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favour may fall slightly short of 50% of total voting rights.
The Court noted a number of schemes of arrangement
overwhelmingly supported by those shareholders who had
voted for them, but where only 42% - 49% of those eligible
to vote had voted.
The Judges noted that Stevens J had contemplated the
possibility that the scheme might be approved by the Court
even if not approved by the shareholders in the manner
fixed by the Court. While acknowledging that such an
outcome might be possible on a literal reading of s 236, the
Justices said [42] that they saw “the scheme of the section
as being very much to the contrary.”
The third and partly overlapping point was that the Court
could see no basis, on the evidence associated with the
present case (which appeared “to be a very orthodox
amalgamation and not a device to avoid the Takeovers
Code”) for departing from usual practice, including the
usual practice previously adopted for similar amalgamations
within the Dominion Group.
Their Honours concluded [44]:
“... we see the most appropriate course as being to
revert to the orders made by Asher J. If the proposed
amalgamation is approved by the shareholders, it will
still be for the Court to decide on the final application
whether to approve the proposal. The smaller number
of votes cast in favour of the amalgamation, the
greater must be the scrutiny of the Court. Further, if the
Court sees the amalgamation as engaging the policy
of the Takeovers Act or an [sic] inappropriate vis-à-vis
dissenting shareholders, then this may be relevant to
whether the Court, on the application for final orders,
should refuse approval or make approval the subject of
a buy out of dissenting shareholders.”
The Court next addressed the issue of the standing of the
Panel to take part in the proceedings.
The Judges had already determined by this point that the
appeal would be allowed on its merits. For this reason [47]
they were not inclined to give a final ruling on the standing
issue. However the Court said:
“We are, however, of the view that it was at least well
arguable that the Panel did have standing. Given that
Part 13 and Part 15 amalgamations (depending on
their structuring) may engage the Takeovers Code and
are sometimes used as devices to avoid the Code, we
are inclined to think that the proposed amalgamation
was legitimately a matter of interest to the Panel
under s 8 of the Takeovers Act. On the basis that
the Panel therefore had a legitimate interest in the
proposed amalgamation, we are inclined to think that
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it was open to Stevens J to form the view that it was
also “interested” for the purposes of s 236(2) and thus
to hear it under that subsection.”
The Court noted that the amalgamating companies had
argued that the Panel's participation in the hearing was
beyond the Panel's powers under the Takeovers Act. At [48]
their Honours said:
“We prefer to express no definitive view on the
Panel's powers although tentatively we think that its
participation was within its powers. If the reasoning
set out in [47] is right, it might be thought that the
Panel's participation in the hearing was sufficiently
related to, or “consequential on”, its functions under s
8 of the Takeovers Act as being within its powers, given
particularly s 14(1)(c) of the Crown Entities Act 2004.”
A further issue addressed by the Court was the ability
of the Panel to intervene at the initial order phase of the
Companies Act process. This ability had been challenged
by the amalgamating companies.
The Court expressed some sympathy for this challenge,
particularly given the potential for such intervention to lead
to expensive disruptions of procedures put in place by an
applicant. The Judges also noted the submission of counsel
for the amalgamating companies that there was a real sense
in which the applicant must take responsibility for the
appropriateness of the initial orders. But they went on [50]:
“... the scheme of the section contemplates involvement
at the initial order stage by parties other than the
applicants. We agree that the initial orders under s
236(2) will almost necessarily be made at the instance
of the s 236(1) applicants. But there is nothing in s
236(2) to indicate that the parties who may apply for
initial orders are confined to the s 236(1) applicant.
For instance, if the 236(1) application is made by a
shareholder, it would be odd if the company was not
entitled to apply under 236(2) in relation to the initial
orders. Further, the fact that s 236(2) permits an initial
order to be made also at the instance of “interested
parties” (who will not be s 236(1) applicants) implies
a power to revise orders.”
Their Honours noted that Stevens J had relied primarily on
r 259 of the High Court Rules to justify changing the initial
orders. Although acknowledging that this rule may well
also have authorised the approach adopted by the Judge, for
themselves [51]:
“we prefer to approach the case on the basis that
s 236(2) itself contemplates further orders.”
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