FEDERAL COURT OF AUSTRALIA

Vietnam Industrial Investments Limited, in the matter of Vietnam Industrial Investments Limited [2014] FCA 39

IN THE MATTER OF VIETNAM INDUSTRIAL INVESTMENTS LIMITED (ACN 063 656 333)

THE COURT ORDERS THAT:

1.    Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (Act):

(a)    the plaintiff convene a meeting of the holders of its ordinary shares (Shareholders) (Scheme Meeting) for the purpose of considering, and if thought fit, approving a scheme of arrangement (with or without modification) proposed to be made between the plaintiff and the Shareholders (Scheme), being the scheme substantially in the form set out in Annexure C of the scheme booklet, containing the explanatory statement, in relation to the Scheme which is annexure AAY12 of the affidavit of Alan Alexander Young sworn 18 December 2013 in the proceeding (Scheme Booklet);

(b)    the Scheme Meeting be held at 10.00 am (AWST) on 4 February 2014 at the Western Australian Chinese Chamber of Commerce, 1304 Hay Street in West Perth, Western Australia;

(c)    Roger Sing-Leong Kwok, or failing him, Alan Alexander Young, be the chairperson of the Scheme Meeting and report the result of the Scheme Meeting to this Court; and

(d)    the chairperson appointed to the Scheme Meeting have the power to adjourn the Scheme Meeting in their absolute discretion for such time that the chairperson considers appropriate.

2.    Pursuant to section 1319 of the Act, Rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules) shall not apply to the Scheme Meeting, except in so far as that rule applies regulation 5.6.13 (without the form 530 stipulated therein) of the Corporations Regulations 2001 (Cth) to the Scheme Meeting. Subject to these Orders and pursuant to section 1319 of the Act, each Scheme Meeting is to be:

(a)    convened, held and conducted in accordance with the provisions of Part 2G.2 of the Act that apply to members of a company and the provisions of the plaintiff's constitution that are not inconsistent therewith and that apply to meetings of members; and

(b)    convened using the notice of meeting in the form or to the effect of the notice contained in Annexure E of the Scheme Booklet.

3.    Pursuant to section 411(1) of the Act, the explanatory statement contained in the Scheme Booklet is approved for distribution to the Shareholders.

4.    Subject to registration of the Scheme Booklet with the Australian Securities & Investments Commission pursuant to section 412(6) of the Act, the plaintiff is to despatch, on or before 6 January 2014, a document substantially in the form of the Scheme Booklet, a proxy form, a roll-over election form and a reply-paid envelope addressed to Security Transfer Registrars Pty Limited to each Shareholder on the plaintiff's register of members (Register) to the relevant address set out in the Register by:

(a)    in the case of each Shareholder who has a registered address in Australia, prepaid post; and

(b)    in the case of each Shareholder who has a registered address outside Australia, prepaid airmail or air courier.

5.    Despatch of the documents referred to in paragraph 4 of these Orders in accordance with its terms is to be taken to be sufficient notice of the Scheme Meeting.

6.    The time by which the Shareholders must return their proxy forms for the Scheme Meeting is 10.00 am (AWST) on 2 February 2014.

7.    All voting at the Scheme Meeting be by poll declared by the chairperson.

8.    If the matter is relisted, the plaintiff is to give notice of the hearing of the application pursuant to section 411(4) of the Act and that notice of the hearing of an application pursuant to subsection 411(4)(b) of the Act for orders approving the Scheme be published once in "The Australian" newspaper by an advertisement substantially in the form of Annexure A to these Orders, such advertisement to be published on or before 30 January 2014 and plaintiff be otherwise exempted from compliance with Rule 3.4 of the Corporations Rules.

9.    The proceeding be adjourned to 6 February 2014 at 11.00 am before Justice McKerracher for the hearing of any application to approve the Scheme.

10.    These orders be entered forthwith.

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

Annexure A

Vietnam Industrial Investments Limited Notice of Hearing to Approve Scheme of Arrangement pursuant to section 411 of the Corporations Act 2001 (Cth)

To all members of Vietnam Industrial Investments Limited ACN 063 656 333 (VII)

TAKE NOTICE that at 11.00 am on 6 February 2014, the Federal Court of Australia at Peter Durack Commonwealth Law Courts Building, 1 Victoria Avenue, Perth WA 6000 will hear an application by VII seeking the approval of the scheme of arrangement between VII and its ordinary shareholders, if agreed to by a meeting of ordinary shareholders to be held at the Western Australian Chinese Chamber of Commerce, 1304 Hay Street, West Perth, Western Australia at 10.00 am (AWST) on Tuesday, 4 February 2014.

If you wish to oppose the approval of the above arrangements, you must file and serve on VII a notice of appearance, in the prescribed form, together with any affidavit which you wish to rely on at the hearing. The notice of appearance and affidavit must be served on VII at its address for service by no later than one day before 6 February 2014.

The address for service of VII is c/- Clayton Utz, Level 27, QV.1 Building, 250 St Georges Terrace, Perth WA 6000 (Reference: Cameron Belyea) Facsimile: 08 9481 3095 Email: cbelyea@claytonutz.com.

A copy of the Scheme Booklet is available from the ASX's website at www.asx.com.au and VII's website at www.vii.net.au.

IN THE MATTER OF VIETNAM INDUSTRIAL INVESTMENTS LIMITED (ACN 063 656 333)

REASONS FOR JUDGMENT

INTRODUCTION

1    These are reasons for orders made in relation to a proposed scheme of arrangement. The plaintiff (VII) sought orders under s 411(1) and s 1319 of the Corporations Act 2001 (Cth) (CA) to convene a meeting to consider the scheme of arrangement with its ordinary shareholders and certain ancillary relief. VII, in accordance with the CA, consulted with the Australian Securities and Investments Commission (ASIC). ASIC did not intervene.

outline of scheme

2    VII is an Australian incorporated public company listed on the Australian Securities Exchange (ASX) with approximately 99 registered holders of an aggregate of 142,277,423 ordinary shares (Shares) as at 16 December 2013. VII is in the business of investing in the emerging market of Vietnam and its primary activities are investments in commercial operations at its two steel rolling mills, steel roofing factory and a ‘total building solutions provider’ throughout Vietnam.

3    A scheme is proposed between VII and its ordinary shareholders (Scheme). The Scheme involves the acquisition of all of the Shares of VII by Structure Steel Engineering Pte Ltd (SSE), a company incorporated in Singapore and which is a wholly owned subsidiary of VII.

4    The Scheme contemplates that:

    VII shareholders will transfer their Shares to SSE;

    VII shareholders will receive 1 SSE share for every 6.8 VII Shares held on the record date;

    the Scheme will effect the acquisition of VII by SSE and will result in VII becoming a wholly owned subsidiary of SSE;

    SSE will become the parent company of the VII group of companies; and

    VII will cease to be listed on the ASX.

evidence in support

5    In support of its application, VII relied upon the following affidavits:

    the first affidavit of Mr Mark Anthony Paganin sworn 29 November 2013;

    the second affidavit of Mr Paganin sworn 18 December 2013;

    the affidavit of Mr Alan Alexander Young in his capacity as director of VII sworn 16 December 2013;

    the second affidavit of Mr Young in his capacity as director of VII sworn 18 December 2013;

    the affidavit of Mr Young in his capacity as director of SSE sworn 16 December 2013;

    the affidavit of Mr Adam Anthony Myers sworn 16 December 2013;

    the affidavit of Mr Roger Sing-Leong Kwok sworn 16 December 2013; and

    the affidavit of Mr Andrew David Walker sworn 13 December 2013.

issues for determination

6    It is well established that there are three stages to a successful application under s 411 CA. First, the Court approves the convening of the scheme meeting and approves a draft explanatory statement to be sent to members. Second, members vote on the scheme at the scheme meeting. Third, the Court approves the Scheme: Re CSR Ltd (2010) 183 FCR 358 (at [7]); Re Foundation Healthcare Ltd (2002) 42 ACSR 252 (at [36]).

7    The five principal questions relevant to the first stage are as follows:

    Is there a compromise or arrangement?

    Is there a Pt 5.1 body?

    Are there shareholders of a company?

    Are there classes of shareholders?

    Should the Court make orders to convene a meeting?

8    I will deal with each of these first stage questions in turn.

standard of review

9     As submitted by VII, the standard of review at this stage is whether the Scheme is not inappropriate and is one that sensible business people might consider is of benefit to its members: Re Sonodyne International Ltd (1994) 15 ACSR 494 (at 499) per Hayne J. If the proposed arrangement is one that seems fit for consideration by a meeting of shareholders and is a commercial proposition likely to gain the Court’s approval if passed by the necessary majorities, then leave should be given to convene the meeting: Re ACM Gold Ltd (1992) 34 FCR 530 (at 535) per O’Loughlin J. The Court does not need to be satisfied that no better scheme could have been devised: Re Foundation Healthcare Ltd (2002) 42 ACSR 252 (at [44]) per French J, as his Honour then was.

10    Orders should be made convening the scheme meeting and approving the despatch of the Scheme Booklet (explanatory statement) if the Court is satisfied of the following matters:

    The Scheme is an arrangement in respect of which the Court may order a meeting of members: s 411(1) CA. That is, the Scheme is an arrangement; VII is a Pt 5.1 Body; the Scheme participants are members of VII; and the Scheme meeting will be convened between members of the same class.

    ASIC has had a reasonable opportunity to examine the terms of the Scheme and explanatory statement and make submissions to the Court in relation to those matters: s 411(2)(b) CA.

    The explanatory statement provides adequate disclosure (s 412(1)(a)(i) CA) and contains the prescribed information (s 412(1)(a)(ii) CA; r 5.1.01 and Sch 8 cl 8301-8319 of the Corporations Regulations 2001 (Cth) (Corporations Regulations).

    The procedural requirements of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules) have been met.

    There is no apparent reason why the Scheme should not, in due course, receive the Court's approval if the necessary majority of members' votes is achieved: Re NRMA Insurance Ltd (at [3], [14]-[41]) per Santow J; Re Ranger Minerals Ltd (2002) 42 ACSR 582 (at [21]-[23], [31]-[36], [40] and [47]) per Parker J; Re Hills Motorway Ltd (2002) 43 ACSR 101 (at [5]) per Barrett J; Re Orica Ltd [2010] VSC 231 (at [7]) per Davies J; Re MAC Services Group Ltd (2010) 80 ACSR 390 (at [5]) per Barrett J.

Section 411(1) members’ scheme

11    In relation to the five factors, the following may be noted:

Arrangement

12    As observed by Santow J in Re NRMA Insurance Ltd (at [20]), the word ‘arrangement’ is a word of wide import.

13    A majority of independent directors of VII, Mr Young and Mr Walker, recommend that VII shareholders vote in favour of the Scheme at the proposed Scheme meeting. Mr Kwok abstains from making a recommendation.

14    Mr Myers of BDO Corporate Finance (WA) Pty Ltd, the independent expert appointed by the VII board to assess the Scheme, has prepared a report and concluded that the proposal is in the best interests of VII shareholders.

15    Critically, it is for the members to decide if they should accept the terms of the Scheme as amended. The Scheme is bona fide and is properly proposed. As the Full Federal Court observed in Re CSR Ltd (at [64]-[65]), it is not the appropriate time at the first court hearing to seek an order convening a meeting of shareholders to determine whether the scheme would be ultimately approved by the Court.

16    The proposal before the Court is an arrangement.

Part 5.1 Body

17    Section 411 CA confers jurisdiction on the Court in respect of a Part 5.1 body. The term 'Part 5.1 body' is defined in s 9 CA to mean, relevantly, a company. VII is a company.

Classes of Shareholders

18    An arrangement to which s 411(1) CA applies is one between a company and its shareholders or any class of them. It is only such an arrangement to which the Court may grant approval pursuant to s 411(6).

19    Section 411 does not define the term 'class'. However, in Sovereign Life Assurance Company v Dodd [1892] 2 QB 573, Bowen LJ said (at 583) that the term ought to be given such a meaning:

… as will prevent the section being so worked as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest.

20    VII has only ordinary shares on issue and does not have any options on issue. VII members have the same rights attaching to their Shares. Therefore, in the present proposed scheme, VII members have the same right to receive the scheme consideration and are able to consult together on the Scheme.

Foreign Shareholders

21    VII shareholders who have an address on the share register outside Australia and its external territories, except for Singapore, Belgium, Malaysia, the Republic of Philippines or Vietnam, are considered ineligible foreign shareholders under the Scheme.

22    The ineligible foreign shareholders will have the SSE shares they would otherwise be entitled to receive under the Scheme transferred to a sale nominee. The sale nominee will sell those SSE shares and remit the proceeds, after deducting any applicable brokerage, stamp duty and other selling costs, taxes and charges, to each respective ineligible foreign shareholder.

23    VII submits, and I accept, that these ineligible foreign shareholders are not in a separate class and the rights of all members under the Scheme are not so different as to require more than one class of members to be constituted for the purpose of the scheme meeting.

unusual aspects of transaction raised for court’s consideration

24     In light of the ex parte nature of the hearing and the disclosure principle described by Barrett J in Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 (at [7]), there were a number of aspects of the transaction which VII brought to my attention. The overall submission of VII, which I accepted, was that none of the matters that follow should be of concern to the Court.

Deal Protection Clauses

25    VII and SSE have not agreed any deal protection clauses. VII is not bound by an exclusivity arrangement under the Scheme Implementation Agreement.

26    Neither VII nor SSE are liable to pay a break fee in any circumstances whatsoever.

Notice of Second Hearing

27    Rule 3.4 of the Corporations Rules requires that notice of the second hearing be published in a newspaper at least five days before the date fixed for the hearing of the application. VII wishes to publish the notice on 30 January 2014, being five days before the proposed date of the second hearing (6 February 2014), though prior to the Scheme meeting. An order to this effect was made by Hall J in Re Westgold Resources Ltd (No 2) [2012] WASC 395. His Honour there said (at [10]):

The meetings were convened on 3 October 2012 and those meetings will be considered in more detail below. Where the members or option holders vote in favour of a scheme of arrangement it is then necessary for the company to return to the court for approval of the scheme. In the normal course, notice of the making of the second application to the court would be published following any meetings. In the present case, the dates of the meetings and the second application hearing were such that if notice was only published following the meetings it would provide insufficient notice of the hearing. In these circumstances, I made a further order on 25 September 2012 permitting notice of this hearing to be published before the date of the meetings to allow for at least five days notice of this court hearing.

28    For the same reason given in Re Westgold Resources Ltd, a similar order was sought and made in this proceeding. (See also Re Avocet Resources Ltd [2013] FCA 496 and Re Sundance Resources Ltd [2012] FCA 1290 where I made similar orders).

Convening Shareholder Meeting

29    VII proposes to convene a meeting of shareholders in accordance with Pt 2G.2 CA and the terms of its constitution. In particular, VII will deem that a notice sent by post is received on the day after the date of its posting, in accordance with its constitution.

Risk and Title

30    Performance risk is addressed by SSE entering into a deed poll pursuant to which it promises to pay or procure the payment of the scheme consideration to each Scheme shareholder. Where, as in the case of this Scheme, there is no sequential requirement for consideration to be paid to shareholders prior to the transfer of their Shares on the Implementation Date, the Court may require further assurances to be provided in relation to performance risk at the second hearing. However, the existence of such a risk does not affect the basic substance of the Scheme, and will not prevent a court ordering the Scheme meeting: Re Kaz Group Ltd [2004] FCA 738 (at [4] – [5]); Re SFE Corporation Ltd (No 1) (2006) 59 ACSR 82 (at [4]).

31    Clause 7.4(a) of the Scheme provides for a transfer of Shares with clear title. A clause to this effect was approved by Lindgren in Re Investa Properties Ltd [2007] FCA 1104 at ([22] – [30]).

32    Clause 7.4(b) of the Scheme provides for a shareholder warranty that the Shares are transferred free of encumbrances. Specific disclosures appear in s 8.7 of the Scheme Booklet.

ASIC’s Consideration

33    The jurisdiction of the Court to make an order convening meetings under s 411(1) CA is conditional upon the matters set out in s 411(2). Section 411(2) requires that the Court be satisfied of two matters before making an order. First, that ASIC has been given 14 days notice of the hearing, or such lesser period of notice as the Court or ASIC permits. Second, that ASIC has had a reasonable opportunity to examine the terms of the scheme and the draft explanatory statement and to make submissions to the Court.

34    The Scheme Booklet was lodged with ASIC on 29 November 2013, and updated copies of the Scheme Booklet were provided to ASIC on 12 December 2013 and 13 December 2013.

35    A stamped copy of the originating process filed in this proceeding was provided to ASIC on 2 December 2013. As noted at the outset, ASIC indicated that it did not intend to attend or make submissions at the first court hearing. This followed a period of consultation and review of the documents since the date of first lodgement.

explanatory statement and disclosure requirements

36    The explanatory statement must provide proper disclosure as required in s 411(3) CA. It must set out ‘all the main facts as will enable shareholders to exercise their judgment on the proposed scheme’: Re Dorman Long & Co Ltd, South Durham Steel & Iron Co Ltd [1934] Ch 635 (at 665-666) per Maugham J; applied by Santow J in Re NRMA Ltd (at 354) and French J in Re Foundation Healthcare Ltd (at 263).

37    The Scheme Booklet prepared by VII in relation to the Scheme has been drafted to satisfy the disclosure requirements prescribed in Pt 3 Sch 8 of the Corporations Regulations. I am satisfied that the Scheme Booklet meets the disclosure requirements and there has been proper disclosure.

conclusion and orders sought

38    There was no order sought that went beyond existing practice. For those reasons and for the reasons advanced by VII, orders were made in the terms of the minute of proposed orders provided by VII and pursuant to s 411(1) CA.

Associate:

Dated:    6 February 2014