FEDERAL COURT OF AUSTRALIA

Woolworths Group Limited v Pinnacle Liquor Group Pty Limited, in the matter of Woolworths Group Limited (No 2) [2019] FCA 2182

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the schemes of arrangement (collectively, the Scheme) the subject of the scheme document, a copy of which is the document marked Exhibit 3 (being titled “Members’ Schemes of Arrangement”) (Scheme Document), be approved.

2.    Pursuant to s 411(12) of the Act, the plaintiffs be exempted from compliance with the requirements of s 411(11) of the Act.

3.    Orders 4 to 7 below are made pursuant to s 413 of the Act for the purpose of facilitating the Scheme and are subject to, and in accordance with, the terms of the Scheme Document. In the orders below, capitalised nouns and acronyms not defined in order 1 have the meanings given to them by the Scheme Document.

4.    Pursuant to ss 411(4)(b) and 413(1) of the Act and with effect from the Implementation Time:

(a)    the Woolworths Drinks Business, Endeavour Property and Endeavour Liabilities of the first to fourteenth plaintiffs will be transferred to the first defendant, Pinnacle Liquor Group Pty Limited (Pinnacle);

(b)    all of the issued shares of the Endeavour Entities held by the first to fourteenth plaintiffs will be transferred to Pinnacle;

(c)    the Endeavour Leases, Endeavour Inventory, Endeavour Contracts and Endeavour Intellectual Property of the first to fourteenth plaintiffs will be transferred to and vested in Pinnacle without the need for any further act or deed, and all Assets and Liabilities associated with those Endeavour Leases, Endeavour Inventory, Endeavour Contracts and Endeavour Intellectual Property will be Assets and Liabilities of Pinnacle without the need for any further act or deed;

(d)    the interest of the first to fourteenth plaintiffs in the Endeavour Plant and Equipment will be transferred to and vested in Pinnacle without the need for any further act or deed, and all Assets and Liabilities associated with that Endeavour Plant and Equipment will be Assets and Liabilities of Pinnacle without the need for any further act or deed;

(e)    the Endeavour Employees of the first to fourteenth plaintiffs will become employees of Pinnacle on the terms and conditions of their employment applicable immediately prior to the Implementation Time, without the need for any further act or deed, and all Assets and Liabilities associated with those Endeavour Employees will be Assets and Liabilities of Pinnacle without the need for any further act or deed;

(f)    the Woolworths Drinks Business, Endeavour Property and Endeavour Liabilities of the fifteenth and sixteenth plaintiffs will be transferred to the second defendant, Vinpac International Pty Limited (Vinpac);

(g)    all of the issued shares of the Endeavour Entities held by the fifteenth and sixteenth plaintiffs will be transferred to Vinpac;

(h)    the Endeavour Leases, Endeavour Inventory, Endeavour Contracts and Endeavour Intellectual Property of the fifteenth and sixteenth plaintiffs will be transferred to and vested in Vinpac without the need for any further act or deed, and all Assets and Liabilities associated with those Endeavour Leases, Endeavour Inventory, Endeavour Contracts and Endeavour Intellectual Property will be Assets and Liabilities of Vinpac without the need for any further act or deed;

(i)    the interest of the fifteenth and sixteenth plaintiffs in the Endeavour Plant and Equipment will be transferred to and vested in Vinpac without the need for anyfurther act or deed, and all Assets and Liabilities associated with that Endeavour Plant and Equipment will be Assets and Liabilities of Vinpac without the need for any further act or deed; and

(j)    the Endeavour Employees of the fifteenth and sixteenth plaintiffs will become employees of Vinpac on the terms and conditions of their employment applicable immediately prior to the Implementation Time, without the need for any further act or deed, and all Assets and Liabilities associated with those Endeavour Employees will be Assets and Liabilities of Vinpac without the need for any further act or deed.

5.    Pursuant to ss 411(4)(b) and 413(1)(c) of the Act, and with effect from the Implementation Time, all Endeavour Litigation by or against:

(a)    the first to fourteenth plaintiffs will be continued by or against (as the case may be) the first defendant, Pinnacle; and

(b)    the fifteenth to sixteenth plaintiffs, will be continued by or against (as the case may be) the second defendant, Vinpac, without the need for any further act or deed, other than appropriate amendments to the record of the relevant court or tribunal.

6.    Subject to the completion of the steps in orders 4 and 5 and pursuant to ss 411(4)(b) and 413(1)(d) of the Act, the third to sixteenth plaintiffs be deregistered by the Australian Securities and Investments Commission (ASIC) without winding up on a date which is not less than 2 Business Days after the Implementation Time, such date to be notified by the first plaintiff to ASIC.

7.    Pursuant to s 413(g) of the Act, as from the Implementation Time, the defendant to whom the transfers in orders 4 and 5 are to be made, or any director of that defendant from time to time, may sign all documents and do all things required to be done by the relevant plaintiff transferor to complete or perfect the transfers provided for in these orders, whether by lodgement, registration, notification or otherwise.

8.    Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), on the ground that the order is necessary to prevent prejudice to the proper administration of justice, until five years from the date of these orders or until further order the document marked Exhibit 2 (being titled “Members’ Schemes of Arrangement Property and Liabilities Schedule”) be marked “confidential” on the electronic court file, not to be published or accessed by any party other than the parties and their solicitors except pursuant to an order of the Court.

9.    Liberty be granted to any party to apply for further orders pursuant to s 413 of the Act as to the Court seems necessary or desirable.

REASONS FOR JUDGMENT

FARRELL J:

Introduction

1    These are reasons for orders made on 19 December 2019 under ss 411(4)(b) and 411(12) and ss 413(1)(a), (c), (d) and (g) of the Corporations Act 2001 (Cth) in relation to Woolworths Group Limited and fifteen of its wholly-owned subsidiaries to give effect to the Restructure Scheme discussed in the reasons for orders made under ss 411(1) and 1319 of the Corporations Act on 1 November 2019 convening scheme meetings of the 16 companies: see Woolworths Group Limited v Pinnacle Liquor Group Pty Limited, in the matter of Woolworths Group Limited [2019] FCA 1810. Words defined in those reasons will bear the same meaning in these reasons unless otherwise indicated.

2    At the second court hearing held on 19 December 2019, the following affidavits were read.

3    First, the affidavit of Gordon McKellar Cairns affirmed on 16 December 2019. Mr Cairns gives evidence that:

(1)    He acted as the chairman of the Woolworths scheme meeting in accordance with the Court’s orders.

(2)    The scheme meeting was held at the time and place ordered by the Court. At the meeting, the results of the poll conducted were as follows:

4    Having regard to Mr Cairns’ evidence, the Woolworths scheme was passed by the majorities required under s 411(4)(a)(ii) of the Corporations Act.

5    Second, the affidavit of David Paul Marr affirmed on 16 December 2019. Mr Marr is the chief operating officer of Woolworths Group. Mr Marr attended each of the scheme meetings of the second to sixteenth plaintiffs. He gave evidence as follows:

(1)    Marcin Firek, Woolworths’ company secretary, chaired the scheme meeting of the second plaintiff and Mr Marr chaired the scheme meeting for the third to sixteenth plaintiffs.

(2)    Mr Firek acted as corporate representative of the sole member of the third to sixteenth plaintiffs under an existing instrument of appointment. Peter Atkin, General Manager – Swan Corporate Structure, was appointed proxy for the sole member of the second plaintiff for the purpose of its scheme meeting.

(3)    General evidence about the proceedings at the scheme meetings of the second to sixteenth plaintiffs and about the passing of the resolutions approving the scheme by the sole shareholder.

(4)    Communications with creditors of Woolworths and the other plaintiffs who are counterparties to material contracts in the form of exhibit DM-4. The letter advised creditors that Woolworths had obtained expert advice that the Restructure Scheme will not materially prejudice a scheme company or a transferee’s ability to pay its creditors, Woolworths drinks business creditors will not be materially prejudiced by the Restructure Scheme and any subsequent ALH merger, and creditors of Woolworths food and portfolio business will not be materially prejudiced by the Restructure Scheme and the ALH merger. Creditors were advised that a copy of the report was available.

(5)    No creditor has raised concerns with Woolworths or said that they oppose the Restructure Scheme.

6    Third, the affidavit of Marcin Michal Firek affirmed on 16 December 2019. Mr Firek is the company secretary of the second to sixteenth plaintiffs (as well as being Woolworths’ company secretary). He gave evidence that, on 15 November 2019, he received by hand a copy of three scheme booklets for the Restructure Scheme for the second to sixteenth plaintiffs. On 13 December 2019 Mr Firek received an email advising of a change in venue for the scheme meetings of the second to sixteenth plaintiffs and that he attended meetings consecutively from 2:20 pm at the International Convention Centre in Sydney (the venue of the Woolworths scheme meeting). Mr Firek gave evidence to the same effect as Mr Marr concerning the proceedings at the scheme meetings of the second to sixteenth plaintiffs.

7    The Court notes that holding the scheme meetings for the second to sixteenth plaintiffs at the International Convention Centre is not consistent with its orders made following the first court hearing that the scheme meetings be held at the Sydney offices of Ashurst. In the context of a public company, such a deviation may be a sufficiently serious matter requiring an approach to the Court to vary the Court’s orders, including, in relation to the timing and nature of the communication of the change of venue. However, in the context of wholly-owned subsidiaries each with a single shareholder, that non-compliance is immaterial to the Court’s decision whether or not to approve the schemes in relation to those companies.

8    Fourth, the affidavits of Philip Andrew Stewart Breden sworn on 17 December 2019 and 19 December 2019 respectively. Mr Breden is a partner of Ashurst, the solicitors to the plaintiffs and defendants. He gave evidence concerning:

(1)    The provision of copies of scheme booklets substantially in the form of tabs 7-10 of exhibit DM-1 to the Australian Securities & Investments Commission (ASIC) on 1 November 2019 pursuant to s 412(6) of the Corporations Act.

(2)    Confirmation by ASIC that it had registered the scheme booklets.

(3)    Comparison of the scheme booklets printed for despatch to members of the plaintiffs with those approved under orders 6-9 made on 1 November 2019 and confirmation that, apart from correcting typographical and grammatical errors, changes to formatting in typesetting and updating relevant date references, the scheme booklets were in the form approved by the Court.

(4)    Publication of a notice of the second court hearing in The Australian newspaper on 11 December 2019. Mr Breden notes that, due to an administrative error, the published notice differed from that approved by the Court, including by erroneously referring to the scheme resolution as having “been passed” at meetings on 16 December 2019 (that is, at a future date). A notice of the second court hearing in the form of that approved by the Court was published in The Australian newspaper on 12 December 2019. The Court is satisfied that this minor non-compliance with its orders was inadvertent and would not be a reason to refuse to approve the schemes comprised in the Restructure Scheme.

(5)    The fact that no one gave notice to Ashurst of their intention to attend the second court hearing to oppose the orders sought. The Court notes that matter was called outside the court room at the commencement of the second court hearing and no person appeared to oppose the schemes comprised in the Restructure Scheme.

(6)    The fact that, by letter dated 18 December 2019, ASIC provided a statement pursuant to s 411(17)(b) of the Corporations Act confirming that it had no objection to the schemes proposed by the plaintiffs.

9    Fifth, the affidavit of Michael Lindsay Spruyt affirmed on 18 December 2019. Mr Spruyt is a Senior Client Relationship Manager at Link Market Services. He gave evidence as follows:

(1)    Link provides registry services to Woolworths and maintains its register of shareholders.

(2)    Link was engaged to arrange for the printing and despatch of the Woolworths scheme booklet and the preparation, printing and despatch of personalised proxy forms for that scheme.

(3)    He had oversight of the performance of some of those functions by a wholly-owned subsidiary of Link.

(4)    He described the process for identifying shareholders on the register who have elected to receive electronic communications and those who receive mail by post, as well as shareholders who are resident in Australia or overseas.

(5)    He described the process of processing proxy forms, registration of attendees at the scheme meeting and voting at the scheme meeting.

(6)    Votes were cast in respect of 55.93% of the issued shares by 4.44% of shareholders.

(7)    The attendance and voting at annual general meetings of Woolworths since 2017 is as follows:

10    Sixth, the affidavit of Gavin Andrew Reed sworn on 18 December 2019. Mr Reed is the General Manager of Lumi Technologies Pty Ltd. Lumi was employed by Woolworths to provide vote counting services at its 2019 annual general meeting and the scheme meeting. Mr Reed’s evidence was requested by ASIC. He details the process for recording and tallying votes cast electronically by those attending the meeting and the steps taken to ensure the integrity of the results.

11    Senior and junior counsel for the plaintiffs provided written submissions which were filed on 18 December 2019. They were comprehensive and addressed well-known principles in relation to the matters the Court should take into account when approving a scheme of arrangement under s 411(4)(b) of the Corporations Act. I summarised those matters recently in Konekt Ltd, in the matter of Konekt Ltd (No 3) [2019] FCA 2105 at [4] as follows:

The matters the Court must take into account in deciding whether to approve the scheme are well-established. They include:

(1)    Whether the orders of the Court convening the scheme meeting were complied with;

(2)    Whether the resolution to approve the scheme was passed by the requisite majority and whether other statutory requirements have been satisfied;

(3)    Whether all conditions to which the scheme is subject (other than Court approval and lodgement of the Court’s orders with ASIC) have been met or waived;

(4)    Whether the scheme is fair and reasonable so that an intelligent and honest Konekt shareholder, properly informed and acting alone, might approve it. In considering this question, it is not the role of the Court to usurp the decision of shareholders by imposing its own commercial judgement on the scheme or to consider whether a better scheme might have been proposed;

(5)    Whether Konekt has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court’s discretion; and

(6)    Whether there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme.

See Solution 6 Holdings Limited ACN 003 264 006, in the matter of Solution 6 Holdings Limited ACN 003 264 006 [2004] FCA 1049; 50 ACSR 113 at [18]-[24] (Jacobson J); Re Permanent Trustee Company Limited [2002] NSWSC 1177; (2002) 43 ACSR 601 at [8]-[10] (Barrett J); Re Central Pacific Minerals NL [2002] FCA 239 at [8]-[14] (Emmett J); Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited (No 3) [2010] FCA 400 at [35]-[39] (Jacobson J).

12    Apart from the minor technical departures from the Court’s orders noted at [7] above (which should not prevent the Court making the proposed orders), the only other matter which needed to be raised was the question of voter turnout. While the Woolworths scheme was approved by majorities of those attending and voting at the scheme meeting which comfortably exceeded the required statutory majorities, only 4.44% of shareholders participated in the meeting. There is no reason to think that shareholders were not provided the appropriate opportunity to attend and vote at the Woolworths scheme meeting and, in a context of an internal restructure, it is not perhaps surprising that voter turnout might be low. As the evidence of Mr Spruyt establishes, the shareholder turnout was in line with the two previous annual general meetings. There is therefore no reason to infer that there was a protest vote and such apathy should not be presumed to be antagonism: see Re Matine Limited (1998) 28 ACSR 268 at 295 (Santow J).

13    In all of the circumstances and having regard to the evidence, the Court considered it appropriate to approve the schemes comprised in the Restructure Scheme and make the orders sought.

Associate:

Dated:    13 January 2020

SCHEDULE OF PARTIES