FEDERAL COURT OF AUSTRALIA

Ventura Investment Management Limited, in the matter of Ventura Investment Management Limited (No 3) [2011] FCA 1010

THE COURT ORDERS THAT:

1.    Pursuant to subsection 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between the Plaintiff and its members, in the form of Exhibit 4 in the proceeding, be approved.

2.    The Plaintiff lodge with the Australian Securities and Investment Commission a copy of the approved scheme of arrangement at the time of lodging a copy of these Orders.

3.    Pursuant to subsection 411(12) of the Act, the Plaintiff be exempted from compliance with section 411(11) in relation to Order 1.

4.    These orders be entered forthwith.

Note:    Settlement and entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1    This is the second court hearing of an application to approve a scheme of arrangement under s 411 of the Corporations Act 2001 (Cth) between Ventura Investment Management Limited (“Ventura”) and its shareholders other than Centrepoint Alliance Limited (“CAF”) and its subsidiary, Professional Investment Holdings Limited (“PIH”). I described the scheme in my reasons for judgment when I made orders convening the scheme meetings on 20 June 2011: see Ventura Investment Management Limited, In the Matter of Ventura Investment Management Limited [2011] FCA 721. It is unnecessary to repeat the details of the scheme of arrangement.

2    The scheme meetings have been held and the scheme was approved by an overwhelming majority of votes cast at the scheme meetings of the Founder Shareholders and the Planner Shareholders. The details of the votes cast at the meeting were given in an affidavit of Linda Maree Kaddatz sworn on 28 July 2011. For convenience I will set out the results of the meetings of the two classes of shareholders.

3    Ms Kaddatz observes at para 28 of her affidavit that a vote for a shareholder was considered as “participating” where the shareholder was present (by either being present in person, by proxy, attorney or corporate representative) or by receipt of a proxy, regardless of the validity of the proxy. She adopted this approach only in relation to the calculation of “voter turnout” at the meeting as reflected in the table referred to in [4] below. Ms Kaddatz did not include invalid proxies when addressing the numbers of votes cast for the purpose of calculating the statutory majorities achieved at the meetings.

4    The details of the participating shareholders and votes are recorded in a table in paragraph 28 of Ms Kaddatz’s affidavit which I will also reproduce as follows.

5    I endeavoured to summarise the relevant principles which govern the approach of the court in exercising its power to approve a scheme of arrangement at the second court hearing in Re Seven Network Limited (No 3) (2010) 267 ALR 583 (“Seven Network”). It is unnecessary to repeat what I said in that case, save to say that the court has a discretion whether to approve a scheme and is not bound to approve it simply because it made orders convening the scheme meeting or because the statutory majorities were attained. Also, the court usually approaches the task of whether to exercise its discretion to approve the scheme upon the basis that the company’s members are better judges of what is in their commercial interest than the court.

6    I should also mention that I made reference, at [33]ff of Seven Network, to five matters referred to by the Corporations and Markets Advisory Committee in their December 2009 report which I will not repeat except to say that emphasis is placed upon the need for full and frank disclosure of all information material to the members’ decision.

7    I have before me the independent expert’s report of Investorlink Corporate Limited to which I referred at [7] of Ventura Investment Management Limited, In the Matter of Ventura Investment Management Limited [2011] FCA 721 (“Ventura Investment Management Ltd”). The report sets out in some detail the basis upon which Investorlink valued the scheme consideration and came to the view that the acquisition is fair and reasonable and in the best interests of Ventura shareholders.

8    I have also considered the terms of the explanatory memorandum which was in evidence at the first court hearing and I note that no criticism of the disclosure made in the explanatory memorandum has been brought to the attention of the court by any shareholder or by ASIC. There is nothing in the evidence before me to suggest that members voted at the scheme meetings other than in good faith, nor is there any evidence to cast doubt on the procedural integrity of the meeting.

9    Mr Oakes SC who appears for Ventura tendered the usual letter from ASIC under s 411(17)(b) of the Corporations Act 2001 (Cth) (“the Act”). ASIC has not raised any “public policy” concern and there is nothing on the face of the proposal to suggest that the scheme is other than one which is of a nature and in terms that the Court would be likely to approve on the hearing of an unopposed application: see FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72 (“FT Eastment & Sons”).

10    As I said in Seven Network, it is not the Court’s task to determine whether the scheme is intrinsically fair to members. The Court’s role is supervisory and the authorities place emphasis upon whether there has been full and frank disclosure to the members. In this regard, the Court relies heavily upon counsel. Also, as was said by Santow J in FT Eastment & Sons at [23], it is the members’ “money” which is at stake.

11    Applying those principles, it seems to me that I ought to exercise my discretion to approve the scheme of arrangement, in light of the very substantial majorities obtained in each class meeting, in circumstances where it appears that there has been adequate disclosure of the essential and material aspects of the scheme. I should add that although the details recorded in Ms Kaddatz’s table of “votes participating” and “shareholders participating” in the scheme meetings show that the numbers fell between 35 and 42 per cent, there was nothing in the evidence to suggest that any further inquiry was required in relation to the procedures adopted for despatch of the documents to shareholders.

12    One of the matters which I addressed in my earlier judgment was the question of the special dividend which was declared, conditional upon the scheme proceeding: Ventura Investment Management Ltd at [14]–[15]. Mr Kenneth Bruce Butler, a director of Ventura, has sworn an affidavit which brings up to date the evidence in relation to the capacity of Ventura to pay dividends out of current year profits in accordance with the requirements of ss 254T and 260A of the Act. Mr Butler’s evidence is that the aggregate amount of the special dividend is $1,879,744.

13    In his affidavit, sworn on 27 July 2011, Mr Butler updates the evidence given in his affidavit of 16 June 2011 which was provided for the first court hearing. Mr Butler’s evidence is that there has been no material change to the financial position of Ventura since the first court hearing. Also, the aggregate amount of the special dividend is $1,879,744 and as at 30 June 2011, Ventura held cash and cash equivalents of $2,381,581. Mr Butler goes on to express the view that payment of the special dividend will not materially prejudice Ventura’s ability to pay its creditors because Ventura is and will be in a position to pay such creditors in accordance with their trade terms. It seems to me, therefore, that I can be satisfied that the requirements of ss 254T and 260A, if applicable, are satisfied.

14    The only other issues to which I should refer are the issue of whether there are eligible foreign shareholders. The evidence satisfies me that there are no ineligible foreign shareholders, and accordingly, no nominee contract of the type usually put before the Court on such applications was required and no such contract was tendered.

15    The other relevant issue is the application of the Securities Act 1933 15 USC § 77a (“US Securities Act”). CAF intends to issue the scheme consideration securities in reliance on the exemption from registration set out in s 3(a)(10) of the US Securities Act.

16    As Mr Oakes observes in his written submissions (which I will mark as MFI2), there is a well-trodden path in relation to such applications. The leading authorities are the decisions of Re Central Pacific Minerals NL [2002] FCA 239 (Emmett J), Re Simeon Wines Limited (2002) 42 ACSR 454 (Lander J) and Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 (Barrett J). I endeavoured to summarise the relevant principles in Re Solution Six Holdings Ltd (2004) 50 ACSR 113 at [37]ff (“Solution 6”) and also in Re Professional Investment Holdings Ltd [2010] FCA 1336 at [44]–[60] (“Professional Investment Holdings Ltd”).

17    It is sufficient to say that the present case is effectively on all fours with the decision which I gave in Professional Investment Holdings Ltd. It is therefore appropriate that I make the same observations in this case as I made in Professional Investment Holdings Ltd.

18     There are five relevant observations which I should make. First, the scheme contemplates the issue of CAF securities in exchange for the Ventura securities. Second, the court was advised before the commencement of the approval hearing that CAF would rely on the exemption under s 3(a)(10) of the US Securities Act on the basis of the court’s approval of the scheme. I referred to this at [20] of Ventura Investment Management Ltd. Third, the court has been fully informed of the value of the securities to be surrendered and the value of the securities to be offered in consideration of that surrender. The valuation has been prepared by an expert independent of both the scheme company and the acquirer and is a sworn valuation. The court has taken this evidence into account in determining whether the scheme is fair and thus should be approved. However, as I noted in Solution 6 at [43], the court has not acted as a valuer in this process but has received the assistance of an unaligned expert.

19    Fourth, the court, as it is statutorily required, has held a hearing to consider the fairness and reasonableness of the scheme proposal.

20    Fifth, the hearing has been open to the public and any person to whom securities are to be issued has standing to appear. Notice of the date of the hearing was included in the scheme booklet sent to all security holders of Ventura prior to the proposal being considered by the meetings of those security holders and was advertised in a daily newspaper circulating throughout the country. There was no appearance today by any security holder.

21    For the reasons set out above, I have made orders in terms of the draft order submitted to me by Mr Oakes SC which I have signed and dated with today’s date.

Associate:

Dated:    1 August 2011