FEDERAL COURT OF AUSTRALIA

Sirtex Medical Limited, in the matter of Sirtex Medical Limited (No 2) [2018] FCA 1559

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between Sirtex Medical Limited (Sirtex) and its members, in the form of Exhibit C in the proceeding, be approved (Scheme).

2.    Sirtex 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 Act, Sirtex be exempt from compliance with s 411(11) of the Act in relation to Order 1.

4.    These Orders be entered forthwith.

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

REASONS FOR JUDGMENT

MARKOVIC J:

1    On 12 September 2018 I made orders including an order pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act) approving the scheme of arrangement between Sirtex Medical Limited (Sirtex) and its members (Scheme). These are my reasons for making those orders.

background

2    On 1 August 2018 I made orders (August Orders) pursuant to s 411(1) and s 1319 of the Act, after a first court hearing, convening a meeting of Sirtex shareholders to consider and, if thought fit, agree (with or without modification) to the Scheme and approving dispatch of the scheme booklet: Sirtex Medical Limited, in the matter of Sirtex Medical Limited [2018] FCA 1315 (Sirtex (No 1)). An outline of the Scheme is set out in Sirtex (No 1) at [5]-[6].

3    On 12 September 2018 the proceeding was listed before me for the second court hearing for the purpose of Sirtex seeking the Court’s approval of the Scheme. As at that time, one member of Sirtex, Todd Hayward, had notified Sirtex of his intention to appear and did appear at the second court hearing. Mr Hayward is also one of the lead applicants in the representative proceeding brought against Sirtex in this Court which is described in section 5.12 of the scheme booklet: see Sirtex (No 1) at [33].

4    Prior to the second court hearing Mr Hayward filed an interlocutory application seeking orders for access to certain documents from Sirtex. Mr Hayward’s interlocutory application which was also listed before me at the time of the second court hearing was resolved by the making of orders by consent between the parties. Accordingly, neither Mr Hayward nor any other member of Sirtex appeared to make submissions or oppose the orders sought by Sirtex at the second court hearing.

legal principles

5    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.

6    In Re Seven Network Ltd (ACN 052 816 789) (No 3) (2010) 77 ACSR 701; [2010] FCA 400 at [31]-[32] and [35]-[40] Jacobson J summarised the approach to be taken at the second court hearing as follows:

(1)    the Court has a discretion whether to approve a scheme and is not bound to approve it simply because it made orders for the scheme meeting to be convened or because the statutory majorities were obtained;

(2)    the Court will usually approach the task of deciding whether to approve a scheme on the basis that the company's members are better judges of what is in their commercial interests than the Court;

(3)    matters noted by the Corporations Markets and Advisory Committee which the Courts have considered in relation to members’ schemes are whether:

(a)    those sought to be bound by the scheme have voted in good faith and not for an improper purpose;

(b)    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;

(c)    the plaintiff has brought to the Court’s attention under the ex parte disclosure principle all information relevant to the exercise of the Court’s discretion;

(d)    there has been full and frank disclosure of all information material to the members' decision;

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

(4)    the Court should consider whether the scheme offends public policy.

formal requirements

Compliance with the August Orders

7     I was satisfied that Sirtex had complied with the August Orders. The evidence established that:

(1)    the scheme booklet was dispatched in accordance with the August Orders:

(a)    in his affidavit affirmed on 11 September 2018 Sumit Singh, a client relationship manager at Link Market Services Limited, gave evidence that shareholders who had elected to receive notices of meeting and proxy forms electronically were sent an email on 8 August 2018 with links to the scheme booklet and a hard copy of the scheme booklet, proxy form and a reply paid envelope was subsequently posted to shareholders where the initial email to them had bounced back; and

(b)    in his affidavit sworn on 11 September 2018 Eduardo Pablo Fernandez, a director of Ideate Co Pty Ltd, gave evidence that on 8 August 2018 a hard copy of the scheme booklet, flysheet, proxy form and a reply paid or a self paid envelope (depending on whether the shareholder lived in Australia or overseas) was sent to each shareholder who elected not to receive shareholder communications electronically;

(2)    the Sirtex scheme meeting was held at the time and place specified in the August Orders;

(3)    John Eady acted as chairperson of the scheme meeting; and

(4)    a notice of hearing was published in The Australian newspaper on 8 August 2018.

8    In addition, each of Sirtex, China Grand Pharmaceutical and Healthcare Holdings Limited and CDH Genetech Limited had signed and tendered condition precedent certificates certifying that the conditions precedent to the Scheme, other than Court approval of the Scheme and lodgment of the Court’s orders with ASIC, had been satisfied or waived.

Statutory majority

9    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 99.69% of votes and 97.25% of members present and voting at the meeting.

Voter turnout

10    In Avoca Resources Limited, in the matter of Avoca Resources Limited [2011] FCA 208 (Avoca Resources) at [20]-[21] Gilmour J said:

20    In Lion Nathan Ltd, in the matter of Lion Nathan (No 2) [2009] FCA 1261 at para [6] Emmett J noted that 64% of eligible shares had been represented and voted at the scheme meeting. In Re MB Group PLC [1989] BCLC 672 at 675 Harman J described a turnout of 52% of scheme shares as “a high turnout”.

21    Since then, this Court has expressed an interest in knowing the turnout percentage of eligible shares (both for and against), and more recently of shareholders. These percentages have no statutory significance, but a low turnout percentage might suggest a flaw in the convening procedure. There is no basis for such an inference to be drawn here.

11    Here, the percentage of possible votes cast by members was 47.3% of all shares on issue and 15.4% of all eligible members voted. As in Avoca Resources there is no basis on which to infer that there was any flaw in the convening procedure for the meeting (see [7] above). The turnout percentages for the meeting are in line with other cases that have been before this and other courts: see for example Avoca Resources at [25]; Auzex Resources Ltd (No 2) [2012] QSC 101 at [18].

Other statutory requirements met

12    By letter dated 12 September 2018 addressed to Sirtex, ASIC advised that, under s 411(17)(b) of the Act, it had no objection to the Scheme.

discretionary matters

13    I was satisfied that, having regard to the relevant matters, I should exercise my discretion in favour of approving the Scheme.

14    First, 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.

15    Secondly, as to fairness, the Court had before it the independent expert’s report prepared by Deloitte Corporate Finance Pty Limited, the independent expert appointed by Sirtex’s board of directors to assess the Scheme. In that report Deloitte expressed the opinion that the Scheme is fair and reasonable and hence in the best interests of Sirtex’s shareholders. As Sirtex submitted, nothing on the face of that report would suggest that the opinion lacked validity and there was no evidence to the contrary.

16    As noted in Sirtex (No 1) at [13] the Court’s approach at the first court hearing is that it would “not ordinarily summon a meeting unless the scheme is of such a nature and cast in such terms that, if it receives the statutory majority at the … meeting the court would be likely to approve it on the hearing of a petition which is unopposed”: see FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69; (1977-78) CLC 40-368 at 72 (per Street CJ with whom Hutley and Samuels JJA agreed). At the first court hearing, Sirtex established, on a prima facie basis, that the Scheme was reasonable, subject to new matters being brought to the Court's attention at the approval hearing. I was satisfied that nothing was brought to my attention that caused that view to be displaced.

17    Thirdly, I was satisfied, on the basis of the evidence and submissions before me, that there had been full disclosure by Sirtex of all matters relevant to the exercise of the Court’s discretion.

18    Fourthly, in relation to full and frank disclosure, the Court had before it the actual scheme booklet which had been verified by the process which was the subject of evidence read by Sirtex at the first court hearing.

19    In Re HIH Casualty and General Insurance Ltd (2006) 200 FLR 243; [2006] NSWSC 485 (Re HIH) at [81], Barrett J stated (in the context of a creditors’ scheme rather than a members’ scheme) that:

At the heart of the disclosure requirement is a concept of materiality. In other words, anything which, if known and appreciated, has the capacity to influence a creditor’s decision and judgment whether to vote one way rather than the other (and, indeed, whether to participate at all) must be made known as part of the explanation called for by s 412.

20    Two issues were raised by Sirtex in its submissions which might impact on the question of disclosure:

(1)    as explained in Sirtex (No 1) at [46], at the first court hearing Sirtex brought to the Court’s attention the need to obtain approval of the Committee on Foreign Investment in the United States (CFIUS) as a matter which could delay the finalisation of the Scheme or prevent it from completing. I was satisfied that the requirement for CFIUS approval was clearly disclosed in the scheme booklet. Further, as at the date of the second court hearing, the Court was informed that CFIUS had not sought to impose any restraint on the implementation of the Scheme; and

(2)    the agreement between Sirtex and the bidders to negotiate commercialisation rights for the China market was considered at [44]-[45] of Sirtex (No 1). As at the date of the second court hearing, a China commercialisation agreement had not yet been finalised. In its submissions Sirtex noted that it and the bidders had agreed to extend the date for negotiating and entering into such an agreement until 20 September 2018, a matter which was the subject of an announcement by Sirtex to the Australian Stock Exchange. I was satisfied at the first court hearing that the China commercialisation rights had been sufficiently disclosed in the scheme booklet. As submitted by Sirtex, the fact that the parties have since agreed to extend the time for entering into a China commercialisation agreement is not material in the sense described by Barrett J in Re HIH at [81] and would not weigh against the Court in exercising its discretion to approve the Scheme.

21    Finally, no public policy concerns were raised by ASIC or any other party. I was satisfied that no such issue arose.

conclusion

22    For those reasons I made the orders sought by Sirtex.

Associate:

Dated:    18 October 2018