FEDERAL COURT OF AUSTRALIA

PR Finance Group Limited, in the matter of PR Finance Group Limited (No 4) [2013] FCA 1009

IN THE MATTER OF PR FINANCE GROUP LIMITED ACN 109 299 390

THE COURT ORDERS THAT:

1.    Pursuant to paragraph 411(4)(b) and subsection 411(6) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between the Plaintiff and its members, having been duly approved by the members in accordance with paragraph 411(4)(a)(ii) of the Act with the alterations identified in Exhibit 7 in the proceeding, be approved.

2.    The Plaintiff lodge with the Australian Securities and Investments Commission (ASIC) a copy of the approved scheme of arrangement, in the form of Exhibit 8 in the proceeding, at the time of lodging a copy of these Orders.

3.    Upon lodgement of these Orders with ASIC, pursuant to subsection 411(10) of the Act, the Orders take effect from 25 June 2013.

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

5.    These orders be entered forthwith.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE MATTER OF PR FINANCE GROUP LIMITED ACN 109 299 390

REASONS FOR JUDGMENT

1    These are brief reasons for orders which I made on 14 August 2013. Counsel for the plaintiff, Mr Oakes SC, provided written submissions on behalf of PRF dated 13 August 2013 and a roadmap of evidence provided by affidavits sworn and exhibits tendered in the proceedings. I made the orders for the reasons set out in those submissions and based on the evidence referred to in the roadmap. There are a few issues of particular note which it is appropriate to record in these reasons.

2    References to provisions of a statute in these reasons are references to provisions of the Corporations Act 2001 (Cth) (Corporations Act) unless otherwise indicated. For convenience, words which are defined in the booklets which are Exhibit 1 and Exhibit 3 in these proceedings (Scheme Booklet and Supplementary Scheme Booklet respectively) have the same meaning in these reasons unless otherwise indicated.

Background

3    On 13 May 2013, I made orders under s 411(1) convening a meeting of the members of the plaintiff (PRF) for 14 June 2013 to consider a scheme of arrangement pursuant to which Keybridge Capital Limited (Keybridge) would acquire all of the shares in PRF (Scheme): see PR Finance Group Limited, in the matter of PR Finance Group Limited [2013] FCA 504.

4    On 25 June 2013, Jacobson J declined to make orders approving the Scheme at that stage and adjourned the application to a date to be fixed in August 2013: see PR Finance Group Limited, in the matter of PR Finance Group Limited (No 2) [2013] FCA 633 (PRF No 2). Although the Scheme Meeting had been held and the resolution to approve the Scheme had been passed by the majority envisaged by s 411(4)(a)(ii), PRF had not filed with the Australian Securities and Investments Commission (ASIC) audited financial statements for the financial year ended 30 June 2012 (FY 2012 Accounts), as the Scheme Booklet had said would occur at least 10 days before the Scheme Meeting. At [60]-[61] of PRF No 2, Jacobson J set out the things which would need to occur in order for him to be prepared to approve the Scheme and to make orders that the Effective Date for the Scheme would remain at 25 June 2013. In summary they were:

    a further meeting of shareholders is duly convened and held at which the scheme approval resolution is ratified (Ratification Scheme Meeting);

    the Ratification Scheme Meeting is held at a time when the audited FY 2012 Accounts are available;

    the audited FY 2012 Accounts have been lodged with ASIC not less than 10 days before the Ratification Scheme Meeting;

    any material matters in the audited FY 2012 Accounts to which attention should be drawn should be provided by way of a supplementary scheme booklet (Supplementary Scheme Booklet);

    the resolution ratifying the scheme approval resolution is passed by the majority stated in s 411(4)(a)(ii) (Required Majority) (Ratification Resolution); and

    the Ratification Scheme Meeting is held no later than 15 August 2013, or such later date as the Court may approve.

5    On 11 July 2013, I made orders under s 1319 approving the despatch to PRF shareholders of a Supplementary Scheme Booklet and ordered that a Ratification Scheme Meeting be convened on 12 August 2013: see PR Finance Group Limited, in the matter of PR Finance Group Limited (No 3) [2013] FCA 704 (PRF No 3). At [7] of PRF No 3 I noted the changed information which was included in the Supplementary Scheme Booklet. This included the fact that FY 2012 Accounts has been lodged with ASIC and a summary of material matters arising from them. Accordingly only the requirements to hold the Ratification Scheme Meeting by 15 August and for the Ratification Resolution to be passed by the Required Majority remained to be satisfied of Jacobson J’s requirements at [60] of PRF No 2.

Hearing on 14 August 2013

Satisfaction of Jacobson J’s requirements

6    The Ratification Scheme Meeting was held on 12 August 2013 and the Ratification Resolution was passed by the Required Majority: 95.7% of votes cast by 96.6% of members present in person or by proxy. If the votes of interests associated with Messrs Llewellyn and James were excluded, the majority was 80.5% of votes cast by 95.2% of members present in person or by proxy. The voter turnout was 81.2% of votes cast by 24.6% of members present in person or by proxy. All of Jacobson J’s requirements had been satisfied.

ASIC

7    By letter dated 13 August 2013, ASIC indicated that it had no objection to the Scheme under s 411(17)(b).

Certificate of satisfaction of conditions precedent

8    PRF provided certificates from PRF and Keybridge that:

(a)    the Scheme Implementation Agreement and the Deed Poll had not been terminated at 8 am on the date of the hearing; and

(b)    all conditions of the Scheme (other than Court approval and lodgement of the Court’s order under ss 411(4)(b) and 411(10)) had been satisfied or waived. Conditions which had not been satisfied but waived related to consent by the Commonwealth Bank of Australia (CBA) to the Scheme, the extension of the Keybridge Facility (which ranks after the Commonwealth Bank’s facility) and the extension of CBA’s facility.

9    The Supplementary Scheme Booklet had disclosed CBA’s position in the Chairman’s letter. While Mr Llewellyn deposed in his affidavit of 13 August 2013 that he has no indication that CBA proposed to enforce its security and Keybridge and PRF had waived the relevant condition, the Court nonetheless had to consider what, if any, risks this posed to PRF shareholders getting the benefit of the Cash Consideration if it was paid to PRF as Trustee, in accordance with the Scheme.

10    To avoid the risk of delay in payment to PRF shareholders of the Cash Consideration held in a trust account operated by PRF if CBA elected to enforce its security (albeit that the account was with another bank), the Scheme was amended to provide that the Cash Consideration would be paid to a trust account operated by PRF’s solicitors.

Approval to alterations to Scheme

11    The Supplementary Scheme Booklet disclosed that PRF proposed to make an application under s 411(6) in relation to some mechanical amendments to the Scheme reflecting changes to the Deed Poll and the Scheme Implementation Agreement which are required to accommodate changes to the timetable, the likelihood that the Scheme’s Effective Date would be 25 June 2013 and a proposed extension of the Quit Date for the merger to 31 August 2013.

12    Keybridge had requested PRF to apply to the Court for a further alteration, which was to excise the words “or such other date as Keybridge and PR Finance agree in writing” from the definition of “Implementation Date”.

13    Section 411(6) provides as follows:

The Court may grant its approval to a compromise or arrangement subject to such alterations or conditions as it thinks fit.

14    In Investorinfo Limited; in the matter of Investorinfo Limited [2005] FCA 1848 at [7], Gyles J described the appropriate circumstances of exercise of this discretion:

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) 8 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 (2001) 187 ALR 520 (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 par 181/43; 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).

15    PRF made the following submissions:

    All of the alterations proposed are of a minor kind which do not affect the details of the Scheme and are within category 1 identified by Gyles J.

    The proposed alterations reflect the regime described in the original Scheme Booklet, namely the Scheme taking effect before 30 June 2013, as noted by Jacobson J at [62] of PRF No 2 in the context of remarks on s 411(10) . Section 411(10) provides:

    An order of the Court made for the purpose of paragraph (4)(b) does not have any effect until an office copy of the order is lodged with ASIC, and upon being so lodged, the order takes effect, or is taken to have taken effect, on and from the date of lodgement or such earlier date as the Court determines and specifies in the order.

    The proposed alterations are not contrary to the interests of members or to what they had in mind when they approved the Scheme.

    The alterations identified at [11] were notified to PRF shareholders in the Supplementary Scheme Booklet and were therefore known to them when they voted. No prejudice was identified in relation to the amendment to the definition of “Implementation Date” proposed by Keybridge. The amendment to provide for the Cash Consideration to be paid to a trust account operated by the solicitors for PRF was identified by the Court out of concern about CBA’s attitude and it was designed for PRF shareholder protection.

16    I decided that it would be appropriate to grant approval to the Scheme with these alterations for the reasons identified in PRF’s submissions, and I note that such alterations are consistent with the authorities mentioned at section 4.7.1. of Damian and Rich, Schemes, Takeovers and Himalayan Peaks (3rd ed, 2013).

Associate:

Dated: