FEDERAL COURT OF AUSTRALIA

ADG Industries Pty Ltd ACN 112 167 638 v ARA Group Pty Ltd

ACN 074 886 561 [2007] FCA 1805

ADG INDUSTRIES PTY LTD ACN 112 167 638 & ORS v ARA GROUP PTY LTD ACN 074 886 561 & ORS

NSD2174 OF 2007

EMMETT J

5 NOVEMBER 2007

SYDNEY

THE COURT ORDERS THAT:

1.                  Each Plaintiff convene a meeting of its members for the purpose of considering and, if thought fit, approving with or without modification, a scheme of arrangement proposed to be made between each Plaintiff and its members and in the form set out in Exhibit “1”.

2.                  The meeting of the members of each Plaintiff is to be held as follows:

a)      in respect of the First Plaintiff, at Level 36, 225 George Street, Sydney, New South Wales on Tuesday 20 November 2007 at 10.00am;

b)      in respect of the Second Plaintiff, at Level 36, 225 George Street, Sydney, New South Wales on Tuesday 20 November 2007 at 10.05am or so soon a time thereafter as the previous meeting closes;

c)      in respect of the Third Plaintiff, at Level 36, 225 George Street, Sydney, New South Wales on Tuesday 20 November 2007 at 10.10am or so soon a time thereafter as the previous meeting closes;

d)      in respect of the Fourth Plaintiff, at Level 36, 225 George Street, Sydney, New South Wales on Tuesday 20 November 2007  at 10.15am or so soon a time thereafter as the previous meeting closes;

e)      in respect of the Fifth Plaintiff, at Level 36, 225 George Street, Sydney, New South Wales on Tuesday 20 November 2007  at 10.20am or so soon a time thereafter as the previous meeting closes;

f)       in respect of the Sixth Plaintiff, at Level 36, 225 George Street, Sydney, New South Wales on Tuesday 20 November 2007 at 10.25am or so soon a time thereafter as the previous meeting closes;

g)      in respect of the Seventh Plaintiff, at Level 36, 225 George Street, Sydney, New South Wales on Tuesday 20 November 2007 at 10.30am or so soon a time thereafter as the previous meeting closes;

h)      in respect of the Eighth Plaintiff, at Level 36, 225 George Street, Sydney, New South Wales on Tuesday 20 November 2007 at 10.35am or so soon a time thereafter as the previous meeting closes; and

i)        in respect of the Ninth Plaintiff, at Level 36, 225 George Street, Sydney, New South Wales on Tuesday 20 November 2007 at 10.40am or so soon a time thereafter as the previous meeting closes.

3.                  Edward Federman to act as the Chair of each meeting referred to in Order 2.

4.                  Other than regulation 5.6.13 of the Corporations Regulations 2001, Rule 2.15 of the Federal Court (Corporations) Rules 2000 shall not apply to the meetings referred to in Orders 1 and 2 above.

5.                  Rule 3.3(2) of the Federal Court (Corporations) Rules 2000 shall not apply to the meetings referred to in Orders 1 and 2 above to the following extent:

a)         the notice period for each meeting as set out in Order 2;

b)         the notice of meeting and accompanying explanatory statement of each plaintiff company (as contained in Exhibit "1") is to be served by 6:00pm on Friday 9 November 2007; and

c)         service of each notice of meeting and accompanying explanatory statement may be effected by delivering it to the registered office in Sydney of each member of a plaintiff company.

6.                  The proceeding be stood over to Friday 30 November 2007 at not before 10:15am before The Honourable Justice Emmett, or as he directs, for consideration of orders approving the schemes of arrangement and associated orders under section 413 of the Corporations Act 2001.

7.                  Each Plaintiff be granted liberty to apply.

8.                  These orders be entered forthwith.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     The plaintiffs are all wholly owned subsidiaries of ARA Group Pty Limited (ARA Group).  They seek orders under s 411 of the Corporations Act 2001 (Cth) (the Act) for the convening of meetings of their members, for the purposes of considering, and if thought fit, agreeing to schemes of arrangement whereby all of the assets and liabilities of the plaintiffs will be transferred to one or other of the defendants, whereupon the plaintiffs will be deregistered.

2                     ARA Group has substantial assets, which exceed its liabilities by some $28 million.  It has a number of subsidiaries, including the plaintiffs and the defendants.  A number of the plaintiffs have no assets and liabilities and the purpose of the schemes is to rationalise the group by removing unwanted subsidiaries. 

3                     The schemes are incorporated in a single document, which is unexceptional in its terms.  The terms of the schemes are such that, assuming there is no objection from outside parties, they would be approved by the Court.  It can be assumed that there will be no opposition from any shareholders, having regard to the fact that all of the plaintiffs are wholly owned subsidiaries of ARA Group.

4                     Senior counsel has drawn attention to the provisions of the scheme whereby certain policies of insurance and liabilities are excluded from the operation of the scheme.  The concern is that there may be policies in existence covering the liability of the transferring or plaintiff company, being policies that are event based rather than claims made based.  Such policies could well be many years old and in many cases it may be difficult to identify the underwriter.  Such policies may contain a provision that any assignment without the consent of the underwriter would avoid the policy.  The intention is that, if there are such policies outstanding, they would vest in Australian Securities and Investments Commission (the Commission) by operation of law.  Any person who may have a claim insured by those policies should continue to have such claim against the underwriters.  For those reasons, the schemes provide exceptions for “Excepted Policies” as defined and “Excepted Liabilities” as defined.  Excepted Liability is defined as a liability to persons who have suffered, or after the date of the scheme might suffer, injury to which an Excepted Policy responds.

5                     However, there are several matters in respect of which I have indicated I would require further evidence before approving the schemes, assuming they are agreed to by the members.   The first concerns at least three of the plaintiffs that have liabilities.  At present the evidence does not indicate the nature of the liabilities or the identity of the creditors.  If any of the creditors are outside creditors, then it is possible that the effect of the transfer could be detrimental to the Transferee.  That is to say, if the assets of the transferring company do not exceed its liabilities, the consequence would be that there is a net detriment to the Transferee company.

6                     Subject to being satisfied as to those matters when the plaintiffs seek the Court’s approval of the schemes, the schemes are such as the Court would ordinarily approve.  Accordingly I propose to make orders in terms of the orders sought by the plaintiffs.

Associate:

Dated:         26 November 2007