FEDERAL COURT OF AUSTRALIA

MDA National Limited v Medical Defence Australia Limited (No 2)

[2014] FCA 1071

THE COURT ORDERS THAT:

1.    Pursuant to s 1319 of the Corporations Act 2001 (Cth), the first plaintiff be permitted to send a letter to its members substantially in the form of the draft letter annexed to the affidavit of Michael Stephen Bracken sworn 30 September 2014 and marked “J”.

2.    Pursuant to s 1319 of the Corporations Act 2001 (Cth), the first plaintiff provide a copy of its register of members to Dr Michael Gannon, President of Australian Medical Association (WA) Inc.

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

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

1    The first plaintiff, MDA National Limited (MDAN), applies for directions under s 1319 of the Corporations Act 2001 (Cth) (the Act) in relation to a meeting of its members that has been convened pursuant to s 411(1) of the Act: MDA National Limited v Medical Defence Australia Limited [2014] FCA 954 (my first reasons). The meeting is to be held on 11 October 2014. The meeting has been convened for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement which is an integral step to achieving a merger proposed between MDAN and the second plaintiff, Medical Defence Association of South Australia Limited (MDASA). The background to, and features of, the proposed merger are set out in my first reasons.

2    When making orders convening the meeting, I also made an order approving the explanatory statement required to be sent to MDAN’s members under s 412(1)(a) of the Act. The explanatory statement is in the form of a Scheme Booklet which is Exhibit 1 in the proceeding.

3    There are two matters that have prompted the present application which was brought on urgently yesterday afternoon.

4    The first matter is that on 9 September 2014, Dr Michael Gannon, President of the Australian Medical Association (WA) Inc (AMA(WA)) sent an email, apparently to members of the AMA(WA), expressing concerns held by the AMA(WA) about the proposed merger. In his email, Dr Gannon said:

Uncertainty in the international insurance and re-insurance industry forms a large part of the stated reasons for the merger. A bigger merged organisation may well be more resilient if there are threats to the industry in the future. Certainly the Commonwealth Government appears in the mood to, at the very least, review the high cost claim scheme and the Department of Health Run Off Cover Scheme (ROCS) arrangements. A merger seems to be a good idea. We remain unsure whether this merger is a good idea.

5    I pause to observe that the evidence before me when making orders convening the meeting for 11 October 2014 was that there are currently four medical defence organisation groups: the Avant Mutual Group, Medical Indemnity Protection Society Limited and the two groups to which MDAN and MDASA, respectively, belong. In my first reasons, I recorded the fact that after the proposed merger was announced, MDASA received an unsolicited non-binding indicative expression of interest from Medical Indemnity Protection Society Limited. The expression of interest was considered by MDASA’s directors, who formed the view that it was not superior to the proposed merger with the MDAN group: see at [36].

6    In his email, Dr Gannon listed a number of “key” concerns about the proposed merger. These included, in Dr Gannon’s words:

    A significant reduction in per capita net member assets.

    The effective move of head office to Adelaide at odds with current arrangements where there is a substantial executive presence in Perth.

    The inability to guarantee savings for MDA National members.

    The potential for MDAN members to end up contributing more than their fair share while getting the same service enjoyed by MIGA members.

    A fundamental change to the way cases are managed with a move away from medical input to cases committee and away from in-house legal staff.

7    MDAN is of the view that these statements are inaccurate. It is concerned that, if left unanswered, they will cause or result in misconceptions or confusion among MDAN’s members as to the effects of the proposed merger. Its concerns are heightened by the fact that Dr Gannon’s email invited the members of the AMA(WA) to give him their undirected proxies to vote at the meeting that has been convened.

8    The evidence before me is that of MDAN’s 33,377 current members, 6,958 have addresses in Western Australia. Although it is not presently known whether all of the members of this latter group are also members of the AMA(WA), these figures provide a fair indication that there is likely to be a significant number of persons who are both members of the AMA(WA) and MDAN. I should also note that there is evidence to suggest that some members of the AMA(WA) are members of MDASA. According to MDASA’s register of members, 1,252 members entitled to vote at the meeting also convened in relation to the scheme of arrangement proposed between MDASA and its members, have addresses in Western Australia.

9    MDAN wishes to send a letter to its members in response to Dr Gannon’s email. However, there is authority which states that where the Court has ordered the convening of a meeting under s 411(1) of the Act and has approved an explanatory statement, as here, the company itself should not dispatch additional material without first obtaining court approval to that step: Centro Retail Limited v Centro MCS Manager Limited in its capacity as Responsible Entity of Centro Retail Trust [2011] NSWSC 1321.

10    In Coates Hire Limited (ACN 073 603 586) No 2, in the matter of Coates Hire Limited (ACN 073 603 586) [2007] FCA 2105, Emmett J at [6] said:

… 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.

11    In Centro, Barrett J referred to this observation and said at [11]:

This 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.

12    Thus, MDAN seeks a direction that it send a letter to its members in a form which it has put before the Court: see Annexure “J” to the affidavit of Michael Stephen Bracken sworn 30 September 2014. In summary, the draft letter refers to the Scheme Booklet; urges members to read the Scheme Booklet if they would like to understand better the matters raised by Dr Gannon’s email; reminds members that all of the directors of MDAN and MDASA believe that the proposed merger is in the best interests of MDAN and MDASA; identifies, in a summary way, where there is disagreement with the statements made in Dr Gannon’s email and refers members to specific pages of the Scheme Booklet; and refers to the consequences of giving an undirected proxy.

13    At the hearing of this application yesterday afternoon, I expressed significant reservations about whether the direction, as sought, should be given. My concern was that by giving a direction in those terms, the Court might be seen to be participating in the debate about whether the proposed scheme between MDAN and its members, or the proposed scheme between MDASA and its members, should be agreed to. It is, of course, solely for the members of MDAN and solely for the members of MDASA to consider whether they should agree to the schemes which concern them.

14    On the other hand, if the Court were to refuse to give an appropriate direction, the debate on important issues affecting members’ rights would be stifled, because MDAN would be denied the opportunity to correct what it considers to be inaccuracies in Dr Gannon’s email about the effects upon members of the proposed merger and thus the scheme which is to be considered at the meeting that has been convened. I should point out that MDAN has been at pains to stress that it is not asking the Court to “settle” its proposed letter. Still less is it asking the Court to endorse what is said in the proposed letter.

15    On reflection, I am persuaded that I should give a direction that permits MDAN to send its proposed letter. I do not think that it should be denied the opportunity to respond in an apparently balanced way to Dr Gannon’s email. Indeed, I think that it is in the interests of MDAN’s members that, following the concerns raised on the AMA(WA)’s behalf by Dr Gannon, they be provided with information that seeks to address those concerns, so as to enable them to comprehend the debate that has arisen and to vote on the MDAN scheme on a fully-informed basis. It seems to me that, in terms of s 1319 of the Act, such a direction would be an ancillary direction with respect to the holding of the meeting that the Court has ordered to be convened.

16    In making the direction I propose to give, I wish to make clear that the Court has formed no view, and expresses no view, on the debate that has emerged. In particular, the Court has formed no view, and expresses no view, about the accuracy, relevance, importance or any other aspect of the concerns raised in Dr Gannon’s email. If there are matters to be brought to the Court’s attention at a second court hearing as to why the MDAN scheme, if agreed to, should not be approved ‒ such as, for example, that MDAN’s members have been misled in a material way in agreeing to the scheme ‒ then those matters can be debated at that time. I include in that observation any matters arising from MDAN’s proposed response to Dr Gannon’s email. That said, I should record that I am not presently aware of any matter stated in MDAN’s proposed response that is inaccurate or liable to mislead MDAN’s members.

17    I note that the solicitors for the AMA(WA) and Dr Gannon have written to MDAN’s solicitors advising that they have taken the precaution of retaining counsel to appear at the appointed second court hearing on 23 October 2014, subject to the outcome of the scheme meetings.

18    I should also record that ASIC has been given notice of MDAN’s present application and has not sought to appear. However, it has made clear in correspondence before the Court that it has been unable to form a view on the MDAN’s proposed letter, given the limited time available to it to consider that letter.

19    The second matter that has prompted the present application is that Dr Gannon has sought a copy of the database of all MDAN members, containing email and postal addresses and categories of membership, to enable him to communicate with them directly on the proposed merger. As I understand it, this database stands as MDAN’s register of members.

20    A company must set up and maintain a register of members: s 168(1)(a) of the Act. The register of members must contain, in respect of each member, the member’s name and address and the date on which the entry of the member’s name in the register is made: s 169(1). A company must allow anyone to inspect the register of members: s 173(1). A company must give a person a copy of the register within seven days if an application in proper form is made: s 173(3). Such an application must state each purpose for which the person is accessing a copy. The purpose must not be a prescribed purpose: s 173(3A).

21    Regulation 2C.1.03 of the Corporations Regulations 2001 (Cth) provides:

2C.1.03 Improper purposes for getting copy of register

For paragraph 173(3A)(b) of the Act, the following purposes are prescribed:

(a)    soliciting a donation from a member of a company;

(b)    soliciting a member of a company by a person who is authorised to assume or use the word stockbroker or sharebroker in accordance with section 923B of the Act;

(c)    gathering information about the personal wealth of a member of a company;

(d)    making an offer that satisfies paragraphs 1019D(1)(a) to (d) of the Act;

(e)    making an invitation that, were it an offer to purchase a financial product, would be an offer that satisfies paragraphs 1019D(1)(a) to (d) of the Act.

Note:    See subsection 1019D(1) of the Act for a description of unsolicited offers to purchase financial products off-market.

22    Indeed, a person must not use or disclose information obtained from a register of members for such a purpose: s 177(1AA). In the present case, it is accepted that the purpose for which Dr Gannon seeks a copy of MDAN’s register of members is not a prescribed purpose within the meaning of reg 2C.1.03.

23    A person must not use information about a person obtained from a register to contact or send material to the person, or knowingly disclose such information for that purpose: s 177(1). However, that prohibition does not apply if the use of the information is relevant to the holding of the interests recorded in the register or the exercise of the rights attaching to them: s 177(1A)(a). Similarly, the prohibition does not apply if the company approves the use or disclosure of the information to contact or send material to the person: s 177(1A)(b).

24    Here, MDAN wishes to accede to Dr Gannon’s application for a copy of the register of members, knowing of his intended purpose of contacting the members on the question of the propose merger, specifically the proposed MDAN scheme and their voting in relation to that scheme at the meeting that has been convened. However, one possible problem raised by MDAN is that its register of members contains the email addresses of those members who have provided such an address as a means of MDAN contacting them. MDAN is uncertain as to whether its obligation under the Act to provide access to its register of members includes access to that information. It seeks, therefore, a direction under s 1319 of the Act that it is justified in providing Dr Gannon with a copy of its register of members, including the email addresses.

25    The Act does not define an “address” for the purposes of the requirement in s 169(1)(a) of the Act, or indeed, so far as I can see, for any other purpose under the Act. Section 249J of the Act, dealing with the giving of notices of meeting, distinguishes between an address for the member in the register of members to which notice can be posted, and an electronic address nominated by the member: see s 249J(3)(b) and (c). This indicates that the requirement in s 169(1)(a) is for an address which has a physical location to which mail can be sent by post. This would seem to be a minimum requirement for an “address” in a register of members. However, there appears to be nothing which would prohibit the inclusion of additional information in a register of members, including, for example, an email address provided by the member. Here, MDAN’s register of members includes additional information (email addresses) for some of its members.

26    Section 173(1) of the Act confers a general right to inspect a register, and s 173(3) requires a copy to be provided of a register, required to be kept under Chapter 2C of the Act, including a register of members. This is subject to the limitations to which I have referred, including the limitation on the use and disclosure of information contained in the register. This must mean all information contained in the register, not simply the information that the register, as a minimum, must contain.

27    As Dr Gannon’s application is for a copy of MDAN’s register of members, MDAN is obliged to provide that copy, provided the requirements of the Act have been met in respect of Dr Gannon’s application. There is no suggestion that those requirements have not been met. In my view, the fact that MDAN’s register of members includes email addresses for some members who have supplied such an address, does not qualify Dr Gannon’s rights or MDAN’s obligations under s 173 of the Act.

28    Further, although MDAN has approved Dr Gannon’s use of the information in its register of members to contact its members, it seems to me that, regardless of that approval, Dr Gannon’s intended use is “relevant to the holding of the interests recorded in the register or the exercise of the rights attaching to them” within the meaning of s 177(1A)(a) of the Act, because it concerns the members’ interests in MDAN and the exercise of their voting rights in relation to the proposed MDAN scheme.

29    A point of principle having been raised, I think it is appropriate that a direction should be made under s 1319 of the Act that MDAN provide a copy of its register of members to Dr Gannon. Given the circumstances in which this question has arisen, I am satisfied that the direction I propose to give would be, for the purposes of s 1319, an ancillary direction in relation to the meeting that has been convened.

Associate:

Dated:    3 October 2014