or stay away and, in the latter eventuality, whether to appoint a proxy and, if so, how to instruct that proxy to vote, if any instruction is given. 13There is, however, a question about the basis for the court's sanctioning the despatch of the further material. A possibility discussed in the course of submissions this morning was that there might be an order under s 411(1) approving the supplementary material proposed to be despatched. I do not think that s 411(1) is available for that purpose. The only approval it empowers the court to give is approval of an explanatory statement "required by paragraph 412(1)(a) to accompany the notice of meeting". Since a notice of meeting and explanatory statement have been despatched, it is not possible now to approve material to "accompany" the notice. 14Mr Santamaria drew my attention to two decisions of Justice Lindgren dealing with the despatch of supplementary material to members after a notice of meeting and explanatory statement had already been sent out. In Re Anzon Energy Ltd [2008] FCA 1579, his Honour made a direction that the company was "justified in publishing to its members" new material of an updating kind. In Re BlueFreeway Ltd (No 2) [2009] FCA 708, he referred to the court's having acceded to an application for "approval" of the distribution of revising material. In neither of these cases was there discussion of the basis for the direction or order made. Nor was there any explanation in Re Citect Corporation Ltd [2006] NSWSC 143; (2006) 56 ACSR 663 where a similar course was taken. 15The desirable course, I think, is for the court to deal with such cases by direction under s 1319 of the Corporations Act : "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 or consequential directions in relation to the meeting, as it thinks fit." 16This section has a wide operation; see, for example, the decision of Burchett J in CMPS&F Pty Ltd v Crooks Mitchell Ltd ( 1997) 147 ALR 292 and cases following it. A direction that a supplementary document be despatched to members for the purposes of a meeting where a notice of meeting and explanatory statement have already been sent is, in my view, an "ancillary" or "consequential" direction in relation to that meeting and therefore within s 1319. In Re Felix Resources Pty Ltd (No 2) [2009] FCA 1337, Logan J, dealing with a case conceptually indistinguishable from the present, said that the court's powers under s 1319 "are designed for just such a situation as this, amongst others". I respectfully agree. 17I make the following direction: Direct pursuant to s 1319 of the Corporations Act 2001 (Cth) that the plaintiffs do, by 9 November 2011, send the letter titled "Update on CER debt extensions and standstill agreements" and document titled "Supplementary Prospectus and Supplementary Product Disclosure Statement" at annexures A and B respectively to the affidavit affirmed by Ronald William Smooker on 3 November 2011: a. to each securityholder whose address is within the Commonwealth of Australia by pre-paid ordinary post; and b. to each securityholder whose address is located in a country other than the Commonwealth of Australia by pre-paid air mail or air courier. 18I direct that the order be entered forthwith.