FEDERAL COURT OF AUSTRALIA

Medical Australia Ltd, in the matter of Medical Australia Ltd (No 2) [2017] FCA 1429

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Corporations Act) that the scheme of arrangement (Scheme) made between the plaintiff and the holders of ordinary shares in the plaintiff, the terms of which scheme of arrangement are set out in Annexure C of the document which has been tendered and marked Exhibit IBM-2, is approved.

2.    The plaintiff lodge with the Australian Securities and Investments Commission a copy of the approved Scheme at the time of lodging a copy of these Orders.

3.    Pursuant to s 411(12) of the Corporations Act, the plaintiff is exempted from compliance with s 411(11) of the Corporations Act in relation to the Scheme.

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

REASONS FOR JUDGMENT

MARKOVIC J:

1    On 17 November 2017 I made orders, including an order pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), approving a scheme of arrangement between Medical Australia Limited (Medical Australia) and its members (Scheme). These are my reasons for making those orders.

2    On 4 October 2017 I made orders pursuant to ss 411(1) and 1319 of the Act approving despatch of the scheme booklet and convening a meeting of Medical Australia shareholders to consider and, if thought fit, agree to the Scheme: Medical Australia Ltd, in the matter of Medical Australia Ltd [2017] FCA 1304 (Medical Australia Ltd). An outline of the Scheme is set out in Medical Australia Ltd at [7]-[10].

legal principles

3    Section 411 of the Act requires that the Court be satisfied that:

(1)    the statutory majority required for a members’ scheme by s 411(4)(a)(ii) of the Act has been obtained;

(2)    there has been compliance with the orders made at the first hearing; and

(3)    the Australian Securities and Investments Commission (ASIC) has indicated that it has no objection to the scheme under s 411(17) of the Act.

4    The Court has a discretion whether to approve a scheme and is not bound to approve it merely because it previously made orders for the convening of a meeting or because the statutory majorities have been achieved: see Re Seven Network Ltd (ACN 052 816 789) (No 3) (2010) 267 ALR 583; [2010] FCA 400 (Seven Network) at [31] (per Jacobson J). The Court will usually approach the task on the basis that members are better judges of what is in their own commercial interests than the Court: Seven Network at [32].

5    In Seven Network at [35]-[40] Jacobson J identified six principles which courts have taken into account as informing their discretion whether or not to approve a scheme:

(1)    whether the shareholders have voted in good faith and not for an improper purpose;

(2)    whether the proposal is fair and reasonable so that an intelligent and honest man or woman who was a member of the relevant class, properly informed and acting alone, might approve it;

(3)    whether the plaintiff has brought to the attention of the court all matters that could be considered relevant to the exercise of its discretion;

(4)    whether there has been full and fair disclosure of all information material to the decision;

(5)    whether minority shareholders would be oppressed by the scheme; and

(6)    whether the scheme offends public policy.

formal requirements

Statutory majority

6    I was satisfied that the resolution to approve the Scheme was passed by the majority required by s 411(4)(a)(ii). The evidence established that the resolution to approve the Scheme was passed by 99.96% of votes and 97.12% of persons present and voting at the meeting and that there were 0.04% of votes, being 2.88% of shareholders present and voting, against the resolution.

Voter turnout

7    The number of shares voted at the scheme meeting represented 87.76% of all shares on issue, which is a result in line with other cases: see Avoca Resources Limited, in the matter of Avoca Resources Limited [2011] FCA 208 (Avoca Resources) at [20] (per Gilmour J).

8    In Avoca Resources at [21] Gilmour J observed that, since the cases referred to at [20] of his reasons, this Court has expressed an interest in knowing the turnout percentage of eligible shares (both for and against) and, more recently, of shareholders. His Honour observed that these percentages have no statutory significance but that a low turnout percentage might suggest a flaw in the convening procedure.

9    In this case, 104 out of 545 Medical Australia shareholders voted in person or by proxy at the meeting, being a turnout of 19.08% of shareholders. While this number might be relatively low, in Avoca Resources, despite there only being a shareholder turnout of approximately 11.5%, the scheme was approved by the Court. As was observed in Seven Network at [61], by reference to the comments in Re Matine Ltd (1998) 28 ACSR 268 at 295 (per Santow J), the apathetic shareholder who chooses not to vote should not be presumed to be antagonistic to the scheme or to warrant paternalistic protection.

10    Those shareholders who did vote at the scheme meeting voted overwhelmingly in favour of the Scheme and there is no evidence of any irregularity in the despatch of the scheme booklet or any issue that would have deterred members from voting.

Compliance with the orders made on 4 October 2017

11    I was satisfied that the orders made by the Court on 4 October 2017 had been complied with by Medical Australia. The evidence established that, subject to one issue, the scheme booklet was despatched in accordance with the Court’s orders; that the Medical Australia scheme meeting was held at the time and place specified in the orders made by the Court; and that Ian Mitchell acted as chairperson of the meeting.

12    The one issue that arose related to evidence before me that, on 9 November 2017, 29,600 shares in Medical Australia were traded at $0.09 per share. Mr Mitchell, who identified the share trading, was unable to identify the purchaser of the shares in order to enable him to send that purchaser a copy of the scheme booklet. Despite that, I remained satisfied that there was compliance with the orders made by the Court on 4 October 2017 in relation to despatch of the scheme booklet.

13    In addition, the conditions precedent to the Scheme, other than Court approval of the Scheme and lodgement of the Court’s orders with ASIC, had been satisfied. The evidence included two condition precedent certificates expressed to be given at 8.00 am on 17 November 2017 which certified that Medical Australia and ICU Medical, Inc (ICU) were satisfied that the conditions precedent to the Scheme, other than Court approval of the Scheme and lodgement of the Court’s orders with ASIC, had been satisfied or waived in accordance with the scheme implementation agreement. The evidence also included a letter dated 16 November 2017 from Medical Australia to the Court by which Medical Australia certified that the conditions in cl 3.1 of the scheme implementation agreement set out therein had been satisfied in accordance with the terms of that agreement.

ASIC

14    On 4 October 2017 a sealed copy of the orders of the Court made that day were sent to ASIC and on 5 October 2017 the scheme booklet was registered with ASIC.

15    By letter dated 16 November 2017 addressed to Medical Australia, ASIC advised that, under s 411(17)(b) of the Act, it had no objection to the proposed Scheme.

discretionary matters

16    I was satisfied of the matters set out at [3] above. In particular:

(1)    there was nothing to suggest that members voted other than in good faith, that they cast their votes for an improper purpose or that any member had been treated in a way that might be characterised as oppressive;

(2)    I was satisfied that the Scheme is fair and reasonable. Medical Australia had not received notification that any person would come forward to oppose the Scheme and, indeed, no creditor or shareholder of Medical Australia appeared at the second court hearing;

(3)    the Scheme had received the support of 97.12% of Medical Australia shareholders who voted on it;

(4)    the independent expert report of William Buck Corporate Advisory Services (NSW) Pty Limited indicated that, in the absence of any other information or a superior proposal, the Scheme was fair and reasonable and in the best interests of Medical Australia shareholders;

(5)    I was satisfied that Medical Australia had brought to the attention of the Court all matters that could be considered relevant to the exercise of its discretion;

(6)    Medical Australia was not aware of any criticism by either ASIC or its members in relation to the disclosure made by it in the scheme booklet. There was no reason to believe that Medical Australia shareholders might have been provided with inadequate information; and

(7)    nothing was brought to my attention that would suggest that the Scheme may offend public policy in any way.

The execution of the deed poll

17    Both ICU and its wholly owned subsidiary, ICU Medical B.V. (ICU BV), both of which are foreign entities, executed a deed poll. As foreshadowed by Medical Australia at the time of the first court hearing, it provided evidence from a lawyer with appropriate expertise in relation to the law of the jurisdiction of incorporation of each of ICU and ICU BV, respectively, the State of Delaware in the United States of America and the Netherlands. Those lawyers were each asked to provide an opinion in relation to the execution of the deed poll by either ICU or ICU BV, as relevant, addressing the following questions:

(1)    whether the company had been duly incorporated under the relevant laws;

(2)    whether the company had full corporate power and authority to execute and deliver the deed poll and perform the obligations therein; and

(3)    whether the deed poll had been duly authorised and executed by the company.

18    I was satisfied on the basis of the opinions that were tendered in evidence that the deed poll has been duly executed by each of ICU and ICU BV.

conclusion

19    For those reasons I was satisfied that I should approve the Scheme and make the orders that I made on 17 November 2017.

Associate:

Dated:    1 December 2017