Queensland Judgments


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  • Unreported Judgment

Re The Rock Building Society Limited


[2011] QSC 310






Trial Division


Originating Application



Orders made ex tempore on 18 October 2011

Reasons delivered 21 October 2011




18 October 2011


McMurdo J


Made ex tempore on 18 October 2011:

  1. Pursuant to subsection 411(1) of the Corporations Act 2001 (Cth) (Act), the Applicant, The Rock Building Society Limited (The Rock), convene a meeting of The Rock shareholders (Scheme Meeting) for the purpose of considering, and it thought fit, agreeing (with or without modification) to a scheme of arrangement proposed between The Rock and the said shareholders (Scheme) being the scheme substantially in the form of that contained in the explanatory statement in relation to the Scheme (Scheme Booklet), which is at Tab 8 to Exhibit "SEL-1" to the affidavit of Stephen Edward Lonie filed on 18 October 2011.
  2. The Scheme Meeting be held on Monday, 28 November 2011 at Travelodge Hotel, 86 Victoria Parade, Rockhampton in the State of Queensland.
  3. The Chairperson of the Scheme Meeting be Stephen Edward Lonie and, in his absence, Rodney Andrew Davies.
  4. The Chairperson appointed to the Scheme Meeting has the power to adjourn the Scheme Meeting in his absolute discretion.
  5. Except for procedural motions, all voting at the Scheme Meeting be by poll as declared by the Chairperson.
  6. Pursuant to subsection 411(1) of the Act, the Scheme Booklet is approved for distribution to The Rock shareholders.
  7. Regulations 5.6.12 and 5.6.14 to 5.6.36A of the Corporations Regulations 2001 (Cth) will not apply to the Scheme Meeting.
  8. Notice of the hearing of an application pursuant to subsection 411(4)(b) of the Act for orders approving the scheme of arrangement be published by an advertisement substantially in the form of "Annexure A" to this order, such advertisement to be published on or before 25 November 2011, and the Applicant be otherwise exempted from compliance with rule 3.4 of the Corporations Proceedings Rules.
  9. The Originating Application filed on 30 September 2011 is adjourned to 10:00 am on Thursday, 1 December 2011.
  10. Liberty to apply on 2 days' notice. 


CORPORATIONS – ARRANGEMENTS AND RECONSTRUCTIONS – SCHEMES OF ARRANGEMENT OR COMPROMISE – APPLICATION FOR ORDER FOR MEETING – where the applicant company applied for orders to convene a meeting of its shareholders to consider a scheme of arrangement – where the scheme provides for the shareholders to transfer their shares in the applicant to MyState Limited in return for shares in MyState Limited – whether the court should order a meeting and approve the explanatory statement

Corporations Act 2001 (Cth), s 411

Corporations Regulations 2001 (Cth)

Re APN News & Media Ltd (2007) 62 ACSR 400, cited

Re Golden Circle Limited [2008] QSC 298, cited

Re Macquarie Private Capital A Ltd [2008] NSWSC 535, cited

Re Mincom Limited [2007] QSC 37, cited

Re Symbiosis Group Limited [2008] QSC 297, cited


M Oakes SC for the applicant


Clayton Utz for the applicant

  1. On 18 October 2011, I made orders to convene a meeting of the shareholders of The Rock Building Society Limited to consider a scheme of arrangement. I also approved a Scheme Booklet to be sent to shareholders. These are my reasons for the orders which were made.
  1. This is a public company listed on the Australian Stock Exchange. It is described as a customer focussed financial institution. Under the proposed scheme, shareholders in the applicant will transfer their shares to MyState Limited (‘MyState’) in return for shares in MyState. They will receive 7.75 MyState shares for every 10 shares in the applicant. The applicant would cease to be listed on the ASX.
  1. The last sale price of MyState shares on 30 August 2011, immediately before the announcement of this proposal, was $3.50 per share. On the basis of that as the value of a MyState share, this proposal represents a consideration of $2.71 per share in the applicant company. The last price of shares in the applicant before the announcement of the proposal (recorded on 29 August 2011) was $1.84 per share. According to the opinion of an independent expert appointed by the directors of the applicant, Lonergan Edwards & Associates Limited, the proposed scheme is fair provided that shareholders in the applicant company also receive an interim dividend for the financial year commencing on 1 July 2011 of at least six cents per share. Upon that proviso, in the expert’s view the scheme is reasonable and in the best interests of the applicant’s shareholders in the absence of a superior proposal. It has reached that view after valuing shares in the applicant by capitalising its earnings. It has valued MyState shares according to an estimated listed sharemarket price of MyState shares, so as to estimate the value that may be realised by shareholders in the applicant if they sold their MyState shares, either immediately after the implementation of the scheme or in the short term thereafter.
  1. The amount to be declared as an interim dividend is uncertain. But some forecast is able to be made in the Scheme Booklet. The chairman of the applicant, Mr Lonie, writes that in the current trading conditions, there is no certainty that at the Scheme Implementation Date, the applicant will have the capacity to pay an interim dividend or as to the amount of any interim dividend that may be paid.  But he says that the directors have no reason to consider that there will not be a dividend of at least six cents per share, consistent with the interim dividend for the previous financial year and that the directors intend to pay the dividend “at the upper end of a six to 12 cents per share range”.
  1. The Scheme Booklet will further inform shareholders that the company’s proposed interim dividend will be announced to the ASX approximately one week before the Scheme Meeting, which is to occur on 28 November 2011. The Scheme Booklet states that it is intended to pay a dividend to those who are shareholders at the so-called Record Date, which is expected to be 8 December 2011, with a payment within seven days of the Implementation Date, which is scheduled as 12 December 2011. It further states that in the unlikely event that the interim dividend is less than six cents per share, the directors will ask the independent expert to update its opinion on the scheme and the Directors will make a further recommendation to shareholders. Similarly, in the report from the Independent Expert, it is said that if the dividend was less than six cents per share, it will need to ascertain the reasons for the lower dividend and update its opinion on the fairness of the Scheme. It is a condition of the scheme that the dividend be not greater than 12 cents per share.
  1. The managing director of Lonergan Edwards & Associates Limited has sworn an affidavit in which he says, amongst other things, that he was a co-author of its report and that he holds the opinions which were expressed in it. He also swears that the factual matters stated in that report, so far as he is aware, are true and that he is not aware of any fact or circumstance which has arisen since the report was prepared in September 2011 which would cause him to change the opinions expressed in the report.
  1. Upon the basis of the opinion of the Independent Expert, the directors of the applicant have unanimously recommended that, in the absence of a superior proposal, the applicant’s shareholders should vote in favour of the Scheme.
  1. In an affidavit sworn by Mr Lonie, the process of verification and approval of the contents of the Scheme Booklet is detailed. He says that based upon that verification process, he considers that all of the statements of facts made in the Scheme Booklet, so far as those facts relate to the applicant company, are true and correct and that there is no omission of material information from the Scheme Booklet.
  1. The Booklet encloses the Scheme Implementation Deed (‘SID’). By cl 12 the applicant has agreed to pay a reimbursement fee of $500,000 (exclusive of GST, if any) if the scheme does not proceed in certain circumstances as there set out.  This amount is less than 1 per cent of the equity value of the applicant, which according to the proposed scheme is about $68.3 million, and is therefore below the threshold according to the Takeovers Panel in its Guidance Note 7 on Lock-up Devices.  The circumstances in which this reimbursement fee would be payable are not such as to make the fee unacceptable according to that Guidance Note.  The fee is not payable if the applicant’s shareholders vote down the Scheme.
  1. There are “no talk” and “no shop” obligations in the SID, in terms which are not unusual or unreasonable. They are appropriately explained in the Scheme Booklet. The period in which there is to be no talk and no shop would expire on the earlier of the termination of the SID and the so-called End Date, which is 28 February 2012.
  1. According to Mr Lonie’s affidavit, the reimbursement fee and the no shop and no talk provisions were agreed following arms length commercial negotiations in which the parties were separately advised and represented by external legal advisors and external financial advisors, each with extensive experience of transactions of this kind.  He says that the provisions do not operate against the interests of the applicant’s shareholders and he considers that the reimbursement fee is reasonable and appropriate.  Similarly, he considers that the no shop and no talk provisions are reasonable and appropriate, having regard to the significant transaction costs for both companies which will be incurred in proposing the scheme and putting it before the applicant’s shareholders and also to cl 11.3 of the SID, which provides that those provisions do not apply to an unsolicited written proposal from a bona fide third party which, if not responded to, would more than likely constitute a breach of the fiduciary duties or statutory obligations owed by the applicant’s directors.  This is evidence of the kind suggested in Re APN News & Media Ltd.[1]
  1. The “performance risk” of the scheme is met by the agreed sequence of events according to cl 4.2 and cl 5.1 of the proposed scheme of arrangement.  Clause 4.2(a) provides that the transfer of shares in the applicant will be subject to the payment of the Scheme Consideration as provided for by cl 5, which is the issue of new shares in MyState.  Clause 5.3(g) of the SID required MyState to execute a deed poll in favour of shareholders of the applicant prior to the first court hearing.  That deed poll has been executed and a copy was exhibited to an affidavit of Mr P K M Viney, the Chief Financial Officer and Company Secretary of MyState.  MyState there covenants to provide or procure the Scheme Consideration to be provided to each shareholder in the applicant according to the scheme.
  1. Ineligible foreign shareholders are accommodated by having MyState shares issued to a nominee, which will sell the shares and account for the proceeds. Clause 8.2(b) of the scheme provides for a warranty by shareholders in the applicant that their shares are transferred free from encumbrances and this is disclosed in the Scheme Booklet.
  1. I was satisfied that all necessary matters to be proved at the first court hearing were established. The applicant is a Part 5.1 body for the purposes of s 411 of the Corporations Act 2001 (Cth).  The proposed scheme is an “arrangement” within the meaning of that section.  There will be proper disclosure to members of the applicant in all respects.  The scheme is bona fide and properly proposed.
  1. I was satisfied that ASIC had a reasonable opportunity to examine the proposed scheme and explanatory statement, and to make submissions and that it had 14 days’ notice of the proposed hearing date of the first court hearing. In a letter dated 17 October 2011, ASIC advised that it did not propose to appear to make submissions, or to intervene to oppose the scheme at the first hearing.
  1. I was also satisfied that all relevant procedural requirements were met. Mr Lonie has consented to act as chairman of the Scheme Meeting and Mr R A Davies has agreed to act as alternate chairman. 
  1. My attention was drawn to s 411(17).  In accordance with the prevailing view, that is not a matter which must be addressed at the first court hearing.[2]
  1. I was satisfied that the Scheme Booklet should be approved, having regard, in particular, to the evidence of Mr Lonie and Mr Edwards to which I have referred. 
  1. I was satisfied that regulations 5.6.12 and 5.6.14 through 5.6.36A of the Corporations Regulations 2001 (Cth) should not apply to the meeting.


[1] (2007) 62 ACSR 400 at [55].

[2] Re Macquarie Private Capital A Ltd [2008] NSWSC 535 at [23] to [31]; Re Symbiosis Group Limited [2008] QSC 297; Re Golden Circle Limited [2008] QSC 298; cf Re Mincom Limited [2007] QSC 37.


Editorial Notes

  • Published Case Name:

    In the matter of The Rock Building Society Limited

  • Shortened Case Name:

    Re The Rock Building Society Limited

  • MNC:

    [2011] QSC 310

  • Court:


  • Judge(s):

    McMurdo J

  • Date:

    21 Oct 2011

Litigation History

No Litigation History

Appeal Status

No Status